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Opportunities In Emerging Asia

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  • 1. Dr. Balbir Bhasin Associate Professor of International Business John F. Welch College of Business SACRED HEART UNIVERSITY & IFCC Global Trends: Opportunities for Europe in Emerging Asia - Tuesday May 30th, 2006
  • 2.  
  • 3.  
  • 4. Global Trends: Population Perspective – Top 15
    • Largest Populations:
    • China (1,300)
    • India (1,100)
    • USA (300)
    • Indonesia (245)
    • Brazil (188)
    • Bangladesh (147)
    • Pakistan (143)
    • Russia (143)
    • Nigeria (132)
    • Japan (127)
    • Mexico (107)
    • Philippines (89)
    • Vietnam (84)
    • Germany (82)
    • Egypt (79)
    • Asian Populations:
    • China (1,300)
    • India (1,100)
    • Indonesia (245)
    • Bangladesh (147)
    • Pakistan (143)
    • Japan (127)
    • Philippines (89)
    • Vietnam (84)
    • Thailand (64)
    • South Korea (49)
    • Burma (47)
    • Afghanistan (31)
    • Nepal (28)
    • Malaysia (24)
    • Taiwan (23)
  • 5. Global Trends: Asia’s Rise
    • Asia’s rise is the fourth big transformation in relative economic power since the industrial revolution:
    • Early 19 th century: rise of the UK
    • Late 19 th and early 20 th centuries: rise of US and Germany
    • Post-second world war: Japanese miracle
    • 1970 onwards: rise of the rest of Asia, including China and India
  • 6. What Caused Asia’s Rise?
    • Asia’s success due to: Deregulation, Liberalization and Reform – same as US & Europe
    • South Korea and Taiwan
    • Hong Kong and Singapore
    • ASEAN 5 – Thailand, Malaysia, Indonesia, Philippines
    • China, India, Vietnam
    • Problems in Bangladesh, Pakistan, Nepal, Sri Lanka, Burma
  • 7. Source: Business Week Special Issue, China/India 2005 2025 2050 2004
  • 8. Global Trends: A New World Economy
    • Based on the IMF’s World Economic Outlook database, The Economist concluded that “In 2005 the combined output of Emerging Economies rose above half of the global total”
    • In 2005, their combined GDP grew in current dollar terms by
    • $1.6 trillion, more than the $1.4 trillion increase of developed economies
    • Their share of exports has jumped from 20% in 1970 to 42% last year; over the past five years, they have accounted for more than half of the growth in world exports
    • Emerging economies are now sitting on two-thirds of the world’s foreign exchange reserves
    • Developed economies’ trade with developing countries is going twice as fast as their trade with one another
    • The EU exports twice as much to the emerging markets as it does to America and Japan combined
    • Source: Emerging Economies “Climbing Back” The Economist 19 January 2006.
  • 9.  
  • 10.  
  • 11. Global Trends: Outlook for Major Economies Source: Asian Development Outlook 2006, Asian Development Bank, ISBN 971-561-603-8 2007 2006 2005 Country 2.4 2.9 2.7 Japan 3.1 3.3 3.5 United States 2.1 2.1 1.3 Euro Zone
  • 12. Global Trends: Outlook for Asia Source: Asian Development Outlook 2006, Asian Development Bank, ISBN 971-561-603-8 4.6 6.1 6.4 Singapore 5.8 5.5 5.3 Malaysia 5.5 4.7 4.5 Thailand 4.9 5.1 4.0 S. Korea 6.0 5.4 5.6 Indonesia 8.8 9.5 9.9 China 7.8 7.6 8.1 India 2007 2006 2005 Country
  • 13. Trends in Asia
    • China is poised to overtake the US as the major trading partner of Japan. China is now Japan’s largest source of imports
    • South Korea’s prime export market is China
    • China-India trade growing – “Hand Across the Himalayas”
    • 10 years ago - $100 million
    • 2002-2003 - $7.6 billion (up 3.6%)
    • 2004 - $10 billion
    • 2005 - $15 billion
    • ASEAN (500 million population) and China agreed to set up a Free Trade Area by 2010
  • 14. Global Trends: Developments in Emerging Markets
    • Growth in current account surpluses
    • Rise in capital inflows
    • Substantial rise in international reserves
    • Improved domestic fundamentals and liquidity
    • Rising demand for energy, food, and raw materials by 2.5 billion Chinese and Indians is already having ripple effects worldwide
    • The US still consumes three times as much grain per person as China and five times as much as India
    • Will this lead not to a global resource squeeze?
