Unlocking Asia's Trade Potential for Ireland by Asia Matters

! UNLOCKING ASIA S TRADE POTENTIAL FOR IRELAND

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An Economic Report by

Asia Matters

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! ! Author! Marc Coleman, Managing Director, Octavian Consulting Limited & Economics Editor, Newstalk, ! in collaboration with the team of experts at Asia Matters. !

! Editorial Team! Martin Murray, Executive Director, Asia Matters! Ronan Lenihan, Director for Operations and Development, Asia Matters! Stephanie FitzGerald-Smith, Director for Marketing & Communications, Asia Matters!

! Special Thanks! Special thanks to Alan Dukes, Chairman, Asia Matters, and to Tom Hardiman, Chairman, Chester Beatty Museum for their invaluable insights. ! The author would particularly like to thank Kevin Sherry & George Kiely of Enterprise Ireland for sharing their expertise.!

! Published by! Asia Matters Ltd. Dublin, Ireland, October 2014.! Copyright ÂŠ 2014. All rights reserved. No part of this publication may be reproduced without the prior permission of Asia Matters.! The selection and compilation of statistics and other data contained in the volume are the responsibilities of the author and editorial team.! The analysis contained in the volume was carried out by the author and editorial team, based on independent research, as well as insights shared in discussions during Asia Business Week Dublin 2014.!

! Disclaimer! This economic research report has been commissioned by Asia Matters to contribute to thought leadership for the benefit of further developing the Ireland Asia Trade relationship. The information in this report is given in good faith and is not investment advice, which is a matter for professional advisory services. The author and partners to this publication expressly disclaim all liability to any person or corporation in respect of any losses or other claims, whether direct, indirect, incidental, and consequential or otherwise arising in relation to the use of this report as the basis for any business decision or in connection with any advice given to third parties.â&#x20AC;Š

ÂŠ Asia Matters 2014

! ! Foreword: Mr. Alan Dukes, Chairman, Asia Matters The

author of this report, Marc Coleman, examines the profound impact of Asia on the global economy and how this is creating new trade opportunities for Ireland.!

By commissioning this research, Asia Matters aims to deepen the understanding of this change and help policy-makers and economic agents in Ireland and across Asia to use these insights to contribute constructively towards building lasting connections. !

! !

The current economic climate in Asia holds vast potential for Ireland’s open economy which thrives on international cooperation and trade. With Asia’s rising economic power, new markets have opened up to meet the growing consumer demand. Parallel to this, since the crisis, savings rates in Asian economies have remained traditionally high, while European economies have lacked investment. This imbalance has raised the possibility of greater investment into the EU.!

We see enormous opportunities for the development of trade and investment flows both into and out of Asia. This report sets out to identify the nature and possible scale of some of these flows, thus providing deeper insights for influential business and government stakeholders. !

Ireland’s key advantages and market leader status in sectors such as food and agri-tech, education, ICT, financial services and tourism, matched with the growing commitment of Team Ireland in Asia, can see Ireland build influence and establish a valuable brand to drive trade development in key Asian markets. !

With this independent research, Asia Matters looks forward to contributing in a positive way to Ireland’s trade strategy towards key Asian partners. We look forward to engaging further with Asian and Irish stakeholders in our future conferences and publications.!

! ! !

Alan Dukes,! Chairman, Asia Matters!

! ! !Figures ! !! !Figure 1: Population (millions) of selected Asian countries in 2011………………………………. 11 ! 2: Workforce of selected Asian countries (millions) - 2011………………………….….….. 12! !Figure Figure 3: GDP per capita* of selected Asian countries in 2011………………….….….….….…… 13! !Figure 4: Asian convergence: Cumulative growth (%) 2009-2011 and GDP per capita (US$)… 13! Figure 5: Household consumption as % GDP and GDP per capita - 2011…….….….….……….. 15 ! !Figure 6: Asians as adaptors of new technology - 2014………………………….….….….…..…… 16! 7: Internet users per 100 persons and GDP per capita…………………..….…….….….…. 16! !Figure Figure 8: Asia’s convergence with EU levels of urbanisation (% of population ……………….. 17! !Figure 9: Target export levels and growth for 2019……………….……………………….….……… 20! Figure 10: Growth trajectory for Irish Food and Drink Exports 2010-2020………….….….…..… 23 ! !Figure 11: Food and drink industry share of the Irish economy and Chinese market growth………… 23! !Figure 12: Services exports from Ireland……………….…………………………………………..…. 24! Figure 13: Growth in imports of services 2009-2013 in selected counties………………………. 25!

