Asia’s trade landscape changing with the times
OVER the last 20 years, trade in the Asia Pacific region has undergone dramatic changes, but this is just the tip of the iceberg: in fact, the trade revolution in Asia is just warming up.
I first came to Asia 20 years ago, at a time when FedEx was fueled by electronics.
Trade was all about the so-called “Asian tiger” economies—Hong Kong, Taiwan, Singapore and South Korea.
The first, mass-produced PCs were growing in popularity, while “personal communicators” —dubbed “bricks” due to their size and weight—were starting to take off, and supply chains were growing ever more complex.
Back then, it was big multinationals who were driving export growth and trade out of Asia.
At FedEx, we were quite literally “running in front of the parade” by helping to transport their revolutionary products to market.
Fast forward to 2014 and there are some things that don’t change.
Now, as then, the kind of freight that we move broadly reflects the macroeconomic trends that have driven our growth.
We’re still running right out in front of the biggest trends in the world—digital revolution, globalization of trade, development of the Internet and e-commerce.
We’re still shipping a high volume of technology products. According to industry estimates, anywhere between 18-25 percent of the entire airfreight business is now composed of electronics in the broadest sense, although it’s now centered on product launches and new devices.
Yet take a closer look and there is much more to it.
The contents on our planes are as diverse as the markets we serve—they now include a huge amount of luxury goods, e-commerce or aerospace goods.
In addition, there are now more healthcare and pharmaceutical shipments than ever before—clinical trial samples, biotech and medical devices.
Another key change over the last two decades has been the emergence of new players. Small business now has more global clout, and the power of the individual is growing.
Even the electronics and high-tech sectors are no longer dominated by the larger firms, with many smaller companies increasingly gaining a foothold.
Change is even more apparent when it comes to the ways in which global transportation has been transformed.
Because we transport by air, land and sea, we bear witness to the global trends that affect our industry.
What we’re seeing is a shift in transport modes, an evolution of our industry in which air express and air cargo is just one player.
Ocean freight is also an increasingly important part of a shipper’s overall equation, with large commodity consignments often going by sea, while dedicated express networks capture more urgent, lightweight shipments.
The economic centers of gravity are shifting too.
In Asia, Malaysia, the Philippines, Vietnam and, of course, China are leading the charge, among other economies in the region.
According to the World Bank, East Asia and the Pacific maintained their position as the world’s growth engine in 2013, accounting for 40 percent of the increase in global output.
With regional trade intensifying, it’s easy to see how the Asia Pacific region is becoming one of the driving forces of the global economy.
Some of the changes in Asia’s trading landscape are relatively recent.
China has evolved into the world’s biggest exporter, for example.
Today, the country is a “mega trader” on the world scene and a driving force in world trade.
However, what may people overlook in this realignment of global trade is the interplay, and the interconnection between all countries, not just major economies.
Manufacturing today requires a very sophisticated supply chain, in which hundreds of critical parts are spread across suppliers, often not just in several countries in Asia, but several continents.
Take the now-ubiquitous smartphone as a prime example.
It might be designed in California, with parts made in Taiwan, assembled in China, shipped through Singapore, loaded with apps from Korea and sold in Indonesia.
Yet what’s most interesting is the question of where we will be in another five to 10 years.
In many ways, Asia is just getting started.
Who will emerge as the “tigers of tomorrow” in Asian trade?
Extremely rapid technological innovation is enabling a smart trading world.
In the modern era, the winners will be those who can adapt best and fastest to new technology—a world in which efficiency and innovation fuse to enable fully optimized, highly sophisticated global supply chains .
That’s why my money is on the “tigers,” whether they are economies or businesses, who are the most agile in capitalizing on this changing landscape. Most of these changes are yet to come.
(Cunningham is Chief Operating Officer and President, International, FedEx Express)
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