    • Source: World-watch Institute’s
    • State of the World 2006 Report
  • 15. Why Asia Holds a Special Interest
    • Asia market growth = emergence of world’s largest new middle class
    • Asia as a source of highly educated, skilled labor (at low cost up to now)
    • Result: Asia has special place in business globalization (supply chains)
    • Result: Asia is becoming a world incubator for new high-tech businesses
  • 16.
    • Increasing Affluence – rising middle class, disposable income, consumption patterns, services, convenience, luxury items
    • Rising Educational Standards – leads to changes in demand for goods and services
    • Increasing Number of English speakers – better able to trade and participate in business activities
    • Improving Infrastructure – information through television, print media, internet, and travel
    • Increasing Availability – better distribution, packaging, advertising, standardization
    Changing Trends in Asia
  • 17. Growth Industries in Asia
    • Legal, Banking and Finance
    • Consumer Goods
    • Infrastructure Development
    • Building and Construction Materials
    • Tourism and Hospitality
    • Communications
    • Health Care
    • Marketing and Management
    • Entertainment
    • Contract Manufacturing
  • 18. Emerging Asian Countries with Potential
    • China and India – one third of the world’s population 2.5 billion!
    • Annual Growth Rates 8–10 % through 2010
    • Asian Tigers: Taiwan, South Korea, Singapore, Hong Kong – newly affluent
    • Asian Non-Tigers: Indonesia, Malaysia, Thailand, Philippines, Vietnam – 400 million
  • 19. Europe’s Advantages in Asia
    • Long history – established presence and trade
    • Better understand cultures and social structures
    • – language, food, religion
    • Better at relationship building
    • Transfer of technology – high demand
    • Resources to compete with North America
  • 20. Asia Europe Ties – Progress? Asia Europe Meeting (AEM)
    • Proposed by Singapore in 1994: means for breaking deadlock between ASEAN and Europe. Established in 1996 – EU and 13 countries.
    • ASEM: a means of promoting an imaginary of Europe in Asia to maintain economic presence
    • ASEM to be a project of ‘common grandeur’
    • Vehicle for widening involvement and expanding cooperation in new areas
    • Lack of progress due to disagreements over human rights and neo-liberal globalization
    • Main components of ASEM process: political dialogue, security and the economy, education and culture
  • 21. Concerns for Asia
    • Need to check Inflation - due to rising prices, especially energy, transportation, labor
    • Need to check Debt – while at the same time improving public service and infrastructure
    • Need to boost consumer buying power – education, healthcare and pensions needed improvements so that people could reduce their saving
    • Bird flu could represent the biggest risk to the region, depending on how well the region is prepared - something which has not yet been tested
    • Need to discuss how to stop currency turmoil and strengthen their financial systems
    • Source: IMF – May 2, 2006 (BBC Report)
  • 22. Asian Development Bank
    • Established in 1966 – aim to help build Asia
    • Owned by 66 member countries = 45 from within the region and 19 from outside
    • Japan and USA hold 12.9% of voting power each
    • 17 European countries hold 17.6% cumulative voting power
    • European member countries recently contributed 32.5% of replenishment to Asian Development Fund
    • At the European Banking Congress in Frankfurt, ADB VP described relationship as “European Bull meets Asian Tiger”
    • Need to cooperate!
  • 23. Asian Development Bank: Unique Opportunity for Europe
    • 18 January 2006 : Speech by Phillipe Benedic, Resident Director General, European Representative Office, Asian Development Bank at the Colloquium Humanum, Bonn, Germany:
    • Title: “Asia – The New Economic Competitor of Europe, Risks and Opportunities”
    • Message: “Asia’s economic strength is also a great opportunity for Europe.”
    • 17 February 2006: Speech by Haruhiko Kuroda, President, Asian Development Bank in Washington D.C. to the Council on Foreign Relations.
    • Meeting was chaired by Gerald Seib, Washington Bureau Chief, Wall Street Journal
    • Message: “Asia’s growth over the past half-century has been dramatic.” This provides challenges and opportunities. Asia is full of money, but Asian countries need support – various know-how and technologies.”
