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How Asia Competes

8 November, 2012 (The Economist) - Asia’s growing competitiveness and its relative resilience have been an important support to the nascent recovery in the global economy argues Ramesh Venkataraman, Senior Partner and Head of Direct Investments at Samena Capital.

It strikes me that Asia competes on four important dimensions, all of which I have seen in action on a recent business trip across the continent.

Firstly, Asia is innovative. In Bangalore I met a company that is second only to Google in mobile advertising, employing 1,000 people in 37 countries and attracting strong interest from the likes of Samsung, Facebook and Microsoft. It is in the process of becoming a global leader through successful innovation and is working with all the top venture capital firms in Silicon Valley.

Secondly, Asia has the ability to find a niche and make the best of it. Sri Lanka, for example, is a country which many associate with civil war, but in Colombo I visited a leading global manufacturer of lingerie. The company not only supplies well-known high street names, but is actively seeking to become a global brand in its own right. It has discovered a successful niche and is in the process of building a lingerie hub in Colombo in collaboration with several specialist makers of lingerie components, creating jobs and sustainable economic activity.

Thirdly, Asia thrives on the dynamic nature of competition across its markets. Manila is now the largest hub of one of the leading call centre companies in the world, a key player in a US$10bn Filipino industry that has successfully migrated from India over the past decade. Asian businesses move rapidly as competitiveness shifts from one country to another, spreading expertise and growth.

Fourthly, Asia has global ambitions. Back in Bangalore, I visited a manufacturer of flap track beams that are integral to every Airbus aircraft, helping to raise and lower the flaps on the wings. This US$100m company recently purchased a German company which was twice its size because it needed the technology and wanted to be a global leader. That ambition will assure the future for Asian businesses.

But Asia is not without its challenges. If I were to pick one single issue that drags on growth it would be crony capitalism. In immature political systems, few businesses have managed to capture large sections of the economy and effectively privatise public resources for their own growth. You can see this happening in India where, in recent years, a small section of the business community has benefited from unfair access to the political system. This is very different to what happened between 1991 with the start of the liberalisation of the economy and the middle of the last decade when businesses thrived by actual competition rather than corruption.

My feeling is that this can only be overturned through the workings of the democratic process as we have already seen in India over the past year. Pressure from an increasingly vocal middle class will force greater transparency in government and better corporate governance, enabling Asia to unleash the four drivers of its dynamic growth.

Ramesh Venkataraman spoke at Economist Conferences’ High-Growth Markets Summit. Watch the full session on ‘How Asia Competes’ here.