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Five reasons why SMEs should look to Intra-Asia

Five reasons why SMEs should look to Intra-Asia

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By Kawal Preet, President, Asia Pacific, Middle East and Africa (AMEA), FedEx Express

Ample opportunities to keep your business afloat even when times get tough

Asia has long been a world leader in closer regional integration – exploring remarkable and ever-adapting networks in trade, investment and innovation. Despite great diversity in people and cultures, the region has positioned itself as a closely-knit economy sharply focused on international business opportunities.

And it’s those long-standing “inside Asia” relationships which will give this region the edge in 2020, as businesses adapt and evolve to meet the vast challenges from COVID-19.

That’s especially so for up and coming small businesses.

Looking closer to home for growth opportunities has its advantages, especially now in these times of global uncertainty.

There are five excellent reasons why:

  1. Intra-Asia trade is expected to remain resilient

Deepening intra-regional trade – where countries focus on cross-border commerce with neighbouring countries rather than those on the other side of the world – now accounts for more than half of Asian trade. In fact, some estimates put the figure as high as 60 percent.

What’s more, the value of intra-Asia trade has been high compared to other regional blocs – intra-Asia exports account for 60 percent of regional exports, second only to intra-EU exports of 68 percent. Intra-Asia looks even more appealing today as companies update commercial strategies because of COVID-19.

While the economic impact from COVID-19 will curtail the growth of Asian economies in 2020,

China and ASEAN will remain key players in intra-Asia trade because of the expected rebound in these markets by 2021, especially as Chinese demand for goods resumes. China and ASEAN manufacturing still offers attractive, cost-effective options not just for Asian businesses, but those in the U.S. and Europe too.

  1. China and India will continue to grow in 2020

Through transforming trade and selling more goods locally, Asian economies can still fare better than those across the world.

In fact, in the current global slowdown, emerging Asia is expected to be the only region with a positive growth rate in 2020.

Among the larger economies, China is forecast to grow just 1.2 percent this year, and India 1.9 percent – well below recent years but still well above other top global economies in 2020.

At the same time, despite the sharp slowdown in regional growth, intra-Asian markets have what it takes to support recovery. For instance, Vietnam remains Southeast Asia’s fastest-growing economy with an ambitious 2020 growth target of 5 percent. It has matured to become one of the world’s key manufacturing hubs, with easy access to China, the world’s largest trading economy.

Shorter, more localized supply chains characterize and serve these market links, giving Asian start-ups and small businesses one of the best market environments in which to operate.

Besides, many economies like Singapore, Korea or Japan stand out as among the most digitally advanced anywhere. Take, for example, Asia’s flourishing digital ecosystem in payments – it’s forecast that Chinese consumers will transact a massive US$45 trillion via mobile in 2020.

  1. APAC exporters remain highly competitive, and start-ups are core to future growth

With a business culture fired by technology and innovation, small companies and start-ups are core to future growth in Asia.

While funding for new start-ups might be more cautious or on pause for now, a third of the world’s “unicorns” – start-ups worth more than US$1 billion – hail from Asia, with more than 90 in China, six in Korea and four in Indonesia.

What’s more, Asia is already home to 50 percent of the world’s fastest-growing companies.

What’s also interesting is what’s being exported. For instance, at the end of 2019, pharmaceutical exports from Singapore surged – rising 34.7 percent in December, ahead of the key electronics sector.

Asia is also very familiar and experienced with the adage that today’s adversity is tomorrow’s opportunity.

This year, with health and safety paramount due to COVID-19, opportunities for healthcare and online education start-ups are clearly in focus. Companies must adapt to the new environment – and decide whether to pivot into new areas in a way that tech giants also have.

Innovation itself is increasingly global, but what’s significant for start-ups, SMEs and enterprises alike is the tremendous growth opportunity and the central role that economies – and companies – close to home can play in exploring new possibilities in Asia and making them a reality.

That reality has seen massive growth in Asia of B2B cross-border commerce, and the Asia-Pacific leads the way with almost 80 percent of the B2B market.

  1. Asia’s growing middle class is tomorrow’s savvy consumers

Providing the all-important consumers for future intra-Asia business growth is a rapidly growing Asian middle class – those living in households with daily per capita incomes of between US$10 and US$100 at 2005 purchasing power parity (PPP).

These consumers have a huge appetite for imports from other countries within the Asia Pacific.

Just a decade ago, the global middle class of 1.8 million was spread relatively evenly around the world, with 525 million in Asia. That number of 1.8 billion from 2009 is tipped to surge to 3.2 billion this year, then 4.9 billion by 2030, mostly due to population growth in Asia.

By 2030, Asia will make up two-thirds of the global middle-class population and just under 60 percent of middle-class consumption.

These consumers will be more demanding, more discerning, more digitally savvy, and will look for an increasingly personalized customer experience.

As technology makes online commerce more accessible to these millions of people, even in smaller domestic markets such as Singapore and Malaysia, businesses must seize all opportunities to go online to meet consumer demands. For instance, the COVID-19 outbreak has seen many online grocers offering more widespread home delivery options to ensure minimal supply chain disruption and ensure consumers in lockdown have the food they need.

  1. Better connections will boost intra-Asia volumes further

Whether it’s test kits or medical supplies or home-grown electronic products, it might be said that all roads currently lead to Asia.

Asia could still reach 50 percent of global GDP by 2040 and drive 40 percent of the world’s consumption, representing a real shift in the world’s centre of gravity.

Consumers today demand faster and broader service.

Intra-Asia volumes also look poised to hold firm thanks to Asia-focused trade pacts such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which brings together 11 countries in the Asia Pacific.

COVID-19 has changed the world and our way of life, but for the small and medium business looking to grow their business, the message is clear. If you’re seeking opportunities across the Asia Pacific, you will find them.