Currently browsing - Asia Pacific

Dr. Razeen Sally of the University of Singapore outlines three megatrends in the Asia-Pacific region

Dr. Razeen Sally of the University of Singapore addressed members of the Asia-Pacific Corporate Development Leaders Network in Singapore on 5 February 2015. He discussed three megatrends in the Asia-Pacific region:

  • Globalisation of supply chains
  • Shift from energy scarcity to energy abundance as a result of the shale revolution in the US
  • Urbanisation – the rise of both established and new cities in the region

Globalisation of supply chains

Fundamental changes in supply chains are revolutionising international trade. According to the World Trade Organization, there is a shift from the traditional model based on start-to-finish production in individual countries to a more dynamic and complex environment where production is fragmented across borders and in which services and logistics are much more important – all to serve global markets.

North America, Europe and East Asia are the three main hubs supporting these supply chains, which are concentrated in the information and communications technology (ICT) and manufacturing sectors.

The globalisation of supply chains will likely have the following outcomes:

  1. Tighter integration between imports and exports
  2. Altered trade balances around the world
  3. Increased services content; today services is around 50% of global trade measured in value-added terms

Recentralisation and decentralisation of supply chains will become key issues. Decentralisation will likely prevail – for two reasons.

First, there is potential for geographic expansion to Southeast and South Asia, especially as low-cost production migrates out of China’s coastal regions. With policy changes such as labour market deregulation, India could grab much of the labour-intensive part of manufacturing supply chains. And second, supply chain fragmentation will likely spread from ICT manufacturing to other parts of manufacturing, services and even parts of agriculture.

Currently, there is a disconnect between supply chain realities and trade negotiations with respect to all sorts of non-tariff and regulatory barriers. The WTO and most free trade agreements have weak disciplines on regulatory barriers to trade and investment. There are three initiatives in the Asia-Pacific region – the Trans-Pacific Partnership, led by the US (with 10 other countries involved); the RCEP, led by China (consisting of ASEAN members and six other countries); and the ASEAN Economic Community. If all three were much more ambitious than other trade agreements, the potential to facilitate supply chains would be considerable, but the reality is different. RCEP and AEC in particular will likely be quite shallow agreements once implemented.

Shift from energy scarcity to energy abundance

The rapid growth of US shale oil and gas production has prompted a radically new era of energy abundance and will likely impact commodity prices in the short and long term. Over the next 20 years, more than 50% of all energy consumption will be in Asia, fuelling its industrial development and bringing electricity to rural areas. Asia’s reliance on fossil fuel imports will increase, especially from the Middle East.

One consequence of this will be the need to build new infrastructure to match demand. Developing Asia needs USD$20-30 trillion of new energy infrastructure by 2030. By 2020 the US could overtake Saudi Arabia as the biggest producer of crude – it is already surpassing Russia in natural gas production, is close to energy self-sufficiency and could become a major exporter. The US is a key balancing power in Asia, but there are increasing tensions between a rising China and a relatively weaker US. The worst-case scenario is a US disengagement with Asia, leaving the field clear for more geopolitical competition among China, Japan and India. But the US’s prospects as Asia’s vital balancing power would be much better were it to export oil and gas to the region.

Urbanisation – the rise of cities

Urbanisation is one of the world’s key megatrends, and it is happening above all in Asia. The McKinsey list of top 600 cities notes that by 2025, China will have 250 top cities and India 60, with seven megacities (with a population of over 10 million) in China. About one billion new emerging middle class consumers will be added by 2025, concentrated in mid-tier cities (with populations of between 250,000  and 10 million) in emerging markets.

We should look to cities more than countries for policy innovation. The most effective mayors act as CEOs, establishing the best policies for doing business, to attract trade, foreign investment and foreign talent, and to roll out hard and soft infrastructure. Currently, Hong Kong, Singapore, New York and Dubai are the only truly global cities, but other cities can be categorised in terms of what they do best and be plugged into global supply chains in other ways.

