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America’s Withdrawal Drives Asia’s Growth

Not to be left behind relationships are forming, Italy is snubbing the EU and looking East. Denmark are forming a relationship, as referenced in the Jakarta post: Indonesia-Denmark: An innovative partnership for the 21st century, Indonesia’s Century.

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Donald Trump’s America First Policy Driving Asia Growth.

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Trump’s cross-hairs, there’s a pun but not intended. China, South Korea and India on Trump’s naughty list it’s not difficult to see who the beneficiaries are: For sure Indonesia but not just Indonesia, Vietnam has benefited. Asia has redoubled their efforts to increase trade and trade relationships, 28 from 44 FTAs “Free Trade Agreements” proposed are between Asian nation states. Cohesive active even pro-active dyads, trade relationships have grown significantly since the global crisis, weathered, even ignored the Trump doctrine, this is set to only improve further.   I bring you back to an earlier note of mine, one where I talk about Asia’s third wave, it’s worth a read, click here. The other where I cover PWC, their forecast for the World Economic growth, in a few short years PWC claim on a measure of GDP that 4 of the top 5 countries will be Asia. China, USA, Japan, India and Indonesia.

Two situations are emerging, in reality they are already upon us. One technology is no longer the domain of the USA, perhaps it’s too early to write  the US off, for innovation or R&D. For several decades North Asia has maintained the industrial mantle for mass production with labour split between Japan, South Korea and China adding Taiwan and Hong Kong at a later stage.  From these five countries they account for $4.2 Trillion Asian exports. This is equivalent to North America, the European Union combined.

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– The predicted rise of Indonesia into a major economic power, engaging Indonesian leaders should be a critical pillar of economic statecraft.

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Technology Innovation The Domain Of Asia.

In the year 2000 China represented less than 10% of Asia’s technology exports, today 44%. Huawei, Lenovo, Haier, and BYD Automobile Company all rank ahead of their Asian peers, and Western rivals in categories such as telecom equipment, laptops, appliances, and electric cars. But, of course, their manufacturing links are all highly integrated as China relies on South Korea and Japan for their semi-conductors.     What Asia is aware of, their markets were once primarily the West this is no longer the case, their markets today are other Asian countries. Hence, the dawning of an age in shifting manufacturing to the south productivity grew, whilst opening new markets to export too.    Cost of labour to the north has increased as has the cost of living. I’ve mention in an earlier document that average daily rate on the manufacturing shop floor is $30, Indonesia and Vietnam are still able to maintain $10 per day, with a substantial workforce, a median age below 30.

Indonesia’s Vast Industrial Parks And Free Ports.

Indonesia has vast Industrial parks one of which can be seen in the image above. Companies from the west, such as Siemens, ABB are already established, but, also from Asia Foxconn, JVC, Omron etc.  Pegatron will invest $300M opening a 2 hectare manufacturing plant in just one of Indonesia’s industrial zones. Foxconn and Pegatron manufacture in excess of 80% of the world’s iPhones. Hyundai announced in Dec 2018 plans to move electric car manufacturing to Indonesia with an investment of $800M. Hyundai anticipate 53% of their cars will head to Asia and Australia, the remainder serving the Indonesian domestic market. Not to be out done VW will build the Tiguan in Indonesia with a €50M investment.    

Japan since the 1970s have invested in Southeast Asia but in recent years have increased its investment to $20billion, they are looking to manufacture Nissan electric and flexfuel (Ethanol and other biofuel) vehicle’s.    I reaffirm the west should look to join their compatriots, explore the possibilities of cheaper markets for manufacture. Positioning for a burgeoning middle class able to consume at the rate that a westerner used as able to.  Since 2014, US, European, and even Chinese companies have outsourced to Asian nations, Japan and South Korea has led the way in moving manufacturing to this region. South East Asia has attracted more annual investment than China.  Asian’s total annual trade amounts to nearly $2.2 trillion, one-quarter of which is within Asian, 15 percent with China, and 10 percent with Japan.   Since the Asian-China Free Trade Area (ACFTA) established in 2000 this created by population (combined population of 2.5 billion people) the largest free-trade agreement in the world, South East and East Asia has become China’s third largest trading partner with $400 billion in annual trade. Don’t be surprised if Asia displaces Europe and North America as the primary destination for Asia exports.

Europe Consumed By Regulation And Authoritarianism.

Whilst Europe squabbles over regulation and authoritarianism Asia is racing ahead. 

Can you afford to miss Indonesia in the 21C.

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