Crisis and Decoupling of Asia and US
By John Chng Kean Siang

There has been much sayings that the economy of Asia Pacific will start to decouple from America and Europe as the countries in the region become more dependent on the emerging market in China and India, and also the robust demand made possible by the economic boom in the region. The concern become more widespread in the recent financial crisis, from which the export to American market starts to dwindle since the depreciating of the Greenback.

The story and the literature portrayed are partly true, in view of large companies in the region still very much dependent on American and European markets. Although the demand is robust and the economies in the region are making tremendous growth, the purchasing powers are still very low compare to those in North America and Europe. We just have to know the exchange rate to imply the importance of the markets to the manufacturers in the region. Most of the consumers in the developing countries in the region seldom ready for any new innovations and the less than maturity of the local markets, make the penetration of new products difficult, retailers are reluctant to absorb the risks, and one finds it difficult to engage an agent to sell the goods. Unless it is already a well known brand or reliable goods which have prior adoptions and are spread via word of mouth, the innovations are seldom successful.

Another reason is that the per-capita income of the countries in the region are still very small, and many are still struggling with basic goods. Although the internet and the globalization have helped to increase the living standard and have created large group of middle class, the luxury is not trickled down to the grassroot consumers. Furthermore, the distribution of income among the population is not equal, which makes the penetration to the mass less easy.

We can see elsewhere that large purchasing power derived from young generations, who are savvy in internet, telecommunications, and fashionable youngsters who are more exposed to the new innovations in the market. In fact, this group of youngsters are mainly responsible for the explosion of handphone innovations in Japan. However, this similar group who is responsible to push for innovations is not present in the region, except Japan, Korea and Taiwan. The other countries in the region, Malaysia, Philippines, Thailand, Indonesia and others, do not provide a mass market base which the world manufacturers can depend on.

With the crisis in US and its contagious effect on Europe, the economy in the region is becoming much fragile. Things have changed and many manufacturers are running dry of contract and many have found difficulty in continuing.

John Chng at http://economicsandpolitics.blogspot.com

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