Back in May 2010, I wrote that Asia was undergoing a rocky recovery amid multiple transformations after the 2007 economic crisis. Then, Asia was witnessing a resurgence of economic and consumerist power, capitalising on broken global supply chains with niche components and spares, seeing changes in national political architecture and rising social forces with civil awakening, thus redistributing power between key state actors.
This multiple transformation is still ongoing, albeit with some enhancement. Throughout this decade, Asia became more integrated into the world flows of production, trade, talent and technology. In 2014, the Philippines was the world’s fastest growing emerging market economy, surpassing Malaysia as the third-largest economy in south-east Asia in 2017. The year 2018 saw two notable achievements. China surpassed the US in terms of purchasing power parity and India overtook Japan as the second-largest economy in Asia and the third-largest globally.
Covid-19 will, like Sars, be a temporary economic hiccup in Asia, likely lasting until 2023.
What trends will define the next decade of economic development and foreign direct investment in Asia-Pacific? Similar to rocky 2010, after Covid-19 passes on, Asia’s economic and consumerist power will grow even more until Asia becomes the world's centre of gravity.
One economic driver is the Regional Comprehensive Economic Partnership (RCEP) signed on November 15, 2020, which emphasises deeper investment integration. The Financial Times reported that RCEP is set to challenge the EU as the world’s largest investment bloc, as it promises to foster integration among 15 Asia-Pacific countries, representing a third of the global population and output.
UNCTAD explains that RCEP’s specific provisions to support least developed countries will benefit them a lot, with many growing by exporting labour-intensive manufactured goods. Another driver is technology. Rapid Industry 4.0 is expected to sweep across Asia, more efficiently connecting people across the continent. Other trends include increasing Asian demand for good corporate anti-plastic sustainability stewardship, rapid urbanisation, consumerism, increase in knowledge-intensive services trade and shorter localised supply chains.
What differentiates Asia is its higher authoritarian governance, be it state-owned enterprises or large conglomerates. These are able to adopt a long-term focus on organic growth.
My 2010 advice remains relevant: before executing market entry or expansion plans, foreign investors should first thoroughly understand the complexity of diverse Asia with its simultaneous quadruple currents in technology, middle-class consumerism, intra-regional trade and evolution of political state governance, especially the developmental and bureaucratic state models.
Lawrence Yeo is CEO of AsiaBIZ Strategy, a Singapore-based consultancy that provides Asia market research and investment/trade promotion services.
This article first appeared in the December/January print edition of fDi Intelligence. View a digital edition of the magazine here.