Rebooting the Asian Economy

While it’s impossible to accurately estimate what the economic losses had been globally with the Pandemic around it, the University of Cambridge study in 2020 has stated that if the Pandemic was left unchecked, it would have costed the global economy over $82 trillion over the next five years, and we have seen that economies across the world have been hit hard by the pandemic. But when we look at Asia, the picture is slightly different in Asia. Says Neeraj Bansal Neeraj Bansal, Chief Operating Officer – India Global, KPMG as he opens the panel discussion on “Rebooting the Asian Economy Post Pandemic Expansion -Challenges & Opportunities for Businesses” at the recently concluded 6th edition of The Economic Times Asian Business Leaders Conclave on 24th March 2022.

Leading the discussion, Neeraj points out that the world economy shrank by 3.2% in 2020. The Asian economy, on the other hand, contracted only by 1.5%.  Asian countries also played favorably as an investment destination. While, the foreign direct investment in the region remained consistent, it dropped only by 1.3% in 2020 compared to a decline of almost 35% globally. Also remarkably, the intra ASEAN region’s share of trade actually increased. It was 12% in the previous year and now it is at 17%. He highlighted the one major development that had happened during the pandemic period is the signing of the RCEP agreement, which is expected to cover 30% of the global GDP and will also account for a quarter of the global trade in goods and services.

In this riveting discussion on the rise of Asian economies, Ketan Patel, Managing Director, HP India, Devin Narang, Managing Director, India, Sindicatum Renewable Energy Company, Singapore, Mayra Andrea Mueller, President, Indonesia Jordan Business Council and Benjamin Chua, Founder & CEO, Speco Singapore (f.k.a Spic & Span) speak on how the growth momentum initiative can be sustained, what the expansion strategies can be, what are the opportunities for both businesses and investors, and what are the challenges that businesses must overcome? They also bring forth their point of view on Asia doing relatively better than the global growth around it. And if the economic revival has been uniformed across the region.

Ketan Patel’s perception is that Asia is in a better place even after the situation which the world has faced over the last 18-20 months. So, the number speaks for itself in terms of how Asia’s resiliency is much stronger, one of the few differentiators where Asia is showing up like this is fundamentally around few areas is about how the demographics are in this part of the world and how each of the countries within Asia is throwing up different kinds of potential, giving the demographic dividend. This is a much younger part of the world.

Ketan feels that Asia to some extent on technological innovation was relatively behind the rest of the world. But now investments have leap frogged into a lot of infrastructure development around technical areas or any other infrastructure areas which is driving a lot of accelerated innovation and investment and hence the overall robustness looks very good.

Adding that Asia is a diverse set of countries and cannot be uniformed across all regions. One side you have China, other you have Japan and then you have a lot of emerging Southeast Asian countries and then India and Asian countries. The relativity and the rate of growth will be different for each of the markets

While speaking of the younger demographics, technology investments getting accelerated and the fact that Asian consumption patterns are different across regions Devin Narang, echoed similar views, describing Asia as “a growing economy”.

“If you particularly look at this part of the world, we are all entrepreneurs. So, it’s an entrepreneur-based society. And when you are entrepreneurs, then your ability to adapt to technology becomes very easy. And with the demographics in favour of Asia, you will see that in the past two years. He says, first of all, I don’t even remember whether now we should talk about the pandemic or we should talk about a different world order considering there is a war going on between Russia and Ukraine. So, I think most of us have forgotten the Pandemic and moved on, what has emerged for example, in a country like India, I think we’ve had 25 unicorns which have come up in the Pandemic. I mean, that’s a remarkable achievement. We’ve seen a flow of money coming in like never before, particularly from the US, because the Fed just pumped in about three to $5 trillion and that money was really not needed there.

So, it found its way into a lot of startups and into the stock markets here, we saw a lot of buoyancy here and we saw different kind of growth, at least in India. Those companies which adopted technology and were able to recognize technology across Asia grew very fast. The economies grew very fast. For example, I know a lot of startups who took to marketing in a different way. So, there has been a focus, there has been a shift in the way to do business in the past two years. And therefore, that has led to a higher growth in Asia than compared to Europe, which I consider particularly a dead market because there is hardly any growth, opined Devin.

