By Graeme Davies
For many years, companies looking to export eastwards into Asia have concentrated on the Asian ‘superpowers’ of China and India as their target markets, but this is potentially doing a disservice to the opportunities elsewhere in a region where other economies are growing rapidly. The success of China and India is rippling out and creating wealth in neighbouring countries which Welsh exporters could benefit from.
The opportunities in China and India are indeed huge, but countries such as Vietnam, Thailand, Indonesia, Pakistan and Bangladesh are also experiencing rapid growth.
In many ways Asia, so long dependent on export driven growth powered by the Western economies of the US and European Union, has been forced to adjust by the prolonged downturn the developed economies have suffered. This has created an imperative in China in particular to encourage domestic-led consumption.
But with costs rising in China, and to a lesser extent India, companies have been prompted to shift production to neighbouring countries which in itself has begun to create more wealth in those countries. This feeds into the growth of the middle classes in such countries and also to their own domestic consumption.
With these economies at an earlier stage of their development, the opportunity for exporters to grab market share remains. Companies which make products required for the growth of infrastructure, such as equipment for power generation and the build out of telecommunications networks, should be looking to make inroads, as should suppliers of industrial manufacturing equipment. Hence the forthcoming UK Trade and Industry trade delegation to Vietnam and Indonesia in April.
Vietnam’s telecommunications industry expanded 19-fold between 2000 and 2010, by which time it was worth $17bn, and Indonesia is forecast to be the seventh largest economy in the world by the middle of this century.
Although dwarfed by China, Vietnam has a population of 90 million and its economy grew by an average 6.5 per cent a year between 2007 and 2011. The UK exported more than £500m worth of products to the country in 2011. Indonesia, with 240 million people and a middle class population estimated in the region of 50m, is bigger still although exports are currently at a lower level.
Services companies can also benefit from establishing themselves in such economies during the early stages of growth when demand for consultancy for construction is at its height, other services such as education and training are also likely to be in demand for many years. And even the most unexpected products could find their way into Asian export markets, hence the trade mission by Welsh secretary of state David Jones to Japan, the Philippines and Vietnam this month to extol the virtues of the Welsh food and drink industry.
But Welsh businesses have more to do in Asia according to export figures which showed the value of exports to Asia and Oceania falling from £397m to £373m in the third quarter of the year, and further to £356m in the final quarter compared with £433m in the final quarter of the previous year. Countries such as China, Hong Kong and Singapore continue to dominate these trading figures, which suggests more can be done to exploit the growth of the next wave of Asian tigers.