By Siddharth Shankar, CEO, Trails Trading
New figures released by the Department for International Trade show UK exports to Asian countries such as India and China growing significantly in the year to March 2018 (up by 31.8% and 15.3% respectively). Notwithstanding the stutter in growth triggered by the US-China trade war, Asian countries are boasting rapid economic and population growth. So, what new opportunities are there for UK businesses in Asia and how can these be exploited?
The UK government has been working hard to pave the way – strengthening trade ties and putting greater incentives in place. Over the period July-October 2018 ministers from the Department of International Trade will visit South Korea, Vietnam, Japan and China. This comes after a succession of visits in the first half of the year. In April, for example, UK Trade Minister Dr Liam Fox touched down in Bangkok on a mission to strengthen links with South East Asia’s second largest economy. It’s the first time in fifteen years such a visit has been made. Simultaneously, the UKEF announced it would double finance available for British businesses exporting to Thailand to £4.5 billion.
It’s easy to see why this has become a priority for the government. Within Asia’s booming population, increasing salaries mean there is a rising middle class – the fastest growing in the world.The highest number of billionaires and millionaires on any continent are also located in Asia. As a result,Asia’s population has an increasingly disposable income and the demand for products and brands is at an all-time high. Health-care spending alone is expected to exceed $3.5 trillion by 2020.Collectively, Asia now represents 60% of the total buying power of the world.
The good news for UK businesses is that the specific demand for high-quality British-made goods – from whiskey to chocolate – is particularly strong.Indeed, research from Barclays Corporate Banking[i] found that 64% of consumers in India, 57% in China, and 48% in the UAE were prepared to pay more for goods made in the UK, because they perceive the quality as higher.
Exporting to Asia is also becoming more straightforward – making it a more appealing proposition for UK businesses. The fast-improving infrastructure in many Asian countries, coupled with the cheap warehousing and logistical costs mean that it’s becoming more feasible to trade there. The lower cost of labour in Asia also allows western businesses to operate in these markets at a reduced cost – minimising the risk normally associated with entering a new export market. Adoption of IFRS and Corporate governance codes by many countries across Asia is also making the process easier.
There are big differences between the different regions in Asia though, so it’s worth taking a close look at the potential of specific nations and areas for individual businesses and sectors. Essentially, Asia is made up of fifty countries, categorised as five major markets – namely China, the Indian Subcontinent, ASEAN countries, the Middle-east(GCC) and East Asia.
- China has immense potential for British businesses. The UK already has a good image there for trade and education relationships.
- India has a population almost equal to that of China but a GDP growth rate of over 7.5% – which is almost double that of China.
- East Asia is a large and wealthy society with high consumption rates. Japan is the world’s third largest economy and already considers the UK an ally, based on long-standing cultural and economic ties. Korea has one of the world’s fastest growing economies – larger than Russia’s, with a third of the population.
- The ASEAN Region– the Association of South-East Asian Nations, including Singapore, Malaysia, Thailand, Vietnam and Indonesia – has a combined population of 640 million people and an economy worth over $2.8 trillion, with increasingly open internal trade. Of the ten members of ASEAN, four are former British colonies and three of those are members of the Commonwealth. Its aggregate economy is forecast to grow this year and next by five percent. The ASEAN region is fast changing from a low-cost manufacturing destination to a pillar of strength of Asian GDP. This area also is a major trade route for global business. The process of regional cooperation and integration is already evident there.
It’s also worth noting that more than half (54%) of CEOs in Asia Pacific are planning new strategic alliances or joint ventures to drive growth and profitability this year, according to PwC’s latest annual CEO Survey[ii]. A further 42% are seeking new mergers or acquisitions.This presents significant opportunities for UK businesses looking to expand overseas.Africa-Asia partnerships also offer new economic opportunities.
There are opportunities within a wide variety of sectors in Asia – from healthcare products to food to tech. Governments are also aiming to shift 60% of Asia’s population to urban areas by 2025. This creates demand in urban infrastructure – with a continued need for both trade and investment. The governments have also signalled that foreign investment will have a significant role to play in this process.
In all, Asia is a market that gives UK businesses access to a population of 4.6 billion people – 75% of the world’s population. And, with Brexit fast approaching, this is an ideal time for more UK businesses to begin exploiting these opportunities.