Ready to bloom
Intra-Asia trade has improved significantly and even though Chinese manufacturing has slowed down for the world, it has not dampened the flow within Asia
November 22, 2017
Two years ago, at a roundtable session on intra-Asia trade at the Payload Asia Conference, Mark Whitehead, chief executive of Hong Kong Air Cargo Terminals Ltd (Hactl) said the 4.4 billion people in Asia would drive the market in the next few years. His calculation was simple: 1.4 billion from China, 1.3 billion from India and 600,000 from the ASEAN nations (Association of Southeast Asian Nations). Since then, the figures have changed and the numbers have grown.
The potential is huge. A World Bank report in May last year said that the intra-regional trade, which is less than 5 per cent of total trade, South Asia was the least integrated region in the world, “dwarfed by East Asia’s 35 per cent and Europe’s 60 per cent”. It mentioned that it was 20 per cent cheaper for India to trade with Brazil than with its neighbouring country Pakistan and that Bangladesh’s exports to India could potentially rise by 300 per cent.
Though there has been little movement – government-to-government – to facilitate intra-Asian trade, traders from Asian nations have been moving ahead independently. A few facts that have to be kept in mind, Asia remains a major player in the international air cargo market, trade growth within Asia provides large volumes for air cargo operators, and air cargo capacity has always remained ahead of demand.
ASEAN leaders have made their interest clear when it comes to increasing trade within the ASEAN region and it is already showing signs of significant growth. The economic corridors connecting ASEAN with China, along with the rise of manufacturing centres in Vietnam and Cambodia have provided air freight operators hopes of steady growth for quite a few years – this despite the fact that Chinese manufacturing has slowed down and put a dampener on air cargo exports. However, the good news is that there has been a huge growth in e-commerce imports that has ensured air cargo operators balance capacity in both directions.
Karen Reddington, President, FedEx Express Asia Pacific pointed out in the beginning of the year that while global economic volatility could be “worrying” for some companies in the Asia Pacific region, “the small – and medium-size enterprise (SME) sector is bucking the trend with strength and optimism for the year ahead”.
She went on to mention, “the many opportunities that Asia intra-regional trade bring to small business leaders are here to stay”. The FedEx President focused on trade within the Asia Pacific region and said that it was “sparking the most confidence. Intra-regional exports are the driving force of this stronger trend – a recent study found almost nine in 10 Asian SMEs sell goods to markets in Asia Pacific and are set to do so even more. Stronger regional ties and trade linkages are also contributing to the sense of optimism and resilience surrounding small businesses.”
These SMEs – in fact just under 70 per cent of them – Reddington said were “currently selling their products via mobile platforms and a similar number offer customers the option of buying via social media platforms such as Facebook”. This was due to the proliferation of “eCommerce, mCommerce, social commerce, the cloud, search engine optimisation, content management systems (CMS), ePayment technology or sophisticated logistics solutions” that SMEs could quickly connect with more intra-Asia as well as global markets than ever before”.
The positive note was also reflected in the latest APAC Forwarding Index survey conducted by Cathy Roberson and Mike King. According to them, Asia-Pacific freight markets “retain a positive outlook for Intra Asian trade, even as optimism for the transpacific and Asia-European trades starts to subside ahead of the peak season.” The survey pointed out that there would be volume growth on intra-Asia trades.
The survey found that 49.3 per cent of survey respondents indicated “higher” month-to-month intra-Asia volumes in June, while 44 per cent reported the “same” month-to-month volumes. The findings also showed “buoyant three-month intra-Asia demand expectations, with 43 per cent of respondents anticipating ‘higher’ volumes across modes in September than experienced in June. “Economic indicators across most of the Asia Pacific region remain very positive and there is no sign of slowing intra-regional trade by sea and air,” said the survey.
While China will continue to be the focal point for intra-regional trade – a lot of new manufacturing industries are coming up in Vietnam and Cambodia that will continue to need machinery and raw materials from China; in the short term – it has ramped up its consumer goods intake from inbound traffic. This has prompted logistics providers to enhance their intra-regional capacities.
India too is becoming increasingly important for intra-Asian trade. This interest has seen Cathay Pacific, for example, add capacity in the country. The carrier has freight services to six Indian cities and there are 25 freighter departures every week from India.
Singapore Airlines too has changed its strategy: it has pushed in freighters for the regional market that was earlier being serviced by passenger flights. Reports indicate that more freighters for the intra-Asian markets could be inducted.