What's happening in Intra Asia

 

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Best of times, worst of times: Making the intra-Asia trade all it can be

What Charles Dickens, author of the Tale of Two Cities, said of the French Revolutionary period, that it was the best of times and the worst of times, can easily be said of the volatile state of the intra-Asia shipping market today.

The market is growing and its prospects are promising, Rapid urbanisation is occurring throughout the ASEAN region, which inevitably leads to greater prosperity and greater demand for what the region produces while at the same time creating a virtuous circle of turning those local producers into consumers of foreign exports.

And on the cusp of an economic take off of its own is India, now ranked No 2 behind China among global emerging economies with overall cargo traffic at India's ports expected to increase 67 per cent to 1.75 billion tonnes this year from the 1.05 billion tonnes achieved in 2015.

What China has done, 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. New Delhi has continually improved maritime efficiency through mechanisation, dredging and speedy evacuations.

Hyundai Merchant Marine (HMM), CMA CGM, Shipping Corp of India, Korea Marine Transport, and Pendulum Express Lines will launch the China West India Express (CWI) a six 4,600-TEU ship  loop that will rotate through Xingang, Qingdao, Ningbo, Singapore, Port Klang, Nhava Sheva, Mundra, Hazira, Colombo, Port Klang, Singapore and back to Xingang.

However promising these developments are, it must be faced that with rare exception, the fundamental intra Asia condition is that one of the poorest people on the planet are providing goods and services for people not much better off than themselves. This is quite unlike the transpacific and Asia-Europe trades, where poorer people provide goods for richer people.

While the present situation is hardly satisfactory, there are steps being taken to ameliorate conditions to effect improvements that sooner rather than later will bear fruit. And given the pace of development these changes will come soon given the many little-heralded events of recent months.

Two things come to mind that in many ways meld into one thing, but are generated from two different sources. One is China's Belt and Road initiative and the other is various homegrown solutions to address the perennial problem in shipping - costs. Prohibitive costs that make otherwise viable projects impractical because they are too expensive to undertake under present conditions.

In many ways, China has largely solved its own problems in this area. With the rapid development of road, rail facilities as well as vast infrastructure, transport costs have been cut. Once so much was lost of the road to final delivery, but this is but a distant memory today - in China. No longer do coal shipments lose 50 per cent of their loads on the road from spillage and pillage as they did little more than 10 years ago. Today, roads are better, rail services are better, the rail cars and trucks more secure and less prone costly incidents.

But less advanced Asian economies have not caught up. Cheap and highly 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 more delays because of road congestion. 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 is precisely where advanced wireless connectivity is most pronounced, and where e-commerce growth is 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.

While Indonesia and the Philippines are doing much to upgrade their ports and back up connectivity, mighty India, which harbours dreams to rival China's industrial output, is on the march working to deregulate its society. All concede that India's suffers an obesity of complexity and this more than anything else, must be addressed if any of its ambitions are to be realised.

Wary of China's Belt and Road initiative, India focuses on its own resources to increase regional and international attractiveness and reliability as a major economic player - and it's paying off. According to third-party logistics provider Agility's 2017 Emerging Markets Logistics Index, more than 800 representative of logistics corporations around the globe classified India as the most attractive market with the greatest opportunities for growth.

Thus, Amazon is now allowed to market groceries in India, which will not only facilitate trade, but also bring new efficiencies to the sector. New ways and means will be found. Again, this will reward the productive, just as it eliminates unproductive bureaucrats and those whose jobs depend solely on pettifogging rules and regulations.

But the major player here is still China. Lamented intra-Asia specialist MCC Transport CEO Tim Wickmann: "The only real growth in the intra-Asia market is China growth. If it doesn't happen in China, it doesn't happen."

But today, China stands to be a greater game changer than simply playing the role of intra-Asia market leader. China's Belt and Road initiative will be mostly exercised on intra-Asia turf as it works to reproduce and greatly magnify Marco Polo, Old Silk Road to the west.

As a firm policy from Beijing, Belt and Road emerges from its misty Silk Road antiquity as a near global exercise in pragmatic adhocracy- that of making an investment here, organising a project there, facilitating a partnership in one case, becoming a partner in another. All to further connectivity on land and sea. It might be a length or road in Myanmar, or a bridge repairs in Thailand or arranging financing for a Turkish tunnel.

Typical is a recent visit from a Hong Kong-Shanghai investors group under the aegis of the Hong Kong Trade Development Council to see what there is to upgrade in Vietnam to enhance connectivity and above reduce the costs of bringing goods to market on one hand and facilitating the delivery of consumables to consumers on the other.

Such missions amount to regular patrols of investors in one form or another throughout the area covered by the intra-Asia trade and well beyond. But it is focused on intra-Asia, 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 to Europe where the New Silk Road can more or less take care of itself by itself.

That leaves a lot for China's Belt and Road initiative to do. It also leaves individual nations within the intra-Asia region much to accomplish on their own. But for the first time in a long 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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