Corporate webinars and blogs on communications could be the answer to many questions: how increase sales, grow your brand, reach more potential customers and establish yourself in the region. DROFA CA is not only responsible for a training of the team, but also learns from them. Svyatoslav Gazandzhiev, Senior Communications Manager at DROFA CA, is an expert in the field of Far East and Asia. Today he will find out why the East remains a strategic priority for the West.
Eastern Allure: Why Asia Is a Promising Market for the Western Investor.
The answer to this question is obvious to anyone who is the least bit involved in business. This region is currently setting the pace for global economic growth and actively expands on trends that come from the West. Entering the Asian market is the dream of many companies, especially in tech. The Asian-Pacific region is a logical next step for their business.
Developed countries are still out ahead of developing countries in just about every market measure. Nonetheless, investors are paying more and more attention to the rapidly growing Asian markets. No surprise there: imagine having a gigantic sales market worth $6.6 trillion in front of you and you don't know how to get into it. That's when you start asking yourself questions like: “How do I ride this wave?” “How do I catch the biggest trends in the most promising region?” “Why is the Asian-Pacific Region (APR) growing and what are the unique features of its local trends?” So let's delve into the key features of this market.
Just look at a world map, and you'll see the allure. First of all, this region is home to over half the world's population: 4.5 billion people, or 60% of everyone in the world, lives there. Second, the region's demographics look particularly good: the average age for consumers is 30 years old. While Europe is aging rapidly, the Asian markets are set apart by how young and mobile their consumers are.
Despite the slowing growth rates of the last few years, the number of wealthy people in Asia, as well as the region's overall wealth, has continued to grow faster than anywhere else in the world.
Something to note in particular is that while a decade ago businesses saw Asia as merely a source of cheap imports, now companies are interested in
exporting to Asia.
Just 50 years ago, one of the APR's subregions, the Southeast Asian countries, was one of the poorest in the world. Over this time period, an incredible leap forward has taken place: the region's overall GDP increased tenfold, and now Western investors are pumping hundreds of millions of dollars into what had previously been extremely risky markets.
Today's favorable state of affairs is the end result of a long path that the region had to take to become attractive and promising as a target for investment. Southeast Asian countries are attractive in a number of ways, both for international expansion and for investing in tech projects. Tangible support for business from these countries’ governments also plays an important role. Many investment companies are now opening or looking into opening offices in Singapore or Kuala Lumpur.
However, despite the attractive forecasts for economic growth, growing middle class, large population, and so on, the biggest challenge is the mindset on the Asian market, which is a difficult factor to take into account when adapting products and services.
Southeast Asia: The World's Fifth-Largest Economy
What is the secret behind the economic miracle in Southeast Asia? First of all, there's the demographics. The subregion's population is about 600 million, with moderate annual growth. On top of that, the population is young, fairly well-educated, and characterized by the idiosyncratic, but unmistakable Asian work ethic. Plus, the governments of certain countries have made investments into developing their technological infrastructure.
Second, the region is relatively calm. That's not to say that there are no military conflicts or other sources of tension at all, but they are not so dangerous as to interfere with the region's economic well-being.
Third, this economy is not as dependent on importing natural resources as developing countries that, for example, import oil. With the exception of Singapore and the Philippines, there is a relatively high level of persification in the industrial sector. Extractive industries, manufacturing, and services are all equally developed, so these countries do not face a critical threat from volatility in global demand for raw materials.
Finally, being next to the economic giant that is China has resulted in significant dependence on its key indicators. Southeast Asian countries are extremely sensitive to their “neighbor's” condition, which is unquestionably due to the gigantic volume of both demand and supply generated by China and the strong (economically and politically) Chinese diasporas in these countries. This is why the state of the Chinese economy has a direct effect on the economies of Southeast Asian countries, and this factor should always be taken into effect.
Southeast Asia lags somewhat behind China and the other “Asian tigers” in its development. Southeast Asia is currently economically in the same spot that China was 10 years ago: on the verge of a major economic boom triggered by the tech industry. According to certain forecasts, the Southeast Asian subregion could become the world's fifth-largest economy in 2020.
Fintech Conquers Asia
Despite the rapid growth in Southeast Asian economies, systematic inefficiencies are still holding the region back. For example, only 27% of the people living there have bank accounts, leaving over 400 million without any banking services.
This gap could be filled with technology, however. Many crypto startups have launched initiatives to provide financial services to those without bank accounts, and there are several products serving the region that use mobile apps to expand client bases.
In addition to the large well-known systems like Tencent (operated by WeChat, with 1 billion users) and LINE (78 million users), which recently merged into a unified mobile platform for convenient payments, there are the relatively new startups GCASH, PayMaya, Coins.ph, and Bitbit.cash.
The development of these markets should be closely watched. A key challenge for companies looking to expand internationally is how their products and services will be received outside of their home countries. It is important that the new product you offer effectively realize their potential and meet their needs, that it be timely and provide modern opportunities, rather than running ahead of the market or lagging behind it.
Asia is currently the most rapidly developing market for fintech projects.
Growth rates in fintech are very high in Asia overall. Even if we set aside blockchain and cryptocurrencies, for which the global situation is currently rather difficult to predict, there are quite a few more conventional and in-demand projects worth paying attention to. That includes the food delivery service GrabFood, the ridesharing platform Go-Jek and bikesharing platform Ofo, the online marketplace Carousell, and many, many others.
Rich Singapore, Poor Indonesia
When entering the Asian market, businesses must first decide whether to start with well-tested countries or take on risk and look at a country with a less-developed economy, where failure would mean fewer losses. This decision depends on a variety of different factors and will ultimately be based on thoroughly researching the market landscape.
Different regions have their own special features. Buying power and consumer habits also vary, of course. For example, Singapore is a densely- populated urban region with over 5 million people living on just 278 square miles of land. The country's economy is set up to create the most convenient possible conditions for doing business. It takes just a few minutes to register your own
company online. The entry-level monthly salary for the average young professional is over US$2000. In 2018, the average monthly salary in Singapore was US$3100 after taxes.
In contrast to Singapore, almost half of Indonesia's population lives in rural areas, and there are only two major cities across 735,400 square miles. The population of Indonesia's 17,000 islands speaks over 70 different languages. The average monthly salary is US$1200.
According to the World Bank, the GDP per capita for Singapore, Southeast Asia's richest country, is seven times higher than for Indonesia, 28 times higher than Vietnam, and 44 times higher than Myanmar.
Therefore, when making investment plans, you should take into account the variation across Asia and the potential offered by underutilized markets. Remember that in addition to the highly developed markets we hear a lot about (China, Japan, South Korea, Singapore, and Taiwan) there are also the less famous, but quite promising and actively developing countries in Southeast Asia (Indonesia, Malaysia, Cambodia, Vietnam, Thailand, Brunei, Laos, Myanmar, and the Philippines).
The growing middle class is another positive sign for the region's future, as it spurs on the consumer market, including online sales. As a whole, the region is going through various phases of the consumer boom: from its inception, such as in the Philippines, to maturity, as seen in Singapore's high consumption levels.
According to RBC Wealth management, the average income per capita for the region is about $1200 per month (although this average is strongly skewed by wealthy Malaysia and Singapore) and continues to grow.
In contrast to Southeast Asia, China, Japan, and South Korea are giant countries and markets. For example, some people think that Japan (the region's second most prominent country) is a small island nation. In reality, Japan covers a larger area than Germany, while its population almost equals that of Russia.