Mayra Andrea Mueller, stated the fact that technology investments and its adoption are changing the uptake on Indonesia’s economy perspective as well as that of companies which are operating in the region. “In Indonesia growth in business and trade has intensified, as well as investments in the country is on the rise.   “Increasing of investment in business and trade is very important to boost development in the country. Also, the investments policies in Indonesia are boosting technology and agriculture and boast of strong establishment for investment equity funding which this primary objective of Indonesia’s minority funding and is supported by legal policies and security guarantees. The country has also amended various regulations to create a positive investment climate and encourage transparency in Indonesia. Mayra further adds that the Country is desirous on interactive investments that can also focus on a labor-intensive investment and for export-oriented natural resources processing industry, which can help elevate the industry with a multiplier effect on the absorption of labor and an increase in revenue income with the result of which can be an increase in exports and growth of foreign exchange in the country.

Benjamin articulates the aspect of Singapore being the financial hub for the region with great detail. “So, fast tracking two years back when Kobe first started here in Singapore in 2020, we were hit as well. There was a contraction. One of the worst hit industries was actually construction. I think we took a scale back of about 35%. But aside from construction there was some tailwind in certain industries. I think industries such as tech, real estate industry and investment banking were the worst hit, and they grew back really quickly and fast forward to two years later. Reported by Bloomberg, Singapore is probably one of the countries that has the fastest GDP recovery in over a decade. This is the fastest we have grown in this entire decade. And where did all this growth actually come from? It came from three major sectors. Manufacturing. It grew really quickly. It recovered from contraction.

Construction rebounded as well as the service industry where Singapore is so well known for as. But how did we get to this stage? I think we as in Singapore the government has been talking about endemic phasing moving past the whole pandemic. We’ve been talking about this for almost a year and how do we do to get to this stage? I think aside from having a strategy we focused on boosting the vaccination rates. More than 90% of our population is vaccinated, more than 90% of us are also boosted which means that we took three injections. So right now, what we’re trying to do is to ease the measures even further.

On the easing of travel restrictions, Benjamin states that “in Singapore, we do not have any resources and we have to see flights coming in, we have to see trip going in order for Singapore to grow, in order to attract talent, in order to attract investments, in order to attract even venture tax as well. So, I think this is Singapore’s strategy in getting back to recovery, a good strategy, high vaccination rate and pushing towards the endemic phase. I think we’re all striving towards it.”

On supply chain, Benjamin points out that, self-reliance is such a tough word for Singapore, “we virtually don’t have a big domestic market. We virtually rely on external taxes, external parties, in order to boost our trade as well and this will continue to be the way we cannot be closed off to the rest of the world, which is why our strategy has always been very consistent. Our strategy is a bit different from some of the other Asian counterparts as well and I think this is working. Look at just the numbers themselves. We are flourishing but what I see is going to be a challenge moving forward is the supply chain. I think we have seen supply chain disruption since the start of Covid and this became quite a big issue at the start of the year when we talked about the budget of Singapore where we had this discussion with the finance ministers as well. And this is an issue that has been brought forward several times.

The cost of supply chain has increased not 20% or 30%, but we are talking about 300%.  Singapore being a hub to the rest of Southeast Asia this is possibly a problem with freight cost increasing. The rest of the things go up as well. We’re talking about inflation; we’re talking about rising consumer indexes and all these kinds of things. This is something that I think is really close to my heart because as some of you may understand my background, I started this company as a social enterprise five years ago. Why did I do it? It started as a housekeeping company. I was working for a private equity firm so I was doing quite okay but one day my friend called me up. He said that there are some workers that got retrenched and what can we do about it? So, at that time, we started this as a social enterprise and we started providing jobs to the marginalized. We are talking about ex-offenders, persons with disabilities so these are the bottom 10% of the market and I’ve always been very concerned about this group.

We see this as a problem because how does the vulnerable end up becoming more vulnerable? How do we stop this from happening as well? How do we stop them from being cycled in a cycle of poverty? The next part aside from supply chain disruption, aside from all these other issues is society; the society fabric, the social compact itself. We do see that in the rest of the world as well. The rich are getting richer. Those bankers, they’re all getting richer. The tech startup, they’re all raising money like nobody’s business. But those that are falling below the poverty line are getting worse. So how do we look at this from an inequality point of view?  were some of Banjamin’s apprehensions, which were of concern to the other panelists as well.

Some big questions that were raised during this discussion were on the prevalent inequality that is kind of increasing, the Russia-Ukraine crisis and resulting inflations which are creating a de-balancing effect and possibilities of increasing further disruptions in the region.

For more on this exhilarating conversation click here