Figure 14: Ireland’s goods exports to China in 2013 by main category….………..……………..

29!

Figure 15: Ireland’s goods exports to India in 2013 by main category..…………..……………… 32! Figure 16: Ireland’s goods exports to Japan in 2013 by main category….…………..………….. 35! Figure 17: Ireland’s goods exports to South Korea in 2013 by main category…….……..……... 38! Figure 18: Ireland’s goods exports to Singapore in 2013 by main category…..……….……….. 40! Figure 19: Ireland’s goods exports to Hong Kong in 2013 by main category….………………... 43! Figure 20: Ireland’s goods exports to Malaysia in 2013 by main category…….………..……….. 45! Figure 21: Ireland’s goods exports to Thailand in 2013 by main category..…………….……….. 47! Figure 22: Ireland’s goods exports to Vietnam in 2013 by main category……………………….. 49! Figure 23: Ireland’s goods exports to The Philippines in 2013 by main category.…………..…. 51! Figure 24: Ireland’s goods exports to Indonesia by goods category by main category………. 53! Figure 25: Standard & Poor’s sovereign debt rating….………..……………………………………. 60! Figure 26: Indicators of economic risk………………………………………..……………………….. 61!

AsiaMatters Matters2014 2014 ©©Asia

! Table of Contents!

! ! List of Figures.……………………………………………………………………………………………….. 4! About Asia Matters/ About the Author ………………………………………………………………….. 6! Introduction ………………………………………………………………………………………………….. 7! An Asian Century ………………………………………………………………………………………….. 11! Convergence is King …………………………………………………………………………………..….. 13! Ireland’s Opportunity ……………………………………………………………………………………. 19! Country by Country overview ………………………………………………………………………….. 28! Risks ………………………………………………………………………………………………………….. 58! Conclusions …………………………….……………………………………………………………….….. 62! Annex: List and status of EU-Asia Free Trade Agreements ……………….…………………….….72!

5© Asia Matters 2014!

! About Asia Matters !

! ! Asia Matters is an economic think tank based in Dublin dedicated to developing Ireland Asia and EU Asia business relations.! It is an independent, not for profit organisation with a strong educational remit delivered through business briefings, conferences, policy research and publications.! Within Ireland, Asia Matters provides thought leadership and business connectivity through events such as the annual ‘Asia Business Week Dublin’ summit and publications such as the annual ‘Ireland Asia Business Yearbook’, the book of reference for bilateral trade relations.! Within Asia, Asia Matters hosts the EU Asia Top Economist Round Table (TERT) series in association with key stakeholders on the ground. In 2014, the TERT series takes place in Tokyo and Beijing.! Asia Matters works in close partnership with government, business and academic stakeholders in Ireland, the EU and across Asia. The Chairman of Asia Matters is Alan Dukes, the former Irish Minister for Finance.

! ! ! About the Author!

! Marc Coleman is a leading national economic commentator in Ireland with a weekly economics column in Ireland’s largest selling broadsheet newspaper, the Sunday Independent, and an award winning radio show on Newstalk 106-108fm. Marc is the Managing Director of Octavian Consulting Limited (www.octavian.ie), which provides economic and business research and analysis to the highest international standards.! Previously an economist with the European Central Bank and Irish Ministry of Finance, Marc was also Economics Editor of the Irish Times and is a leading figure on Ireland’s public speaking circuit. He holds a scholarship MBA from Ireland’s leading business school, an honours economics degree from Trinity College, a Master’s economics degree from University College Dublin and also a prestigious Advanced Studies Programme qualification from the Kiel Institute of World Economics.! As well as Asia Matters, Marc has worked with Ernst & Young, the European Central Bank (ECB), KPMG, the Irish German Chamber of Commerce and a list of other prestigious organisations.

This report outlines the significant potential to further develop Irish business connections with key partner countries across Asia, as the key region driving global economic growth and activity. It aims to shed light on key markets and sectors where Ireland has a competitive advantage. It also provides   6!

! ! Introduction This report outlines the significant potential to further develop Irish business connections with key partner countries across Asia, as the key region driving global economic growth and activity. It aims to shed light on key markets and sectors where Ireland has a competitive advantage. It also provides data and analysis outlining ambitious targets for government and business stakeholders to meet in their engagement with key partners in Asia.!

