Letâ€™s focus on five specific reasons why globally-minded companies should look first to Asian markets when considering doing business in Asia.
For lack of a better word, Asia is huge. It is the world’s largest, most populous continent, regulatory environment, and home to some of the world’s most vibrant and diverse Asian economies and cultures. However, it also represents one of the most significant opportunities for doing business and expansion that can be found on the planet.
Let’s focus on five specific reasons why globally-minded companies should look first to Asian markets when considering doing business in Asia.
Asian markets together makeup the second-largest consumer market in the world
While it may take some time for any country to surpass the mammoth consumer economy found in the United States, combining the pre-COVID markets in just three countries – China, Japan, and South Korea – the total of over nine trillion USD in spending well exceeds the eight trillion of EU member states. Moreover, the combined GDP of the world’s second-and third-largest economies of China and Japan is rapidly approaching once unthinkable US levels.
More impressive is a recent report by McKinsey suggesting that Asia may very well be responsible for 40% of the global economy and consumption and over 50% of global GDP by 2040. And the trend looks to become more pronounced in the immediate future, with China soon becoming the most vociferous consumer of luxury goods globally.
China and its regional rivals Japan and South Korea already boast a combined luxury goods market value 25% greater than what US consumers invest in the same premium goods.
It is a business partner to most western economies as it imports all kinds of crucial products vital to them
Consumer spending and luxury items are certainly not the whole story, as Asia currently features four of the top 10 global oil consumers – not surprisingly China, Japan, and South Korea again – with China and Japan in the top four globally.
Singling out Japan as one particularly striking example, the world’s fourth-largest exporter also imports nearly two-thirds of a trillion USD worth of commodities and goods each year: everything from copper ore to integrated circuits to advanced weaponry. Japan is an unbelievably lucrative business partner for the US defense industry, investing nearly a billion USD just last year in drones, missiles, fighter aircraft, and lots of other hardware too sensitive to mention here.
But for the manufacturers, the partnership is much more than just a sale; it is an investment, with companies like Boeing and Lockheed Martin training their Japanese counterparts to produce domestic variants of the latest and new technology. A case in point is the next-gen F-35fighter plane, for which the final assembly is performed in Nagoya, Japan.
It has more intra-regional trade than anywhere else, with more regional trade partnerships
When the Regional Comprehensive Economic Partnership Agreement (RCEP) comes into effect in January 2022, this alliance amongst the Association of Southeast Asian Nations (ASEAN) and six other regional countries will immediately become the most significant trade partnership in the world – far out-sizing similar agreements in North America and the EU – with member states representing 30% of global GDP.
The agreement will help streamline the movement of goods and services across member state borders and also make it simpler for companies to expand their footprint across multiple locations. And there is the added advantage of having the financial and commercial hubs of Hong Kong, Shanghai, Singapore, Seoul, and Tokyo all within a one-hour time difference of each other.
But RCEP is simply the largest and most visible trade agreement in a region that already sees quite a bit of productivity through APEC, ASEAN, ASEAN Plus Three, and of course the Trans-Pacific Partnership.
Asian countries have a vast pool of talent across sectors
It’s only natural that the world’s most highly populated region will have a massive potential labour pool. Highly skilled local workers have for years been imported from countries like China and India by US tech giants, however as the middle class grows across many parts of Asia, the amount of money that can be invested in education has also grown.
Continuously developing Asian economies like Indonesia and the Philippines (and to a lesser extent Myanmar and Vietnam where there are large populations and significant potential for economic progress) are notable examples. Honing their skills in the more advanced economies of their neighbors, and not content to wait for organic career growth, scores of skilled local workers are now showing interest and looking to test the waters of non-traditional locations outside of Silicon Valley.
Medical workers represent another significant pool of local skilled labour in Southeast Asian countries such as Thailand, Indonesia, and the Philippines. Care workers can be educated and trained in their home countries at a fraction of the cost of receiving similar experiences in the west, are proficient in English and other languages, and are ready to meet the growing demand for labour in aging societies like Japan and in regions such as western Europe.
It has the world’s fastest-growing technology hubs and busiest shipping hubs
Many cities across Asia are considered to be amongst the most prominent global hubs for new technologies. Singapore, however, is the location that has been garnering the most attention recently, ranked by KPMG as the leading tech innovation hub in the world, and home to 80% of the top global tech firms.
This “Little Silicon Valley” may one day no longer need to have the “little” preceding its name. Its prominence is in no small part due to a government that incentivises tech firms and pushes them to innovate locally rather than simply peddling an existing product.
Sea freight is also one of the growing industries in the region, with the eight busiest global ports located in Asia. For total container volume, Singapore lost the top rank to Shanghai in 2019 and is now in the second spot, followed by Shenzhen, Ningbo, Busan, Hong Kong, Guangzhou, and Qingdao. Outside of Asia, only the port of Dubai can be considered a candidate for this elite group.
But regardless of all of these advantages, businesses that want to expand into Asia need to be located in Asia. Understanding how to establish a successful and sustainable Asia presence is the key to making an investment worthwhile, and the companies that have made a real, long-term difference all have a significant operational capacity in the region.
There may soon come a day when opening first in Asia is a prerequisite to doing business internationally. It may already be here!