By Nathan Gray.
Asia is increasingly seen as one of the major global drivers of economic growth around the world. It is home to nearly half the world’s population - some 3.3 billion people, including China with nearly 1.4 billion and India with 1.1 billion. The speed at which the middle class is rising from poverty across Asia is faster and has greater depth than at any previous point in history. China is the major trading partner of most western economies, and then there is Japan, Korea, India all amongst the largest Asian economies and highly integrated into global trading networks. Asia is a behemoth. It's a continent of rapidly emerging wealth, with seemingly abundant labour and mineral resources, and yet many people in the west look to Asia with fear, suspicion, and disbelief that there is anything here of merit worth pursuing seriously. There are also the regular prophets of doom forecasting imminent collapse of the Asian "miracle".
"Really?" I can hear you say.....isn't this the "Asian Century". Aren't we all refocusing on Asia?
The short answer is no.
The public is fearful of the rise of Asia. We see this in our media coverage of events in China, Indonesia, the Philippines and India. There is almost a colonialist view that is prevalent amongst many comments in the media. That is that we (the civilised west) are better than these emerging Asian economies. This fear is seen most directly in our discussion of foreign investment. Media commentators raise concerns over Chinese, Indian, Indonesian, Japanese and any other investment into property; particularly residential and agricultural. This is despite foreign direct investment (FDI) from these countries in most cases well behind FDI from North America and Europe. There is often discussion of the need to take a protectionist approach to trade, in order to ensure our Asian friends don't ship off the farm to Beijing or New Delhi.....or else yet "steal" our jobs!
This conflicted and negative public perception of Asia is at times propagated and allowed to flourish by our politicians. At various points in the recent past there have been exaggerated and negative comments made about FTA's, and similarly negative sentiments expressed about people, businesses, and governments from different regions in Asia. As long as there are votes to be gained. These discussion points from the public, media and political classes have created a conflicted perception of Asia. Australia is inexplicably linked to Asia through trade, commerce and geography, and yet our xenophobic fear of the neighbours to the north are limiting our economic and political integration with Asia.
Western economies such as Australia are undergoing industrial disruption on a large scale. Our economy is moving from a mining construction to maintenance phase. Traditional manufacturing has been eroded to the point of collapse, and the knowledge economy seemingly requires fewer employees to complete a task than was the case in the "old" economy. This economic transformation has created the perfect environmental conditions to foster, fear and loathing in the perceived cause of all of our ills......the rise of Asia.
And yet Asia is not the cause of our ills but the result of increasing global economic integration. Asia has re-awakened after more than 300 years of Western economic dominance. This is not a process that is likely to be reversed. Get used to it. Asia has not fully emerged yet, but is coming fast. The challenge for western business leaders will be on how to strategically grasp opportunities in Asian markets, in a manner that may fundamentally transform the business beyond the traditional western business model.
Many western business leaders have been content to look to Asia for the most part as the low cost manufacturing base for consumer markets in the west. However, this economic reality is evolving and it is now increasingly the case that if you are not reaching the Asian consumer market then your business model is limited in scope, and possibly doomed to failure. We need to acknowledge the growth of the Asian middle class that by some measures is upto 1 billion people. Some economists are forecasting there will be 3 billion middle class consumers in Asia by 2030.....these are massive numbers.
I regularly find Western business leaders talking of the opportunities in Asian markets. But when reality hits that these emerging Asian markets are structured differently, have different regulatory processes, are complicated by complex cultural expectations, and opportunities simultaneously can rush and crawl to a conclusion, these very same executives find an inability to act. Subsequently these businesses aren’t equipped to strategically take advantage of opportunities in Asia. The Asian century therefore becomes for many western businesses an enigma….an intangible market too difficult to crack.
At the same time there is the new emergence of Asian businesses who are aggressively and rapidly growing in financial strength due to the power of the “local” Asian market. How many in the west have heard of the new generation of Chinese entrepreneurial companies like Xiaomi; the five-year-old smartphone manufacturer that is the third largest manufacturer of smartphones in the world? Asian businesses are rapidly emerging to respond to the consumer needs of the fast growing Asian middle class (and I would point out this is not just occurring in China, but across East Asia, South East Asia and South Asia).
Western business leaders need to adapt quickly to the emerging Asian markets from South Asia to East Asia and everything in between. It will require a re-appraisal of western models of corporate risk to accept the emergent opportunities in Asia. It is not the time to be cautious and xenophobic about Asia, but to open our minds and grasp the opportunities in the region. Without a bold reassessment of the strategic market opportunities in Asia the future may be bleak for western business who remain too cautious to respond to the opportunities and challenges ahead in the Asian Century.