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What with President Trump’s continued efforts to inflict trade tariffs on any country that dares compete with the US and stark warnings from the Bank of England this week that a Brexit no-deal could sink the UK into a terrible recession, one could be forgiven for assuming that economic growth is entirely dependent on politic policies – and to a lesser extent on geography, demographics and natural resources.
But, as Sharat Shroff, manager of Matthews Asia Pacific Tiger, pointed out recently, entrepreneurs and businesses can play a significant role too: as they invest in innovate, creating growth in the process.
To thrive entrepreneurs require basic physical infrastructure such as roads, highways and ports, as well as a regulatory environment that encourages fair and robust competition. They also require access to capital, talented employees and customers with growing purchasing power: all areas where Asia is making breakthroughs today.
Sharat has identified five trends that are currently helping Asia entrepreneurs to thrive:
Across Asia there is a continuing trend toward deregulation, which is supporting entrepreneurs. In India, for example, the pro-business government of Modi has cut the red tape and made it easier to do business. The private sector today now contributes 30% of the country’s GDP.
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The onset of the global financial crisis in 2007-2008 was a reminder for policy makers in Asia to build better institutions, to manage financial risks. It also highlighted the need for policymakers to continue to enhance availability of capital for the most productive parts of the economy, so banks have been encouraged to focus on small and medium-sized businesses and foreign ownership restrictions have been relaxed in places like China.
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Entrepreneurs in Asia are increasingly competing on more than cost. Factors such as superior intellectual property, quality of product or service, trust and convenience help Asian companies enhance competitiveness and the ability to attract and retain skilled workers is a differentiating factor.
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In 2016, Asia outpaced north America in patent filings by more than 3. Asian businesses are developing products that meet the region’s distinctive tastes and needs. Songdo, a city in South Korea near Seoul, has become the home to the world’s largest biomedical facility, for example. An area originally designated as a zone to attract foreign investment, but that was hit by the onset of the global financial crisis, it has become home to more healthcare businesses that were able to purchase the land cheaply.
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Consumers worldwide have different tastes but remarkably consistent behaviour. As income grows, consumers buy nicer things and it is estimated that Asia will account for half of global middle class consumption by 2030.
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“These trends show why it is a good time to be an entrepreneur in Asia,” Sharat said. Global macro issues will have an impact on Asia but important trends for successful entrepreneurs are developing in Asia itself.
“It is easy to get lost in the noise emanating from trade-related concerns or other macro headwinds that are looming on Asia’s economic horizon. We find that successful Asian businesses use there challenges as an opportunity and we aim to stay focused on understanding the prospects for these businesses and investing in those that are capable of delivering steady and durable growth across cycles.”
For more insight from Sharat, watch as we discussed Asian tech stocks and whether Vietnam is still a regional favourite in an interview earlier this year.