! Renaissance or Revolution - Asia’s Economic Rise! Between 2009 and 2011, while most of Europe and the US was gripped in recession, the Chinese economy grew by 20 per cent, the Indian economy grew by 25 per cent and the Indonesian economy grew by 18 per cent. This is no mere accident of economic survival. It is a long, deep and strong process, no less than an economic renaissance. In 2011, the Asian Development Bank reported on the scale of the region’s economic potential: “Asia is in the middle of a historic transformation. If it continues to follow its recent trajectory … Asia would regain the dominant economic position it held some 300 years ago, before the Industrial Revolution”.1 ! This revolution is not confined to China or India. Although dominant at present, the opportunities for exporters presented by China and India are complemented by the rise of ASEAN, a bloc of ten countries2 who promote closer ties with each other and neighbouring economies in the fields of economic cooperation, free trade, energy, pollution and migration. ASEAN alone has been cited by a McKinsey report3 as having the potential to become the world’s 4th largest economy by 2050, while Indonesia – the regions largest 1

economy – could be the world’s 7th-largest economy by 2030, overtaking Germany and the United Kingdom, according to a separate McKinsey report4. Interestingly, Myanmar – an ASEAN member currently undergoing rapid development with huge economic potential – will have more than half the world’s consuming class living within a five hour flight of its commercial capital Yangon by 2025 and will be the centre of a road and rail network linking China, India and Southeast Asia5. While there are recent signs of challenges ahead in some Asian countries, as well as debt related risks familiar to us in Ireland, Asia’s medium to long term potential for Ireland is significant.! In short, Asia is not just a region of growth potential for Ireland. Rather, Asia’s rise is a new global reality for which business and government must prepare strategic responses.!

! !

Asian Development Bank, 2011 “Asia 2050: Realising the Asian Century”

ASEAN was founded in 1967 and its current membership includes Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Cambodia, Laos, Myanmar 3

Vinayak HV, Fraser Thompson and Oliver Tonby, McKinsey 2014 “Understanding Asean: Seven things you need to know”

Raoul Oberman, Richard Dobbs, Arief Budiman, Fraser Thompson and Morten Rosse, McKinsey, 2012 “The archipelago economy: Unleashing Indonesia’s potential 5

ibid 4

Asian Opportunities! With a combined population touching 3 billion people, Asia’s6 growth represents a unique economic opportunity for Ireland. Since 1999, Asia has been on the government’s radar screen with the launch of the 1999 - 2009 Asia Strategy, a comprehensive plan to build substantial trade and investment links across Asia. The growth in opportunities for Irish business in Asia since the end of this strategy period has, despite recession, not abated. The trajectory of growth referred to by the Asian Development Bank in 2011 has not just been maintained but, as this report shows, promises to continue – albeit more moderately – for the next 5 years and beyond.! The projected macroeconomic growth in Asia significantly understates the potential for trade gains in the region for Ireland. Thanks to both demographic and economic factors, demand in many sectors is growing at even faster rates than the overall economy. Whether macroeconomic or sectoral, Asia’s potential comes with associated political, governance, legal and cultural risks and challenges. The failure to sustain growth potential - either due to poor economic policies or to external market shocks - is also a major vulnerability. This is particularly the case where long term economic planning is absent or weak and where the transition from resource driven growth (low cost labour and capital) to technology and productivity driven growth is uneven or stalled. Asia will continue to be a key global competitor for scarce energy resources.! These problems merely underscore the importance of fully engaging with the Asian challenge. Home to half the world’s population, Asia should aspire to account for a more appropriate share of global economic output in the coming decades and close the gap in terms of per capita incomes to those of Europe and the US.

While not the case at the moment, Asia’s rapid pace of growth means that the coming decades will see greater convergence with European and US living standards for the growing Asian middle classes. As that happens, Ireland must not be left behind.! This emerging middle class, accompanied by massive urbanisation and a transformation of financial services, represent major potential for Ireland across Asia as demand rapidly rises for products and services, such as dairy and meat products. These are areas in which Ireland has a competitive advantage and should use this advantage accordingly.!

