22 January 2018
The Asia Pacific has long been the world’s fastest growing region. Now often referred to as the Indo-Pacific – noting India’s emergence – 5-10 percent national GDP growth rates are frequently attained.
Throughout Asia, the British government could seek trade relationships and British firms could more actively invest and trade. Areas of particular interest include:
For thirty years an average 10 percent growth was reported. Over 400 million came out of poverty – little short of the world’s total reduction. China became the world’s low-cost manufacturer. While widely believed that the reported data are exaggerated, this country has clearly grown impressively, now the world’s second largest economy. Although even the reported growth has fallen recently, the actual growth is still likely to be around 3-4 percent. Britain’s image here is good. For rich Chinese families, Britain is the first choice for universities and the second choice for schools.
Japan is the world’s third largest economy, with high personal savings and strong in high technology. It is growing slowly, partly because it has entered a period of low fertility. Its population could fall by a quarter by 2100. However, it is a large, wealthy, society with substantial consumption. Japan considers the UK a friend and ally, based on long-standing cultural and economic ties and political and security factors.
Growing the last three years at an average rate of over 7.5 percent - faster than China - India was the world’s seventh largest economy in 2016. With India’s substantial population growth and China’s low growth rate, the reported gap between the two is so small now it is almost a rounding error. Given the general weakness of demographic data and especially in China, it is possible that the long-awaited surpassing of China by India to become the most populous country has already happened. This will have in particular one marked effect: just as most international companies have tended to feel they must have a “China strategy”, so in future will they feel it necessary to have an India strategy. This will almost inevitably lead to more foreign direct investment flows into India to the benefit of its infrastructure and its manufacturing skills.
ASEAN is the Association of South-East Asian Nations, including Singapore, Malaysia, Thailand, Vietnam and Indonesia. With 640 million people, an over $2.8 trillion economy and increasingly open internal trade, ASEAN becomes increasingly important. Its aggregate economy is forecast to grow this year and next by five percent. Of the ten members of ASEAN, four are former British colonies and three of those are members of the Commonwealth. Since 1971, Britain, with Australia and New Zealand, has been a member of the Five Power Defence Agreement with Malaysia and Singapore. This addresses external threat or aggression against the Malay Peninsula or Singapore. Many Singaporeans, Malaysians and Thais go to school and university in Britain.
These are Commonwealth countries. With Canada and Britain, they are also members of the exclusive “five eyes” intelligence sharing relationship with the United States. In 2016, the IMF forecast Australia to overtake Spain, the EU’s fourth economy, by 2021. Australia, New Zealand and Britain share similar economic outlooks.
Korea has one of the world’s fastest growing economies, verging on the top ten. It has a larger economy than Russia with a third of the population. During the Korean War, Britain was the second largest troop-provider in support of South Korea after the United States. However the UK has neglected trade, providing 1.3 percent of imports, compared for example with Germany’s 4.9 percent.
The Asia-Pacific Economic Community should also be noted. It contains 21 countries - from Chile in South America through Mexico, the US, Russia, Japan, China, Taiwan, Indonesia to New Zealand. It aims to create growth and increased economic integration. One innovation is the APEC card for qualified businessmen to secure visa free entry to most other member countries. Britain’s Pitcairn Islands territory makes it technically a Pacific participant. Even if this were not accepted it would be a creative initiative for the UK to apply to be a member/associate member of APEC and offer reciprocal access to APEC card holders to the benefit of UK-APEC business.
China is so large economically that policy-makers are tempted to put most of their eggs into one basket – what we might term the Osborne error. However, Beijing’s habit of using trade tactics to address political disagreements can turn businesses into victims of ideological disputes - as occurred with Norwegian salmon after 2010 or last year’s sanctions on South Korean businesses. Fortunately there are several alternative areas in the Indo-Pacific region to create a balanced trade and investment portfolio.
Considering both the dynamic growth and Britain’s history in Asia, and today’s strong cultural, linguistic and social links, it would be logical for British companies to increase their engagement.
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