Why SMEs are turning to intra-Asian trade
It is these longstanding “inside Asia” relationships that will give this region the edge in 2022 and beyond, as businesses continue to adapt and evolve from COVID-19. 19. This is especially true for small businesses looking to thrive during tough times. Seeking growth opportunities closer to home has its benefits, especially in times of global uncertainty.
There are four good reasons why:
1. Intra-Asian trade should remain resilient
Deepening intra-regional trade – where countries focus on trading across borders with neighboring countries – now accounts for more than half of Asian trade. In fact, some estimates put the figure as high as 60%. Moreover, the value of intra-Asian trade has been consistently high compared to other regional blocs – intra-Asian exports account for 60% of regional exports, just behind intra-EU exports at 68%. Intra-Asia looks even more attractive today as companies update their business strategies due to the pandemic.
While the economic impact of COVID-19 has dampened the growth of Asian economies since the start of the pandemic, India, China and ASEAN will remain key players in intra-Asian trade, and we have already seen a healthy rebound in these markets.
2. Asia will continue to grow over the next 12 months
By transforming trade and selling more goods locally, Asian economies can still fare better than those around the world. Among major economies, India’s economy has been boosted by great strides in e-commerce, and online retailing, both domestically and in Asia, will help drive the recovery. At the same time, despite the sharp slowdown in regional growth, intra-Asian markets have what it takes to sustain the recovery. For example, Vietnam remains Southeast Asia’s fastest growing economy and has matured into one of the world’s leading manufacturing hubs. Shorter, more localized supply chains characterize and serve these market linkages, providing Asian start-ups and small businesses with one of the best market environments in which to operate.
In addition, economies such as Singapore, Korea or Japan stand out among the most digitally advanced in the world. Take for example Asia’s thriving digital payments ecosystem, driven by e-payment platforms and the shift to cashless economies.
3. APAC exporters remain highly competitive and start-ups are at the heart of future growth
With a business culture driven by technology and innovation, small businesses and start-ups are at the heart of future growth in Asia – one-third of the world’s “unicorns” – start-ups worth over a billion dollars come from Asia. Yes – Asia is already home to 50% of the fastest growing companies in the world. 1,679 Asian companies have increased their market capitalization more than 10 times over the past decade, with India accounting for the highest number of ten bags. And many of them know the adage that today’s adversity is tomorrow’s opportunity.
Today, with health and safety a priority for businesses and individuals, the opportunities for online healthcare and education start-ups are clearly front and center. Businesses need to adapt to the new environment – and decide if they want to expand into new areas as the tech giants have also done. Innovation itself is increasingly global, but what’s important for start-ups – SMEs and enterprises alike – is the huge opportunity for growth and the central role that economies and businesses close to home can play to explore and realize new opportunities in Asia. This reality has seen tremendous growth in Asia in B2B cross-border trade, and Asia-Pacific is leading the way with nearly 80% of the B2B market.
4. Asia’s growing middle class is tomorrow’s savvy consumer
Future consumers of intra-Asian business growth include a rapidly growing Asian middle class – those living in households with daily per capita incomes between US$10 and US$100 at purchasing power parity (PPP) of 2005. Among Asian countries, the growing share of middle-class spending in India is currently over 70% and is expected to reach over 80% by 2030.
These consumers have a huge appetite for imports from Asia-Pacific. Just ten years ago, the global middle class of 1.8 million people was fairly evenly distributed around the world, including 525 million in Asia. However, by 2030, Asia will account for around 65% of the world’s middle class population and just under 60% of middle class consumption.
These consumers will be more demanding and more digitally savvy, and they will seek an increasingly personalized customer experience. Whether it’s test kits, medical supplies or home electronics, it’s safe to say that all roads lead to Asia.
COVID-19 has changed the world and the way we live, but for companies looking to grow, the message is clear: if you’re looking for opportunities in the Asia-Pacific region, you’ll find them.
The author is Vice President, India Operations, FedEx Express.