  • 24. Asian Development Bank: Opportunities for Europe
    • Asia offers huge unsaturated export markets with over 4 billion consumers and growing income
    • Cheap labor calls for sourcing for sourcing from and investing in the region
    • Manufacturing (in China) and Services (in India) – now represent over 50% GDP
    • The demand for technology and know-how from Europe is tremendous.
    • The competitiveness of European companies includes among others cutting edge in science and technology, infrastructure, energy, water, transport, environment, and financial services
    • Source: ADB, European Representative Office, 18 Jan 2006
  • 25. Asian Development Bank: Loss of Jobs or Benefits to Europe?
    • European companies investing in Asia improve their global competitiveness = save European jobs
    • Low costs = lower prices = control inflation and keep interest rates moderate, boost demand in Europe
    • Asian countries sell and also buy goods and services in Europe
    • Many Asian companies owned in whole or in part by European companies. Earnings are repatriated and invested in Europe = supports economic growth.
    • Productivity gains = new jobs with higher value added. Taking advantage of their comparative strengths
    • Through Joint Ventures, European and Asian companies can step up exports to “third” countries in the region
    • Rise in standards of living in Asia will result in rise in cost of labor and reduce the gap compared with European labor cost
    • Source: ADB, European Representative Office, 18 Jan 2006
  • 26. European Bull and the Asian Tiger: What Must Europe and Asia Do?
    • Europe must help develop Asia .
      • Long industrial tradition and efficient system for keeping a free market economy
      • Europe has a strong banking sector, a strong corporate governance system, legal stability and a welfare system allowing the population to benefit from economic success
    • Asia can and wants to learn from Europe .
      • Learn to combine rapid economic growth with environmental protection, energy efficiency, balanced urban growth and sustainable rural development
      • Learn to strengthen resilience from external shocks and build regional economic programs
      • Learn to better use its huge foreign exchange reserves and regional savings for creating global balances
    • Source: ADB, European Representative Office, 18 Jan 2006
  • 27. Asia-Invest II 2003-2007 EU-Asia business co-operation
  • 28. What is Asia-Invest II?
    • Opportunities for EU-Asia business co-operation:
    • Primary initiative to support business co-operation between the EU and Asia
    • Strengthen the EU’s political and economic presence across Asia
    • Raise awareness of Europe in Asia and vice versa
    • Strengthen mutual trade and investment flows
    • Reinforce Asian private sector and new business development opportunities
    • Support new business partnerships
    • Enhance export capabilities and foreign direct investment prospects of the less prosperous countries in Asia
    • Promote the integration of Asia into the Information Society
  • 29.
    • Asia-Invest I : 1997, Commission contribution of €32m
    • Asia-Invest II: 2003 to 2007, Commission contribution of €35m
    • More than 260 projects supported to date across a range of sectors, involving hundreds of organizations
    Asia-Invest II
  • 30. EU and Asia: Eligible countries ASIA: Afghanistan Bangladesh Bhutan Cambodia China East Timor India Indonesia Lao PDR Malaysia Maldives Mongolia Nepal North Korea Pakistan Philippines Sri Lanka Thailand Vietnam EU: Austria Belgium Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Slovakia Slovenia Spain Sweden United Kingdom
      • Organizations from Brunei, Hong Kong, Macao and Singapore can fully participate in projects as associates, provided they do not receive Commission financing
  • 31. Global Trends: A New World with Asian Characteristics?
    • Westernization, particularly Americanization, was a distinct feature of the 20th Century
    • Western domination prevalent in music, clothing, entertainment, fast-food, language
    • The 21st Century Global Village will have Western and Asian characteristics
    • 30 million non-Chinese are learning Mandarin. Chinese is already the second language on the Internet – 100 million Chinese netizens
    • In vogue now: Asian food, fashion, music, martial arts, yoga, movies, religion
    • Adapted from : David Gosset, Asia Times Online, 7 April 2006
  • 32. Dr. Balbir Bhasin Associate Professor of International Business John F. Welch College of Business SACRED HEART UNIVERSITY & IFCC Global Trends: Opportunities for Europe in Emerging Asia - Tuesday May 30th, 2006

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