Asia-Pacific to become world's largest area

The Asia-Pacific region is expected to overtake Europe to become the world’s largest market-expansion services (MES) area by 2015, according to a recent report by DKSH and Roland Berger Strategy Consultants.
The current economic downturn in Europe and the United States will provide a good opportunity for Asia as a growth MES market, as multinational companies streamline their business to focus on core competency, productivity and building their global brand image, the report said.
For small and medium-sized firms, they are looking for good business partners to provide them with strong market access around the world, particularly in Asia.
The MES market in the Asia-Pacific region, excluding Japan, is expected to experience an annual growth rate of 11.3 per cent between 2010 and 2015, to about US$853 billion (Bt26.5 trillion) in value by the end of the period.
Meanwhile, the overall MES market in Europe is anticipated to increase by 4.3 per cent per year to about $759 billion in 2015.
The study, for which DKSH and Roland Berger interviewed more than 100 executives in Europe, the US and Asia, found that the dramatic growth of the Asia-Pacific MES market in had been driven by a huge increase in the middle classes in the region.
It defines the middle classes as those who can afford an adequate and comfortable living standard and who are living in households with daily per capita incomes of between $10 and $100.
In the Asia-Pacific region, the number of those in the middle classes is expected to grow 9 per cent per annum in the coming decades, which is expected to lead to a fundamental change in consumption patterns with rising demand for higher-quality consumer goods, consumer durables and healthcare products.
The totality of the middle classes in the region is expected to increase significantly from 572 million people, or 28 per cent of the global middle classes, in 2010 to 1.74 billion (54 per cent) in 2020, and then to 3.23 billion people (66 per cent) in 2030.
In Thailand, the number of middle-class consumers will also increase significantly, from 13 million last year to 39 million in 2020.
“The market-expansion services sector is set to grow strongly in Asia. The key drivers will be the increasing affluence and aspirations of middle-class consumers, and the tendency for companies to outsource services,” said Charles Toomey, executive vice president and global business unit head for healthcare, DKSH Hong Kong.
He said businesses would have a strong fundamental focus on core competency, developing innovative products and looking to outsource non-core business activities.
This makes MES one of the most promising sectors within the outsourcing landscape, he added.
According to the study, healthcare and consumer goods are anticipated to have the highest MES penetration rates, while engineered products are projected to grow the fastest by 2015.
“DKSH, with our comprehensive and integrated capabilities across multiple countries, is well positioned to perform very well as a result,” Toomey said.
The company has already upgraded its distribution centres for healthcare and medical products in Vietnam, Taiwan and Singapore, and plans to upgrade the distribution centres in Hong Kong and Malaysia further within the next two years.
DKSH’s healthcare division has also acquired 60 new clients in the Asia-Pacific region this year, of which 20 are in Thailand, he said.
Toomey said the global market value for MES business was expected to enjoy significant growth from $2.2 trillion last year to $3.1 trillion in 2015. Over the period, the MES market is anticipated to expand by 7.1 per cent per annum, which is faster than the expansion of consumer markets, which is expected to grow at 6.1 per cent annually over the same period.
“The economic recession in the US and Europe is expected to encourage more small and medium-sized companies to enter the Asian markets as they seek growth. Larger multinational companies will also try to bring more of their products to Asia, and will thus utilise the skills of MES companies to maximise the growth potential of their brands,” he added.