! Asia’s Growth Story ! In some cases, demand is growing exponentially. However, this is mostly due to “low base” effects, whereby imports are starting from a very low level. Nonetheless this does not alter the fact that the speed of growth offers huge potential for those ready to respond to rising demand. For instance, meat imports in 2013 rose by a staggering 248 per cent and 390 per cent higher in China and Thailand respectively from their 2009 levels. Demand for fish imports in Pakistan, grew by 1089 per cent between 2009 and 2013. While these growth rates must be qualified by their very low base, the reality is that the rate at which Asian demand is rising in specific areas presents huge opportunities for Irish business as new consumer markets open and mature. ! Even more mundane growth rates are strong enough to offer sustained returns to those who devote the time and resources to enter key Asian markets.! Growth in internationally traded service sectors is impressively fast. In China, demand for financial services imports rose by 427 per cent between 2009 and 2013. In India, demand for imported commercial services rose by 60 per cent, while in Indonesia demand for imported government services rose 126.3 per cent during the same period.! In the construction sector where doubts have emerged about China’s rate of building, there are new growth centres emerging to replace demand. For instance, in Malaysia, construction imports rose by 142.5 per cent between 2009 and 2013, while in Hong Kong, they rose by 171 per cent in the same period.

For the purposes of this report ‘Asia’ refers to 16 countries, namely, China, Japan, India, Pakistan, Bangladesh, South Korea, and the 10 ASEAN states mentioned above.

Each of these categories represent areas where Irish companies are doing well and can continue to succeed.!

! Targeting Growth! Efforts by successive governments to expand trade in the region have proved highly successful. In 2011, the Irish Exporters Association, through their Asia Trade Forum programme, set out their plan, entitled “Trading with the Asia Pacific Region 2011-2015”. At the time it described the number of Irish companies with significant presence in Asia as “disappointingly low”. Initiatives contained within the plan - some short term such as a “visa review” for selected Asian countries, some long term such as the “increased Government funding, practical commitment and resources” - are seeing positive outcomes.! Last year, indigenous exports to the region grew by 17 per cent. However, Ireland’s share of exports remains much lower than it should be. Asia, as defined by this report, accounts for one quarter of global GDP, nearly a third of global trade flows and half of the global population. Despite these facts, the region makes up just 6.2 per cent of our total exports. Although, we are certainly making progress in unlocking Asia’s vast potential, there is much further to go.! HSBC, in a recent report on Ireland’s trade forecast, estimate that ‘the fastest growing markets for Irish exports are expected to be in China, Vietnam and Malaysia, with double digit export growth to these countries expected out to 2030’. The report goes on to encourage ‘endeavours to diversify trade towards fast-growing emerging economies’ with particular attention paid to leveraging Ireland’s competitive advantage and capacity in food and agribusiness7. !

To illustrate, by merely keeping pace with projected import growth rates in the region, we could see Ireland’s exports to the region nearly double over the next 5 years, this would result in many positive implications for employment, tax revenue and domestic demand spill over effects. By strategically targeting that growth to zone in on sectors that are poised for particularly strong growth, we could do even better than this.! This can be achieved. The success of indigenous entrepreneurs, combined with the work of Enterprise Ireland and a host of government led supports have enabled a significant expansion in the region. However, as this report sets out to illustrate, multiplying that effort could yield significant returns. The good news is that while demand is moderating in some Asian countries the region is expected to remain a powerhouse of demand. According to 2014 IMF forecasts, import demand across Asia over the 2014 – 2019 horizon is expected to rise and maintain pace with the impressive rates of the past 5 years.! Unlike any other part of the world and no other time in history, Asia presents Irish exporters with the opportunity for sustained and significant growth. By focusing attention on key sectors and demographics, particularly in urban areas, companies can grasp these opportunities. By giving Asia adequate status in terms of resources and attention via policy supports, government and government agencies can strongly assist their success.! Such efforts should be informed by Ireland’s areas of strong competitive advantage such as food and agritech, business services, tourism and the education sector. A brief glance at two of these traditional sectors is enough to illustrate the enormity of opportunities which exist for Ireland.!

! Food and Agri-tech! In the food sector, the government has formed the strategic objective of growing Ireland’s capacity to supply food to 50 million people by 2020, thus raising food exports to €12 billion by 20208, while HSBC estimates agricultural exports to rise by 40 per cent by 20309. As the analysis below confirms, food demand

HSBC Global Connections, September 2014, ‘Ireland Trade Forecast Report’

Department of Agriculture, Fisheries and Food July 2010 “Food Harvest 2020”

ibid 7

in Asia is rising so rapidly that the region has the capacity to absorb most if not all of the increased exports envisaged in that target period. Potential links extend far beyond food supply, following a high level Chinese delegation visit to Ireland in June 2013, Vice Agriculture Minister Zhang Taolin remarked, “Ireland is leading the whole world in terms of agriculture, in particular agricultural science and technological advancement”10. Across Asia, Ireland can play a leading role in assisting the transition from traditional to modern agricultural methods.!

