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5 Reasons Why SMEs Are Looking To Intra-Asia

               
By Kawal Preet | First published: April 21, 2021    Updated: January 3, 2022

Whether times are tough or business is booming, Intra-Asia 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 ever-adapting networks in trade, investment and innovation. Despite great diversity in people and cultures, our 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 2022 and beyond, as businesses continue to adapt and evolve through COVID-19.

That’s especially so for small businesses looking to thrive during these difficult times. Looking closer to home for growth opportunities has its advantages - especially in times of global uncertainty.

There are five very 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 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%.

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 COVID-19.

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. We’ve already witnessed a healthy rebound in these markets. Chinese, Indian and ASEAN manufacturing still offers attractive, cost-effective options not just for Asian businesses, but those in the U.S. and Europe too. And as supply chain bottlenecks at sea ports continue, Intra-Asia trade that relies on air cargo is also less likely to be disrupted.
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2. China and 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. In fact, in the current global slowdown, In the current global slowdown, the only region that records a positive growth rate (in 2020) is East Asia and the Pacific thanks to the strong rebound from the world's second largest economy - China.

Among the larger economies, China was initially forecast to grow just 1.2% and India 1.9% in 2020 – well below recent years but still well above other top global economies. In all actuality, China performed better than forecast while India downgraded growth projections due to ongoing implications from community lockdowns and high numbers of COVID cases. Despite the current economic environment related to continued COVID variant outbreaks and the real estate sector, China’s e-commerce outlook is strong for 2022. 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 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, 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 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.
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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. While funding for new start-ups might be slow or on pause for now, 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. And many of them are familiar with the adage that today’s adversity is tomorrow’s opportunity.

Right now, 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 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 the Asia-Pacific leads the way with almost 80% of the B2B market.

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

Forming 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 huge appetite for imports from other countries 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 in Asia. But by 2030, Asia will make up two-thirds 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.
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As technology makes online commerce more accessible to people, even in smaller domestic markets such as Singapore and Malaysia, businesses must seize all opportunities to go online to meet consumer demand. 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.

5. Better connections will boost intra-Asia volumes further

Whether it’s test kits, medical supplies or home-grown electronic products, it might be said that all roads currently lead to Asia. Asia could still reach 50% of global GDP by 2040 and drive 40% of the world’s consumption, representing a real shift in the world’s center of gravity.

Intra-Asia volumes also look poised to hold firm thanks to Asia-focused trade pacts such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive agreement for Trans-Pacific Partnership (CPTPP), which brings together 11 countries in the Asia Pacific. Here’s more about the trade deals Asia’s businesses can take advantage of.

COVID-19 has changed the world and our way of life, but for the business looking to grow, the message is clear. If you’re seeking opportunities across the Asia Pacific, you will find them. For the latest tips and insights on trading cross-border, visit us here or follow us on LinkedIn.
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About the Author
the author bio

Kawal Preet

President,
Asia Pacific, Middle East and Africa, FedEx Express

Kawal started out as a FedEx engineer in Singapore over 20 years ago, and she’s now the President of FedEx Express AMEA. Kawal is based in Hong Kong.

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