Asia's opportunities come with challenges

Asia's opportunities come with challenges

Boardrooms around the world are abuzz with talks about Hong Kong's new budget, and global businesses are cautiously optimistic about its measures to cut taxes and stabilize the economy. It is a much-needed step that could drive growth at a critical time.

Of course, this is just the latest chapter of a promising economic story in Hong Kong - and all across Asia. Thanks to developments like these, more and more businesses and investors from around the world are looking to Asia.

In a slow growth world, Asia offers a strong prospect. Some major Asian economies have slowed in recent years. But even with that deceleration, Asia remains the fastest-growing economic region in the world. This year, Asia's economy is projected to grow 6 per cent, nearly double the expected global rate of 3.5 per cent.

Part of this is because of market-oriented policies, like those we've seen in Hong Kong for some time. There are encouraging prospects like these across Asia.

Businesses worldwide are hopeful about China's plan to reshape its legal system, combat corruption and reform its financial market. It's a positive step in a country whose standards for rule of law ranked 79th out of 99 countries last year.

China needs to find a way to sustain its growth as it shifts to a consumption-based economy and addresses the problems of urbanization, and the resulting energy and environmental challenges.

Businesses are also closely following the developments within the Association of Southeast Asian Nations. As it moves toward economic integration, ASEAN's economic potential is significant. ASEAN is expected to grow 5 per cent a year by 2018 - surpassing the United States, the European Union and Japan. By 2025, ASEAN's middle class is projected to nearly double. It's little wonder then that many companies - from Uber to Microsoft - are especially targeting the ASEAN market.

Developments like these have been compounded across Asia by the global collapse in oil prices. Countries that rely on oil imports have essentially received a boost. India, Indonesia and Malaysia are taking this chance to eliminate the fuel subsidies that have crippled their economies for years. China, the world's largest net oil importer, could save as much as $50 billion in 2015 if the current price trend continues. With the confluence of cheap energy, political stability and relatively reliable growth, it's not hard to see why so many businesses are looking to invest or increase their presence in Asia.

But risks still exist. For example, even in a market-driven economy like Hong Kong, businesses still come to us to deal with a variety of regulatory requirements. They are still working to make the most of a digital and technological transformation.

Indeed, significant challenges remain across Asia. But, if addressed, the region can lure businesses eager to expand markets and put capital to work. It is thus imperative that governments and businesses work together to address the problems related to income inequality, youth unemployment, urban development, climate change and resource efficiency. Steps like these are critical, because they won't just boost the confidence of foreign investors; they'll also help drive stable economic growth.

Asia's success will require many more steps in the right direction - and decisive actions by the region's leaders to ensure that it happens. Asia's opportunities for growth on the horizon are clear.

The author is the Global Chairman and CEO of EY, a leading global professional services organisation.


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