! Tourism! The Asian view of Ireland’s tourism potential is equally positive with China’s largest online travel agent Ctrip recently naming Ireland the “best potential destination” for 2014. Combined with the strong personal connections and positive impressions, created by Ireland in the hearts and minds of Chinese residents and visitors, this is an excellent basis for a dramatic increase in tourist activity from a new and vibrant source. Indeed, Ireland’s valuable soft power elements, such as the global success of Riverdance and other popular and traditional culture icons have made a meaningful contribution to Ireland’s attractiveness as a tourism destination.

Alison Healy, Irish Times, June 4th 2013

! ! An Asian Century The resilience of Asia in defying the global crisis in the last five years has been impressive. Indeed it is hard to exaggerate the scale of growth in the region in the last three decades. From just under 1 billion people in 1980, the Chinese population has risen by approximately 300 million to over 1.3 billion and continues to rise. From some 700 million in 1980, India’s population rise has been even more dramatic, with a rise of over half a billion to a current level of 1.24 billion. In lesser populated countries, growth has been remarkable, so much so that the combined population of the “Next 11”11 now exceeds 1 billion, as Figure 1 illustrates. ! As is later explored in this report, it is in some of the “Next 11” countries that the most exciting opportunities for growth are occurring, for instance, the Vietnamese population has risen from 54 to 88 million since 1980, while the Indonesian population has risen from 151 to over 250 million since 1980. The impact on demand in key sectors of potential Irish interest, such as food and business services, in the “Next 11” is significant. Once again drawing an example from Vietnam, since 2009 Ireland has exported €5 million worth of goods to Vietnam in the dairy products sector, a sector that has seen demand rise by 68 per cent in that period. Speaking during Asia Business Week Dublin in June 2014, H.E. Bui Thanh Son, Vice Minister for Foreign Affairs offered more insights into sectors where Ireland might benefit from higher demand: “The strengths of Ireland lie in energy, agricultural exports, dairy and pharmaceutical products. These are also the items for which Vietnam has demand”. IMF forecasts for total import volumes up to 2019 in Vietnam indicate

massive opportunities for those entering the market now to make significant gains. This will be addressed in later sections of the report.!

Figure 1! Population (millions) of Selected Asian Countries in 2011*!

Source: Penn Wold Table version 8.1, Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2013), “The Next Generation of the Penn World Table”. Data for 2011.! * US and Ireland are used as reference points throughout the report!

Those opportunities are weighed heavily in favour of the growth in Asia’s workforce and accompanying growth in spending power. According to McKinsey12, the class of consumers – defined as those enjoying a disposable level of income of over $10 a day13 - is set to rise to 4.2 billion persons by 2025 and most of this growth will occur in urban Asia. This equates to a rise of approximately $15 trillion in world consumption over the next decade14. ! As Figure 2 shows, China will contain a strong plurality of this rise in demand by virtue of the sheer size of its relative workforce, which exceeds those of

The ‘Next 11’ refers to Indonesia, Pakistan, Bangladesh, Japan, Philippines, Vietnam, Thailand, South Korea, Malaysia, Hong Kong and Singapore. The ‘Next 11’ have a combined population exceeding 1 billion. 12

McKinsey Quarterly 2012 Number 4 “Emerging Markets on the Move”

On Purchasing Power Parity basis, that is adjusting for differing relative prices of consumer goods in different countries

Source: The author’s interpolation of McKinsey estimates.

