Opportunities In Emerging Asia


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Opportunities In Emerging Asia

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