Intra-Asian market prospects improving but still nowhere near cruising speed
 The intra-Asian market is growing, and with rapid urbanisation in the ASEAN region, there is new prosperity resulting in greater numbers of affluent younger consumers. In short, good news for shipping.
This combines with the region's provides products and reefer produce creates a virtuous circle that turns weekday export producers into weekend purchasers of imports - a classic virtuous circle.
India, now ranked No 2 behind China as the top emerging economy with overall cargo through its ports, isexpected to increase volume 67 per cent to 1.75 billion tonnes last year from the 1.05 billion tonnes in 2015.
What China has done in the last 20 years in upgrading infrastructure, India is now doing, and it won't be long before it will have caught up to levels China reached only a few years ago.
Yet it must be faced that with rare exception, the fundamental intra Asian condition is that poor people are providing goods and services to slightly richer people rather like themselves. This is different from the transpacific and Asia-Europe trades, where poor people provide goods to comparitively rich people.
Many see amelioration coming with the gradual implementation of China's Belt and Road initiative combined with other homegrown solutions like port upgrades to cut shipping costs. Prohibitive costs that make otherwise viable products and produce impractical to provide because bringing them to market is too expensive.
Southeast Asia finds now itself focused of port development. Singapore, Malaysia, Indonesia and the Philippines all work hard building new ports or modernising old ones. Such is needed lest mega ships pass them by as they threaten to do. At the same time some projects do not bring the expected economic benefits.
An ambitious plan to build a US$45.5 billion mega port in Malaysia reportedly has been put on hold due to falling cargo volumes after global shipping alliances moved operations to Singapore, though this has been denied by the Malaysian transport minister.
Still, it's undeniable that some ports in Southeast Asia will face the problem of insufficient utilisation if too many are expanded or built.
Although some statistics show that 60 per cent of the world's seaborne trade passes through Asia, exports from China, Japan and South Korea to the US and Europe account for a considerable portion of the business. As for the intermediate goods trade among Asian countries, that segment has grown slowly or even contracted in the past few years, according to a report released in March at the Boao Forum for Asia.
These factors mean that there's insufficient demand for port development, regardless of investment plans. But stopping construction is not a good solution. As Asian ports are growing, there is a need to boost Asia's intra-regional trade.
The World Bank says south Asia is the least integrated region in the world, with its trade accounting for less than five per cent of the total, dwarfed by east Asia's 35 per cent and Europe's 60 per cent.
"Increasing demand for port development by promoting regional integration is the optimal solution. An early delivery of the Regional Comprehensive Economic Partnership (RCEP), a free trade pact among 16 economies in the Asia-Pacific region, will help achieve this goal," said China's Global Times in a recent commentary.
Southeast Asian countries, it said, should take advantage of their economic complementarity with China, Japan and South Korea to further integrate themselves into the Asian industrial chain. "To do that, they will have to curb trade protectionism within their borders to promote the free flow of capital. Economic restructuring in Southeast Asia should be promoted gradually and patiently, but nobody can afford to be complacent. The effort is fundamental to boosting Asia's intra-regional trade," said the Global Times.
At last November's South Asia Economic Summit in Kathmandu, there were renewed calls for rapid infrastructure development and the removal of non-tariff barriers to expedite regional integration.
The region has been talking about this since 1985 when the eight-country bloc formed the South Asian Association for Regional Cooperation (SAARC) to foster regional integration and create a common market.
Yet the volume of intra-regional trade is still a paltry 6.9 per cent of the total trade in South Asia, up from 5.6 per cent in 2006 when South Asian Free Trade Agreement was implemented.
But slow growth in intra-Asian regional trade has lingered and resulted in high transport costs, with the lack of infrastructure, a cumbersome regulatory regime, poor communication and non-tariff barriers all contributing to the disappointing outcome. Or as one wag put it: "It is cheaper for Sri Lanka to trade with Brazil than Nepal."
Said Nepal Planning Commission vice chairman Swarnim Wagle: “Clearly, we haven’t been able to match lofty aspirations of regional integration with concrete measures. Hence, it is essential to build credible building blocks.”
The immediate aim, said Mr Wagle, would be the reduction in trade costs between South Asian nations, the creation of a business-friendly environment, a revival of manufacturing and a relaxation in the flow of capital across borders in the region as well as better connectivity and consolidation of economic corridors.
South Asia, home to 1.7 billion people, remained the fastest-growing region in the world since the second quarter of 2014. Yet these deficiencies indicate South Asia needs to do a lot to catch up with other regional blocs like the Association of Southeast Asian Nations (ASEAN). Yet it is said there is new hope in the region because of robust economic growth over the years.
Although the region no longer holds the top position, many are optimistic about its prospects as it has just started tapping its many potential resources.
“We can achieve a lot if we do two basic things,” said Bhutanese economic affairs minister Lyonpo Lekey Dorji. “First is cooperation in energy sharing in the region. Second is cooperation in movement of goods and services.”
Trade facilitation - which enables goods and services to move across borders smoothly - and energy sector development - which provides South Asian countries access to electricity required to power various industries - have remained high on the agenda of South Asian countries for a long time.
Efforts to attain these goals are being made through implementation of a programme called South Asia Sub-regional Economic Cooperation (SASEC), under which 209 projects worth $121.5 billion are to be launched with Asian Development Bank support.
“Effective implementation of SASEC will go a long way in liberalising the South Asian market,” Maldivian Economics Minister Abdul Latheef Mohamed told delegates attending November's Kathmandu summit meeting.
While north east Asia is nearly as advanced as western countries, less developed south east Asian economies have not caught up. Cheap, marketable goods and perishables often fail to meet delivery contract terms and simply rot in inadequate warehousing that might have served if the truck was able to make on time, but was instead delayed on the road by an accident, the wreckage of which might take a half a day to clear, resulting in delays and spoilage because of road congestion or in adequate warehousing. Or goods and foodstuffs are not produced at all because these conditions are self-evident rendering such projects senseless to undertake at all.
The challenge here is to reduce costs to a point where poor people can still buy what they want on one hand and transport their wares and produce to markets at a cost buyers are willing to bear. But only through efficient handling can this be achieved.
There have been recent encouraging developments. Not the least is the mobile phone market penetration. It is an irony of our times that it is in the most primitive of cultures, where wiring is least reliable where wireless connectivity is most pronounced and advances rapidly, and where e-commerce growth is the most promising.
E-commerce giants Alibaba and JD.com are gearing up to provide Indonesia with greater access to their warehouses and delivery systems with the erection of every cell phone tower, which are rapidly being installed across the country, and activity that will be mirrored in other more remote Asian districts as time goes on.
These companies are now planning to locate distribution hubs, or fulfilment centres, near cell phone towers, realising that these alone will generate fresh demand from a populace with near universal possession of a mobile phones. This in turn will generate supply chain employment, and ancillary services from restaurants to trishaw services as the money trickles down to the ground floor of the economy and helps it grow.
Such developments will boost intra-Asian trade, which now includes the Pacific Rim and east Africa. This is because Belt and Road most needed in these areas, which have some distance to go before they catch up. It also leaves individual nations within the intra-Asia region much to accomplish on their own. But for the first time, there appears to be the means at hand and the energy to do what is needed to make the intra-Asia realm all it can be.
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