India, Indonesia and the US put together. Chinese cities in particular – not just megacities such as Beijing, Shanghai and Shenzhen but a multiplicity of medium sized cities – will represent huge opportunities in this regard as the government emphasises sustainable economic development in the regions. For consumer goods, China also represents a further opportunity as its relatively advanced retail sector is conducive to consolidation and economies of scale in terms of logistics and distribution. Factors that are important considerations for exporters from a small island nation like Ireland.! As will be illustrated later in this report, China, India and the “Next 11” are all expected to have import growth of at least 30 per cent between now and 2019 with most of these markets expected to grow significantly faster.!

sustain Indonesia’s remarkable economic rise.! Figure 2! Workforce of Selected Asian Countries (millions) - 2011! Workforce%(millions)% The%"Next%11"%

%442.4%%

Ireland%

1.8%%

Singapore%

3.1%%

Hong%Kong%

3.6%%

Malaysia% South%Korea%

12.4%% 24.1%%

Philippines%

34.6%%

Thailand%

40.1%%

Vietnam%

49.4%%

Bangladesh%

50.4%%

Pakistan%

53.2%%

Japan% Indonesia%

61.9%% 109.5%%

US%

141.8%%

India%

495.7%%

China% 0.0%%

784.4%% 100.0%%

200.0%%

300.0%%

400.0%%

500.0%%

600.0%%

700.0%%

800.0%%

900.0%%

Source: Penn World Table version 8.1, Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2013), “The Next Generation of the Penn World “. Data for 2011

Another key element shaping the Asian century will be the leadership shown across the region. Xi Jinping has established a strong anti-corruption stance, in part to prepare for far reaching economic reforms. Abenomics has seen major reforms in an effort to kickstart growth in Japan. The three arrows - fiscal stimulus, monetary easing, structural reforms - has been seen as a proactive attempt to jolt the Japanese economy out of a two decade long slump. The election of Narendra Modi in India and Joko “Jokowi” Widodo in Indonesia sees two major emerging powers take on reform minded new governments that have raised expectations considerably. In India, optimism is high that Modi’s new government can deliver on its mantra of ‘less government, more governance’ and will be more result-oriented, target driven and accountable in laying the foundations for India to become a global economic powerhouse. Similarly, Indonesia’s Jokowi has been charted as the right man to take on the many challenges facing Indonesia, s u c h a s i n e q u a l i t y, i n a d e q u a t e infrastructure, and restrictive labor laws, while also building the institutions to 12

! ! Convergence is King How can the most exciting opportunities be grasped by Irish companies? Spotting them is the first challenge and the “convergence story” is an essential prerequisite to doing that. Singapore has the highest GDP per capita, followed by Hong Kong, Japan and South Korea. This pecking order reflects the order in which open market economies were adopted in each country, with Singapore and Hong Kong leading the way as historic trading ports, while Japan and South Korea following quickly as they adapted new economic paradigms in the post war era. It is little surprise that following these nations are Malaysia, Thailand, China, Indonesia and India, whose levels of GDP per capita relative to one another closely resemble their relative positions with regards to embracing economic reforms. In other words, despite a rough and occasionally uneven process, there is a clear process of convergence over time, with lower income countries playing “catch up”. See Figure 3 for the GDP per capita of the countries analysed in this report. ! Figure 3 GDP per capita* of Selected Asian Countries in 2011!

Figure 4 confirms this process of convergence by illustrating how, generally, countries with lower levels of GDP per capita have avoided recession to produce significantly higher rates of growth than most developed economies. The chart below gives historic growth data (2009 to 2011) but IMF projections for import growth suggest this relationship is also set to continue into the future, as shown further below. There are of course exceptional countries like Singapore, Hong Kong and South Korea that – despite already high living standards – are maintaining solid growth.! Figure 4 Asian Convergence: Cumulative Growth (%) 2009-2011 and GDP per capita (US$)!

30.00%# IND# 25.00%#

VT# CH#

20.00%#

INDO# BG#

15.00%#

SG#

PH# PK#

10.00%#

TH#

SK#

ML#

HK#

5.00%# US#

0.00%#

JP#

IE#

45.00%# 0#

10,000#

20,000#

30,000#

40,000#

50,000#

60,000#

BG: Bangladesh, CH: China, HK: Hong Kong, IE: Ireland, IND: India, INDO: Indonesia, JP: Japan, ML: Malaysia, PH: Philippines, PK: Pakistan, SI: Singapore, SK: South Korea, TH: Thailand, VT: Vietnam ! Sources: Penn World Table version 8.1, Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2013), “The Next Generation of the Penn World Table” !

! Source: Penn World Table version 8.1, Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2013), “The Next Generation of the Penn World Table“. Data for 2011! *PPP adjusted 2005 $US! ** US and Ireland used as a reference point!

Three convergence factors working in Ireland’s favour!

