Why SMEs are looking at Intra-Asia trade

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Whether times are tough, or business is booming, Intra-Asia trade offers ample opportunities for the region’s SMEs and e-commerce operators to unlock new business growth. Asia has long been a world leader in closer regional integration – exploring remarkable and constantly evolving networks in trade, investment, and innovation. With significant diversity of our people and cultures, our region has successfully built a close-knit economy sharply focused on international business opportunities.

It’s those long-standing ‘inside Asia’ relationships which will give this region the edge in 2022 and beyond, as businesses continue to adapt and evolve from COVID-19. That’s especially so for small businesses looking to thrive during difficult times. Looking closer to home for growth opportunities has its advantages – especially in times of global uncertainty.

There are four good reasons why:

1. Intra-Asia trade is expected to remain resilient

Deepening intra-regional trade – where countries focus on cross-border commerce with neighboring countries – now accounts for more than half of Asian trade. In fact, some estimates put the figure as high as 60%. What’s more, the value of intra-Asia trade has been consistently high compared to other regional blocs – intra-Asia exports account for 60% of regional exports, second only to intra-EU exports of 68%. Intra-Asia looks even more appealing today as companies update commercial strategies because of the pandemic.

While the economic impact from COVID-19 has curtailed the growth of Asian economies since the pandemic began, India, China, and ASEAN will remain key players in intra-Asia trade, and we’ve already witnessed a healthy rebound in these markets.

2. Asia will continue to grow in the next 12 months

Through transforming trade and selling more goods locally, Asian economies can still fare better than those across the world. Among the larger economies, India’s economy has been boosted by great strides made in e-commerce, and online retail both domestically and inside Asia will help to nurture the recovery. 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 and has matured to become one of the world’s key manufacturing hubs. Shorter, more localized supply chains characterize and serve these market links, giving Asian start-ups and small businesses one of the best market environments to operate in.

In addition, 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 – driven by e-payment platforms and a move to cashless economies.

3. 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 – a third of the world’s “unicorns” – start-ups worth more than US$1 billion hail from Asia. Yes – Asia is already home to 50% of the world’s fastest growing companies. 1,679 Asian companies have increased their market capitalizations by more 10 times over the past decade, with India accounting for the largest number of ten-baggers. And many of them are familiar with the adage that today’s adversity is tomorrow’s opportunity.

Right now, with health and safety a primary focus for businesses and individuals alike, opportunities for healthcare and online education start-ups are clearly in focus. Companies must adapt to the new environment – and decide whether to move 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 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 huge growth in Asia of B2B cross-border commerce, and Asia Pacific leads the way with almost 80% of the B2B market.

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

Future consumers for intra-Asia business growth include 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). Amongst the Asian countries, the rising middle-class spending share in India is currently over 70%, and is projected to reach over 80% by 2030.

These consumers have huge appetite for imports from within Asia Pacific. Just a decade ago, the global middle class of 1.8 million was spread fairly evenly around the world, with 525 million located in Asia. However, by 2030, Asia will make up around 65% of the global middle-class population, and just under 60% of middle-class consumption.

These consumers will be more discerning and more digitally savvy, and they will look for an increasingly personalized customer experience. Whether it’s test kits, medical supplies, or home-grown electronic products, you could say that all roads lead to Asia.

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

The writer is Vice President, India Operations, FedEx Express.



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