ASIA
26 March 2014
Canada -- wake up to Asia!
Canada needs to break out of its comfort zone and fully embrace the opportunities presented by the rise of Asia.
Canada needs to break out of its comfort zone and fully embrace the opportunities presented by the rise of Asia.
This was the message that the Asia-Pacific Foundation's President and CEO, Yuen Pau Woo, delivered to a high-level Toronto business group last Friday.
As Woo said, the rise of Asia makes us uncomfortable. Discomfort with Asia is evident in the official caution towards inward foreign investment proposals from Asia. Witness CNOOC's $15.1-billion troubled bid for the oil and gas producer, Nexen Inc, and Petronas's (Malaysian state-owned oil company) attempt to takeover Progress Energy Resources Corp.
Canada has also invoked a "national security exception" that could exclude China's Huawei Technologies from a role in helping build its new super secure government network. Some have also expressed reservations about a possible free trade agreement with China.
But as Canada Minister of Foreign Affairs, John Baird, said to a meeting of Canadian Council of Chief Executives, Canada must be part of the profound change taking place in Asia, "It’s not a choice; it’s not an option; it’s a national imperative."
In looking at the rise of Asia, most focus has been on Asia's fast growing markets for our exports, and on the increasing purchasing power of Asia's middle classes. Asia could be an alternative outlet for Canada's exports at a time of US economic weakness. Likewise, most focus is on Asia's two giants of China and India.
There is however more to the rise of Asia. We are witnessing a global power shift. Asia is becoming an important center for innovation and R&D, with India leading the way in "frugal innovation" at the bottom of the pyramid. With rapid urbanization, we also seeing the rise of big city Asia. And there are many more dynamic Asian economies beyond China and India.
In short, we are yet to fully understand fully what the rise of Asia is about.
The Asia Pacific Foundation's 2012 National Opinion Poll shows that for Canada as a whole, two-thirds of the population believe that, looking 10 years ahead, the influence of China will surpass that of the US, and that China's growing military power is a threat to the Asia-Pacific region.
The same opinion poll shows that Canadians are more aware than ever of the importance of Asia to its economic future. But attitudes in Ontario are very much cooler, and Ontarians are the least likely to agree that Asian economies are vital to the well-being of Canada.
Why is Ontario different from the rest of Canada? It seems to be a product of history, its close trade relationship with the US, especially since NAFTA. Ontario has a comfortable business relationship with the US, where it is not so exposed to competition. But excessive focus on the US has proved costly, with a big drop in exports following the global financial crisis
The auto sector is Ontario's leading manufacturing sector, and it is now facing profound challenges. However, looking ahead to 2020, the Chinese auto market could be twice that of the US. But the Canadian auto industry has been slow to go abroad.
Perceptions about Asia are affected by the fear of the unknown, just as with Japan a few decades ago. Many are concerned about China's state-owned enterprises. It is true that they are not very transparent, but they are now going abroad and they are changing.
Much of Asia's growth these past decades has been driven by the rise of global supply chains. But Canada has not participated in these supply chains. The next phase of China's growth is likely to be more domestic demand driven, with services and quality of life issues, like food safety, being important. Canada has great potential in these areas.
What is needed is greater awareness of Canada's success stories, and there are many, such as in the wood sector. But what is also needed is an investment of time and energy. The wood sector did not achieve success over night, it required a decade of hard work. In general, companies that succeed in China have a higher appetite for risk, a willingness to fail, and a CEO who is willing to take the time to tackle China.
So, in short, when it comes to doing business in China, it's a story of "no pain, no gain". But if you make the effort, there are plenty of gains to be had, and there will be even more in the future.
Executive Director
Asian Century Institute
www.asiancenturyinstitute.com
This was the message that the Asia-Pacific Foundation's President and CEO, Yuen Pau Woo, delivered to a high-level Toronto business group last Friday.
As Woo said, the rise of Asia makes us uncomfortable. Discomfort with Asia is evident in the official caution towards inward foreign investment proposals from Asia. Witness CNOOC's $15.1-billion troubled bid for the oil and gas producer, Nexen Inc, and Petronas's (Malaysian state-owned oil company) attempt to takeover Progress Energy Resources Corp.
Canada has also invoked a "national security exception" that could exclude China's Huawei Technologies from a role in helping build its new super secure government network. Some have also expressed reservations about a possible free trade agreement with China.
But as Canada Minister of Foreign Affairs, John Baird, said to a meeting of Canadian Council of Chief Executives, Canada must be part of the profound change taking place in Asia, "It’s not a choice; it’s not an option; it’s a national imperative."
In looking at the rise of Asia, most focus has been on Asia's fast growing markets for our exports, and on the increasing purchasing power of Asia's middle classes. Asia could be an alternative outlet for Canada's exports at a time of US economic weakness. Likewise, most focus is on Asia's two giants of China and India.
There is however more to the rise of Asia. We are witnessing a global power shift. Asia is becoming an important center for innovation and R&D, with India leading the way in "frugal innovation" at the bottom of the pyramid. With rapid urbanization, we also seeing the rise of big city Asia. And there are many more dynamic Asian economies beyond China and India.
In short, we are yet to fully understand fully what the rise of Asia is about.
The Asia Pacific Foundation's 2012 National Opinion Poll shows that for Canada as a whole, two-thirds of the population believe that, looking 10 years ahead, the influence of China will surpass that of the US, and that China's growing military power is a threat to the Asia-Pacific region.
The same opinion poll shows that Canadians are more aware than ever of the importance of Asia to its economic future. But attitudes in Ontario are very much cooler, and Ontarians are the least likely to agree that Asian economies are vital to the well-being of Canada.
Why is Ontario different from the rest of Canada? It seems to be a product of history, its close trade relationship with the US, especially since NAFTA. Ontario has a comfortable business relationship with the US, where it is not so exposed to competition. But excessive focus on the US has proved costly, with a big drop in exports following the global financial crisis
The auto sector is Ontario's leading manufacturing sector, and it is now facing profound challenges. However, looking ahead to 2020, the Chinese auto market could be twice that of the US. But the Canadian auto industry has been slow to go abroad.
Perceptions about Asia are affected by the fear of the unknown, just as with Japan a few decades ago. Many are concerned about China's state-owned enterprises. It is true that they are not very transparent, but they are now going abroad and they are changing.
Much of Asia's growth these past decades has been driven by the rise of global supply chains. But Canada has not participated in these supply chains. The next phase of China's growth is likely to be more domestic demand driven, with services and quality of life issues, like food safety, being important. Canada has great potential in these areas.
What is needed is greater awareness of Canada's success stories, and there are many, such as in the wood sector. But what is also needed is an investment of time and energy. The wood sector did not achieve success over night, it required a decade of hard work. In general, companies that succeed in China have a higher appetite for risk, a willingness to fail, and a CEO who is willing to take the time to tackle China.
So, in short, when it comes to doing business in China, it's a story of "no pain, no gain". But if you make the effort, there are plenty of gains to be had, and there will be even more in the future.
Author
John WestExecutive Director
Asian Century Institute
www.asiancenturyinstitute.com