• October 31, 2017
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  • Trade

Asia: The New Center of Gravity

Here are five takeaways on what rising connectivity means for Asia.

Jim O'Gara | UPS

As thought leader Parag Khanna reminds us, we’re living in an age of rising connectivity, which affects everything from highways to seaports to power lines and broadband cables. This is particularly relevant to Southeast Asian nations expected to account for a greater share of global economic growth.

With a tip of the hat to Khanna, here are five takeaways on what this shrinking world means for Asia as a whole.

More trade within the region

Intra-Asia trade is steadily increasing, even exceeding exports to Europe and the US in certain industries. The ASEAN nations in particular are showing great promise for businesses looking to expand in the region. ASEAN has barely half the population of China, but it has been successful in attracting significantly more foreign investment.

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ASEAN nations have been successful in attracting more foreign investment.

With the ASEAN Connectivity Master Plan in place to promote bilateral ties and strengthen cross-border commercial relationships, intra-Asia trade is on an upward trajectory – businesses should plan accordingly.

 Infrastructure is the backbone

With increasing affluence, skyrocketing rates of internet penetration and the rapid adoption of new technologies, Asian consumers are enjoying unprecedented levels of access to goods and services from around the world. Underscoring this progress is a steady increase in connectivity that makes it easier than ever before for the forces of supply and demand to cross borders.

China perfectly illustrates the key role of connectivity – the mobility supported by China’s high-quality infrastructure has enabled it to become one of the world’s most developed e-commerce markets. Without the underlying foundation of high-speed rail lines and broadband cabling, China may not have given rise to the likes of Alibaba and the related economic growth.

An Iron Silk Road

Connectivity will become even more apparent with China’s ambitious “One Belt, One Road” (OBOR) initiative and the huge boost to infrastructure that it entails. The pace of this project has ramped up considerably since its formal announcement. With trillions of dollars of infrastructure developments planned in the coming decades, the splintered nations spread across Asia will be connected like never before.

Manufacturing shifts

While Asia has long been a heavyweight in the worldwide manufacturing scene, global brands have started relocating their manufacturing operations within the region. This shift has driven higher levels of quality control and also boosted training and IT capabilities in countries like Vietnam, which have emerged as new hotbeds of manufacturing.

As a result, businesses now have heightened access to manufacturing capabilities that deliver high quality for a low price. ASEAN countries like Vietnam, the Philippines and Indonesia are poised to reap the lion’s share of the benefits.

The World Economic Forum hosts a panel to discuss ASEAN economic growth.

Challenging diversity

Operating in Asia brings with it a particular set of challenges. As one of the most diverse regions in the world, some businesses cite language barriers as a challenge. While English is rapidly emerging as a common language, companies are increasingly turning toward non-verbal communication as a solution. Take, for example, training conducted via video and animation – these platforms not only train a greater numbers of employees, they also serve as reference material for future use.

Asia is making big strides toward truly seamless transportation. Businesses looking for their next big opportunity would be wise to ride the tidal wave of newfound connectivity – or risk getting left behind.

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Jim O'Gara is President of UPS South Asia.

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