<p>Richard Martin, Managing Director of IMA Asia, our sister company, spoke at a session of the CEO and CFO Forums earlier this week. His commentary centered on the global economy, together with projections, risks and opportunities. Richard provided an interesting perspective on how the world has evolved over the course of the last 5 decades, providing a basis for where future opportunities for businesses are likely to stem from. Countries, he argued, rise and fall mostly for obvious reasons. These include consumer demography, an ability to raise capital either through internal savings or foreign investment and the efficient use of labour, resources and technologies. Those that have excelled, have shown an uncanny ability to be resistant to risk, as also to sustain a level of growth over decades, limiting the frequency and duration of tumbles. At the end of the day, it helps to avoid bad politics and follow policy guidelines that would at best be written on no more than half a page!</p><p>Notable in its incessant rise is the Asia Pacific region which, over the last 50 years, has jumped from contributing 14% of world GDP to 33%. The main drivers to this remarkable story have been consumer demographics, generally avoiding bad politics and excelling in export driven manufacturing. The rise of the Asian region was on the basic premise of a liberal world order, which encouraged the free flow of goods and capital across national boundaries. Leading the pack has been China with a national output aggregating to USD 18 trillion - 18% of global GDP. In 1970, its share was below 3%. The critical issue for business managers to grapple with is whether growth in China has stalled and whether the reward of the China opportunity is offset by rising risk. As things stand, China is still considered worth the effort. What needs to change is China’s role in global corporations, specifically in supply chain linkages. This is prone to a new set of risks.</p><p>The Asean 6, specifically Indonesia, Vietnam and Singapore, have got their basics right and should continue to prosper in the years ahead. Thailand, Malaysia and the Philippines will grow at rates between 3-5% leading up to 2030. The Asean 6 now constitutes 4% of global output compared to 1% in 1970. North Asia, that incudes Japan, Taiwan and South Korea, has inched ahead over the decades. Taiwan’s share of global output increased from 0.2% to 0.8% and it remains critical to global manufacturing as the principal producer of sophisticated computer chips. The shares of South Korea and Japan have altered from 0.3% to 1.7% and 6.2% down to 4.2%. Both countries are likely to shrink in terms of global market share, mostly on account of an ageing population and colossal public debt.</p><p> The divergence amongst the two large western economies that constitute the United States and the Euro area, has been most blatant. US GDP in 2022 was 80% larger than the Euro area (USD 26 trillion vs USD 14 trillion), both were the same size in 1991. America has been much better at innovation and adopted a more liberal immigration policy, especially in the technology sector. When your columnist first visited the Bay area in the Silicon Valley, in 1984, there were few immigrants, San Jose airport had no aero-bridges and passengers walked down a staircase. Now, the entire region thrives on a large Asian community and San Jose airport operates as many flights as San Francisco.</p><p> This article is the first of a two-part series. The follow-on piece will address how the economic environment will play out the next 7-10 years and the likely winners and losers.</p>
<p>Richard Martin, Managing Director of IMA Asia, our sister company, spoke at a session of the CEO and CFO Forums earlier this week. His commentary centered on the global economy, together with projections, risks and opportunities. Richard provided an interesting perspective on how the world has evolved over the course of the last 5 decades, providing a basis for where future opportunities for businesses are likely to stem from. Countries, he argued, rise and fall mostly for obvious reasons. These include consumer demography, an ability to raise capital either through internal savings or foreign investment and the efficient use of labour, resources and technologies. Those that have excelled, have shown an uncanny ability to be resistant to risk, as also to sustain a level of growth over decades, limiting the frequency and duration of tumbles. At the end of the day, it helps to avoid bad politics and follow policy guidelines that would at best be written on no more than half a page!</p><p>Notable in its incessant rise is the Asia Pacific region which, over the last 50 years, has jumped from contributing 14% of world GDP to 33%. The main drivers to this remarkable story have been consumer demographics, generally avoiding bad politics and excelling in export driven manufacturing. The rise of the Asian region was on the basic premise of a liberal world order, which encouraged the free flow of goods and capital across national boundaries. Leading the pack has been China with a national output aggregating to USD 18 trillion - 18% of global GDP. In 1970, its share was below 3%. The critical issue for business managers to grapple with is whether growth in China has stalled and whether the reward of the China opportunity is offset by rising risk. As things stand, China is still considered worth the effort. What needs to change is China’s role in global corporations, specifically in supply chain linkages. This is prone to a new set of risks.</p><p>The Asean 6, specifically Indonesia, Vietnam and Singapore, have got their basics right and should continue to prosper in the years ahead. Thailand, Malaysia and the Philippines will grow at rates between 3-5% leading up to 2030. The Asean 6 now constitutes 4% of global output compared to 1% in 1970. North Asia, that incudes Japan, Taiwan and South Korea, has inched ahead over the decades. Taiwan’s share of global output increased from 0.2% to 0.8% and it remains critical to global manufacturing as the principal producer of sophisticated computer chips. The shares of South Korea and Japan have altered from 0.3% to 1.7% and 6.2% down to 4.2%. Both countries are likely to shrink in terms of global market share, mostly on account of an ageing population and colossal public debt.</p><p> The divergence amongst the two large western economies that constitute the United States and the Euro area, has been most blatant. US GDP in 2022 was 80% larger than the Euro area (USD 26 trillion vs USD 14 trillion), both were the same size in 1991. America has been much better at innovation and adopted a more liberal immigration policy, especially in the technology sector. When your columnist first visited the Bay area in the Silicon Valley, in 1984, there were few immigrants, San Jose airport had no aero-bridges and passengers walked down a staircase. Now, the entire region thrives on a large Asian community and San Jose airport operates as many flights as San Francisco.</p><p> This article is the first of a two-part series. The follow-on piece will address how the economic environment will play out the next 7-10 years and the likely winners and losers.</p>
