The global economic financial crisis in 2008 and its subsequent waves continue to challenge much of the developed world, particularly the countries of the Eurozone. But while Asia Pacific has not been immune to the problems of the US and Europe, many countries in the region continue to grow strongly.
Economists believe that we are experiencing a structural shift of the world economy from west to east. With over half of the world’s population and three of its four most populous nations, Asia is seeing literacy, wealth, and technology adoption grow at a faster pace than anywhere else.
The rise of the Asian consumer and the pace of wealth creation in the region are well documented. According to the 2011 Asia-Pacific Wealth Report, the number of high net worth (HNW) individuals, with net worth of over US$1 million, in Asia Pacific exceeded that in Europe for the first time in 2010, and will soon match that of North America.
The region is also quick to adopt new technology. There were an estimated 1.02 billion internet users in Asia at the end of 2011. Internet use has grown by 789.6% since 2000 compared to growth of 528.1% for the world as a whole.
Similarly, China overtook the US as the world’s biggest smartphone market in the first quarter of 2012. According to China’s Ministry of Industry and Information Technology, the country’s phone penetration rate will surpass 100 percent by 2015. Despite such impressive statistics, the potential for further growth remains far from exhausted.
It should be no surprise that corporates worldwide are looking to Asia to drive their future growth. The region already has three of the top four economies in the world based on purchasing power parity, its markets are growing rapidly in terms of consumption, and its stature as a business leader and as an innovator in everything from finance to technology is continuing to build.
Five forces at work
But these companies are faced with treasury and working capital challenges unique to the region. Asia’s large number of currencies – most of which remain under foreign exchange controls – as well as its wide range of regulatory structures and areas of underdeveloped infrastructure create a series of challenges for CFOs and treasurers seeking to maximize efficiency for their businesses.
To address these challenges, companies must focus on the following five forces as they plan for future growth.
Evolving business growth models. The dynamic and rapidly evolving nature of markets in Asia means that business models for many companies operating in the region need to be highly adaptable. Many large companies are expanding inorganically in Asia, which creates challenges to integrate new businesses with different processes and technologies. The need to manage costs prudently is stronger than ever as companies look to maintain and improve profitability in their businesses against rising costs and high inflation in Asia.
Differences in access to credit. With governments in the developed world continuing to expand money supply, liquidity is certainly not scarce at the macro level. However, smaller enterprises continue to face challenges in accessing funding from banks or other sources due to the increase in risk aversion after the global financial crisis.
We now have a situation where large multinationals with strong balance sheets are not only sitting on huge cash positions but are also able to borrow at rates that are often lower than what some sovereigns would pay. At the same time, smaller enterprises that make up the supply chains of these large multinationals are finding it increasingly difficult to raise the funds required to grow.
2013, May 23 
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