Ranking Emerging Markets in the East Asia and Pacific Region
No region has been able to match the growth opportunities that the East Asia and Pacific region has provided to exporters in recent decades. In fact, this region contributes more growth to exporters in most industries than any other region in the world. On one side, there are the East Asia and the Pacific region’s developed markets such as Japan and Australia that have long been major markets for exporters from around the world. On the other, there are the region’s emerging markets, led by China, that have become the key drivers of growth for exporters in recent decades thanks to the size of their markets and the rising levels of purchasing power in these countries. While growth in this region has been strong, and more such growth is forecast, there are nonetheless a number of challenges facing exporters as they select markets in this region for their exporting activities. For example, exporters face a number of formal and informal obstacles when attempting to sell their goods or services in many countries in this region. Likewise, purchasing power levels in many of the larger countries of the region remain relatively low, limiting near-term growth opportunities. Nevertheless, the East Asia and Pacific region will continue to provide more opportunities for growth for exporters than any other region in the coming years.
As a reminder, ISA uses four criteria to rank a country’s export market potential in order to determine the attractiveness of a region’s markets. First and foremost, the size of the market is the most important criteria in determining the attractiveness of a particular market and therefore, this accounts for 50% of our score for market attractiveness. Second, purchasing power accounts for 20% of our score, as most exporters are focusing on the upper and middle classes in export markets. Third, the growth outlook for each market plays a vital role in the attractiveness of an export market and this counts for 15% of our overall score. Finally, the openness of the market for exporters, both formally and informally, is a major factor in determining how exporters view a potential market and this also accounts for the final 15% of the overall market attractiveness score. Altogether, these four criteria give us a solid base from which we can determine the relative attractiveness of individual export markets within a particular region, in this case, the East Asia and Pacific region. Please note, this region’s rankings are within the region only and should be compared with our scores used in a recent report on Latin American export markets.
In the East Asia and Pacific region, there are three clear tiers of export markets according to our ranking system. As one would expect, the top tier is occupied by a single country, China, which has gone from a closed market three decades ago to the world’s most important growth market for exporters. Thanks to its massive population and rising income levels, China is now the largest or second-largest market for many of the world’s leading exporting companies and, despite recent economic concerns, its domestic market continues to expand at a healthy pace, particularly its consumer market. The next tier of export markets in the East Asia and Pacific region consists of the region’s developed economies, led by Japan. This group of countries, with a combined population of more than 225 million, enjoys some of the highest purchasing power levels in the world. Next come Southeast Asia’s larger emerging markets, led by Indonesia, Malaysia, Thailand, Vietnam and the Philippines. While purchasing power levels here are well below those of the region’s developed economies (and in most cases China’s level as well), large populations and rapid economic growth mean that these markets have major long-term growth potential. However, their near-term potential is limited by their lower purchasing-power levels and, in some cases, substantial trade barriers.
There is no doubt that major growth opportunities remain in place for exporters across most of this giant region. At the top, China, while already a massive export market, still has much room to grow and will continue to provide most exporters with significant opportunities for growth. The region’s developed economies will not grow as fast as China, but apart from Japan, their outlook is at least as favorable as that of other developed export markets in North America and Europe. The emerging markets of Southeast Asia also have a massive potential for growth and will become, over time, some of the world’s most important markets for exporters. The key will be openness, as it remains to be seen if many of the region’s emerging export markets will make it easier for exporters to do business in those markets. If so, the opportunities for exporters in the East Asia and Pacific region will continue to expand faster than nearly anywhere else in the world. In fact, given the region’s size and growth, it is imperative for all exporters to have at least a presence in the region that will drive global economic growth for the foreseeable future.