Asia – Where are we now?

Asia - Where are we now?
Where are we now?

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Below is a transcript of the episode, edited for readability.

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Good morning and welcome to the Lotus talks. This is Granger Whitelaw and it is the new year now 2020. We are in the year of the rat here in Asia. Everyone’s coming back from Tet and trying to get a in a business mindset, I guess you would say –  all the food and celebrations and wonderful times with family are over and now it’s time to get back to work – hahaha- with that mind, I thought I would start the new year, reviewing kind of business in Asia.

Where are we How does the world look at Southeast Asia right now and Asia in general, from an economic standpoint and where are we going. So with that in mind, bear with me and let’s talk. Asia corporation is now account for 43% of the world’s largest 5,000 companies contributing $19 trillion in revenue to the world economy every year. Granger Whitelaw: It’s huge.

Granger Whitelaw: 42% of the global GDP and purchasing power parity. And this number is expected to rise to more than 50% by 2040. The Asian share of global consumption grew from 23% in 2000 to 28% in 2017  – and could increase to nearly 40% by 2040.

Granger Whitelaw: it’s huge. You know, if you look at it, Asia as a destination right now for an investment takes $1 of every $2 of new investment over the past decade. Again, 43% of the world’s top 5,000 firms by revenue are headquartered in Asia. Now, the capital influx has not resulted in higher economic profits. Asia accounts for half of the deterioration in global economic profits from two, sorry, $726 billion to an economic loss of $34 billion over 2005 to 2017. Now, capital intensification of the world’s accounts for 90% of the global fall in return or cap. that is driving down economic profit, particularly in Asia. This decline in global economic profitability over the decade largely reflects cyclical energy and the materials sectors, European finance and Chinese capital allocation to value destroying sectors. However, pockets of economic profit generating excellence can be found in several sectors across Asia.

Granger Whitelaw:  The opportunity? Asia could unlock $440 billion of incremental economic profit from two major levers  – 2  – turning around troubled companies and capturing companies, latent potential to create more profit champions. Now I get a lot of this numbers from McKenzie. McKenzie does a great job of kind of combining and pulling all this stuff together, and I’m reading from a lot of this, but if you think about what’s happening right now in Asia and Southeast Asia, the DOT has moved across the globe. There’s so much growth happening right now as we always talk about on the Lotus…. startups.

Entrepreneurs all over the plates are coming, but also major corporations are shifting and allocating more resources to Southeast Asia and Asia in general. Even if you look at India and Africa, there’s a tremendous amount of growth happening there.

Over the past century, corporations in Asia have helped usher in an unprecedented era of economic development and prosperity. It has boosted economies, improved the living standards of hundreds of millions of people. Were witnessing the benefits of this economic contribution, stable employment growth, rising incomes in a range of consumer benefits including lower prices and more available and competitive products. These benefits have been particularly significant in economies that we describe is outperforming because they’ve just sustained substantial GDP growth for the last 5, 10 or 20 years. If you look at Vietnam at 7% growth rate compounded year over year, you know, between six and a half, seven, 7.2 we don’t really know the real number, but it’s incredible what we’re seeing happen in Vietnam and other parts of Southeast Asia.

Now that really is going to plateau. I was speaking at the university of Minnesota has a MTO, which was their masters of technology event about a week ago and a panel with a, a friend of mine who is a head of Autodesk and another senior executive from grab. And we were talking about what’s happening here, right? and can it  sustain and the students said, can you sustain this type of growth and you know….. my position on this, and I’ve said this many times to friends and colleagues… is that you have to look at the choke point, right! Sure, A lot of companies can come down and move their manufacturing from China. Sure you can build new factories. It takes time. Can you get access to employees We’ve discussed this. It’s hard and you have to create new employee benefits now, different ways to incentivize your employees and keep your employees and at the end of Tet, many people listening to this may experience some loss.

Granger Whitelaw: I was with a CEO yesterday and he said, yeah, we’ve lost some people already and it’s not even February 3rd yet. Well I guess it is today, February 3rd! So interesting that you see this shift after Tet, right, of employment, but I think you’re seeing a lot more people stay put. But what’s the choke hold? What’s the choke point for manufacturing? What’s the choke point in Asia… and to me it’s very simple. It’s the ports. As I told the graduate students, it’s the ports. You can build and create as much product as you want, but if you can’t get it out of the country and get it to where it needs to go into the United States or into Europe or wherever it may be going, you’re, you’re, you’re choked, you can’t grow. And the ports here cannot take – really any more growth. 3% maybe 5%. I don’t know where it is. You know, I’m not a port expert and I can certainly get one on the show if you’d like, but I do know that the ports that are available to use in many places in Vietnam, for instance:  the roads, you can’t get them to a place where it can take that heavy of a load of trucks. And the country is right now doing a great job of improving the highways and improving the roads. And I commend them for doing that. And I implore, please build that infrastructure, keep building and making the highways and the roads better in Vietnam because then you’ll open up more access to ports, you’ll open up more transportation and you’ll be able to create more business and let the growth continue.

Other than that, you’re going to have to stay more in the FinTech technology areas / space. Real estate is already being pressured here. So you know, there’s a lot of growth potential in technology here. The labor force is skilled and growing.

Granger Whitelaw:  So really when you look at any of these issues and you look at the positions of where we are now, it’s incredible, incredible. When you see that Asia accounting for 43% of the world’s largest companies, where Europe only accounts for 25% in North America, only accounts for 24% –almost double the percentage in Asia of North American companies in the low 5,000 largest companies by revenue in the world. Amazing!

So anyway, welcome back from TET. I hope everyone had a wonderful, wonderful holiday. It’s the year of the rat, so let’s make it a good one. Let’s figure out how we can all join together and continue to work together because it’s going to take companies working together now to take this country to the next level. I repeat this always. I see great energy, incredible entrepreneurial spirit, tremendous amount of growth happening, access to technology, access to talent.

Granger Whitelaw:  Although Vietnam is on a very low scale for access to talent, there is access – “external talent”-. There’s a lot of talent in this country that we can work with and teach and grow with. So really take your time, put a good plan out for the next 12 months and figure out what partnerships you can put together. How can I partner with somebody, not just thinking about myself, my little company, my ideas, but how can I partner with somebody to grow my business? Because just like Silicon Valley and just like New York city and just like Austin, Texas and other places in the United States where you see incredible growth happening in the technology sector. I am here to tell you those companies work together. You would be surprised at how much those companies really work together. That’s why Silicon Valley is what it is today. Sharing of ideas, transferring of employees, working together on issues and problems to get great scale in business. And I truly believe with all my heart, bit of this country is going to grow and going to scale. It’s going to have to happen from starting to work together more closely – together as businesses.

That’s it for Lotus talks today. This is Granger Whitelaw. I will speak to you on Friday. I hope you have a wonderful week. Thanks.

The Lotus Talks is produced by The Vietnam Group and Hosted by Granger Whitelaw.
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