For financial services, the implications of urbanisation are the following (these are reflections from Vishrut Jain):

  1. Should banking firms consider the top-tier, obvious cities or invest in the next tier? Urbanisation will mean USD30-50 trillion of infrastructure investment that will lead to massive opportunities.
  2. Will there be an international banking model or will it be restricted to the top few banks by country? An international trade finance model that hooks into trade flows and that leverages connectivity is becoming a reality. This could signal a move away from domestic banking.
  3. What will be the impact of energy flows? The new energy patterns will have a major impact on currencies and the balance of power in Asia (for example, Japan will be able to access gas for USD4), and there will be more money available to buy assets in the region.

The original article was written by Ernst & Young Global Limited, and was subsequently edited by Dr. Razeen Sally.

For more information, or to book Razeen Sally as a keynote speaker for your conference or event, please contact Raleigh Addington at raleigh@chartwellspeakers.com or call +852 5512 9714.

Listen to John Hulsman on Narendra Modi’s landslide

Listen to Alex Hickman in conversation with geopolitical analyst Dr John Hulsman on what Narendra Modi’s victory means for India, its economic outlook and the Asia-Pacific region. John explains why he believes Modi’s victory is “the single most important thing” that will happen in 2014; and discusses the consequences of rising nationalism in Asia Pacific.

For information on how to book John for your conference or client event, please contact Alex Hickman at alex@chartwellspeakers.com, or call +44 (0) 20 7792 8004.

Curtis S. Chin: “China can lead the Asia-Pacific”

In his latest musing for CNN and Fortune, Curtis S. Chin, Managing Director of advisory firm RiverPeak Group LLC, explained how China has the chance to lead the Asia-Pacific as more confident and responsible Pacific power.

As host of the Asian-Pacific Economic Cooperation Forum this year, China has the opportunity to shape the agenda and drive economic ties with its neighbours.

However in order for this to happen effectively, the world’s second-largest economy must address three issues.

Click here to find out what these are.

Chartwell in Hong Kong

We try and come through Hong Kong as often as possible as we have some great clients and many old friends here. Every time one sees change, and feels keenly the proximity of China’s vast economy and population. The energy you encounter here is what people mean by the centre of gravity shifting East.

Yesterday I watched the USS Bonhomme Richard, a 40,000-tonne warship, slip into Victoria Harbour and moor near the Pacific Club on Tsim Sha Tsui’s waterfront. The South China Morning Post reported on Wednesday that the warship’s arrival coincided with the the beginning of joint military exercises with the Philippines off Luzon, just 220km from the disputed Scarborough Shoal islets, also known as Huangyan Island – territory which is claimed by China. Tensions run high here, as China looks to build a blue water navy to protect its shipping lanes, and the US looks to pivot hard into its Asia Pacific neighbourhood.

Despite the brutal conflicts and instability of the Middle East, this region is now the crucible of world affairs. It is raw proof that politics follows the money – the shifting gravity. Follow the money, and you arrive somewhere around the South China Sea.

But economic competition is remorseless, and there is no time to savour success. The front page story on Wednesday’s South China Morning Post was the challenge Hong Kong now faces from the new free trade zone at Shanghai. “Hong Kong needs to develop more quickly or risk being left behind, warns tycoon (Li Ka-shing, Asia’s richest man and an HK champion) …”

Here’s more:

“The landmark project signals Beijing’s determination to raise the competitiveness of the mainland economy. It plans to elevate Shanghai’s role in economic reform by loosening controls on capital flows and expanding foreign investment in its free-trade zone, to officially open next week.

Asked if Shanghai would surpass Hong Kong in the next five to 10 years, Li replied: “I do not want to predict. But it will be faster than most people expect.

“It is just like you are running a 1,000-kilometre race. When you run one-third of the race, you see [your competitor] still behind you. But you are already surpassed [by your competitor] in the first half of the race. It is all about the speed.”

Welcome to the geopolitics of the 21st century.

get in touch

We’re here to help.

If you can’t find the right speaker you need, or would like speaker ideas tailored to your event,

talk to us on the details below.

For UK, Europe and general enquiries, please contact

Rob Higgins

+44 207 293 0864

For US enquiries,

please contact

Ellis Trevor

+1 516 6581608

For Middle East, Asia & international enquiries

please contact

Raleigh Addington

+852 5819 2227