Opportunity in Southeast Asia
Canada’s Minister of International Trade, the Hon. Ed Fast, wrapped up talks with his Southeast Asian counterparts last week. His visit reflects the dramatically growing weight of developing economies in the global economy and the possibilities this shift raises for Canada.
The Conference Board of Canada's research on Canada’s next top markets shows several Southeast Asian countries could be some of this country’s most important future commercial markets. (See table “Canada’s Next Top Markets.”)
Canada has only a kernel of engagement with most of Southeast Asia and the rest of this “next top markets” group at the moment, but that could change since emerging markets are playing a dramatically larger role in the global economy.
To be sure, Canada’s traditional trade partners – including the U.S. and Western Europe – will continue to represent the most significant long-term potential for Canadian businesses. But rapid growth in Brazil, India, China, and beyond to smaller, fast-growing, emerging markets in Latin America, Eastern Europe, the Middle East, Africa, and Asia – including Southeast Asia – has the potential to drive Canada’s trade and investment growth going forward.
Southeast Asia, in particular, is large and an extremely rapidly growing region. The region as a whole has the ninth-largest economy in the world – larger than both India and Russia. Its population is twice that of the United States.
Most notable are the growth rates of these countries in recent years. To put things into perspective, the accompanying chart matches up countries in Southeast Asia with more familiar U.S. states of similar economic size. Canadian businesses have the obvious advantages of proximity, shared language, and a massive market in trading with the United States. But it is obvious that U.S. growth rates are meagre compared with those of Southeast Asia.
Despite it being such a large, fast-growth region, Canadians have failed to give Southeast Asia much attention. Trade with this region represents only 1 percent of Canada’s exports, though a more significant 2 percent of our imports. And, according to official statistics, Canadian companies invested less than $7 billion in the region in 2011.
To some degree, it is not surprising that most Canadian businesses have not been actively involved in these markets. While the region offers many rewards, it is geographically distant, and doing business there can be very challenging. But while some of these countries have extremely challenging business environments, others are more welcoming. And the rewards can be massive.
Moreover, all companies and countries are courting the largest, fast-growth markets, so companies that focus on smaller fast-growth markets, such as those in Southeast Asia, may be able to get easier access to business and government leaders.
International commerce is not an end in itself. It improves living standards and is particularly important for a small economy such as Canada’s. To improve – or even maintain – Canadian living standards as the world’s economic weight shifts to the developing world, more Canadian companies will need to seize the opportunities that these “next top markets” offer.