1. Emerging consumers: “Hidden Tigers, Crouching Dragons”!

Aside from growth in income per capita, three other “convergence” factors are working towards Ireland’s advantage as an exporter to the region. First, we should examine the challenges Ireland has faced as an exporting nation.!

A determining factor in the extent in which consumer demand is ready to “take off” can be gauged by key elements, the level of GDP per capita as mentioned above and, secondly, the share of consumption in a country’s GDP.!

As a small island whose indigenous exporters mostly lack critical mass to exploit large markets immediately, we have been at a historical disadvantage. Even adapting to scale requirements in our nearest trading partner, the UK, can present challenges for Irish SMEs. !

India is in this respect a “Hidden Tiger” in that its level of GDP per capita is low relative to that of China. Indian consumers will emerge but not just yet. China by contrast is a “crouching” (i.e. ’ready to pounce’) dragon in that - unlike India - its level of GDP per capita is now at or above the threshold at which consumers begin to enjoy goods and services taken for granted in the west.!

One good reason why Ireland’s share of exports to Asia is lower than it should be, may relate to the nature of growth in a developing country’s early stages of development. It is usually highly capital intensive and the profile of exports to that country are therefore necessarily highly weighted in sectors – heavy engineering, transport goods and industrial equipment – in which Ireland does not yet have a comparative advantage.!

China is still “crouching” because like India the share of household consumption of GDP is still relatively low at 28 per cent, see Figure 5. Significantly lower in fact than peer countries in Asia. In Hong Kong, for instance, household consumption accounted for 62.5 per cent of GDP in 2011, more than double China’s level. In Japan the equivalent figure is 59.5 per cent. If China targets a level of consumption even half way between these peer benchmarks and its current level of consumption, the consequences for Chinese demand in coming decades for consumer goods will be profoundly positive.!

A good example of this can be seen in Bangladesh where imports of rolling stock and shipping stock has risen by 2,700 per cent and 937 per cent respectively between 2009 and 2013. But as countries converge with higher levels of GDP per capita, consumption tends to replace investment as the leading component of growth. This, in turn, gives relatively more opportunities to SMEs compared to large conglomerates and to countries specialising in consumables compared to heavy industrial goods.!

On March 14 2014, the National People’s Congress directed that consumer spending in China must rise. This gives rise to an intriguing opportunity in that not only are economic forecasts pointing to continued (albeit moderating in overall terms) economic growth, but government policy is set to concentrate this growth not in investment (where small countries like Ireland are at a relative disadvantage) but towards consumption (where small countries and SMEs can better leverage unique competitive advantages).!

Figure 5!

Household consumption as % GDP and GDP per capita - 2011 GDPPC (2005) US$

Household consumption (% of GDP)

Country Singapore

51,644

33.1

42,646

75.9

Hong Kong

38,569

62.6

Japan

30,427

59.5

South Korea

27,522

51.0

Malaysia

13,469

52.2

Thailand

8,491

52.8

China

8,069

27.9

Indonesia

4,339

58.0

India

3,602

51.8

Philippines

3,521

75.8

Vietnam

3,448

47.5

Pakistan

2,473

71.0

Bangladesh

1,554

70.7

Source: Penn World Table version 8.1, Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2013), “The Next Generation of the Penn World Table”

2. Etail revolution!

A key factor in grasping this opportunity will be technology and, in particular, the etail revolution. As shown in Figure 6, while earlier developers such as Hong Kong and South Korea have familiar patterns of telephone line subscription per 100 persons (60+), something new is happening in countries that were late developers. Malaysia, Thailand, Indonesia, the Philippines and Vietnam are leap frogging over some of their western counterparts through bypassing old technologies and embracing new ones with rates of cell subscriptions that are already over 100 per 100 persons.!

! ! This ties in with a related and even more exciting development, internet usage, which in many low to middle income Asian countries is already higher than in some western countries. Figure 6 shows three broad groupings. In the case of high to medium GDP per capita countries (Hong Kong, South Korea, Malaysia), internet penetration is already very high. In the case of medium to low GDP per capita countries (China, Thailand, Vietnam and the Philippines), it is catching up. In the case of lower income per capita countries, it remains in its early stage of take-up. But a clear pattern of convergence and catch up seems apparent.

Figure 6!

Asians as Adaptors of New Technology - 2014! Telephone lines  per 100 persons

Country!

Cell subscriptions  per 100 persons

Hong Kong

61.29

229.24

South Korea

61.42

109.43

Malaysia

15.69

141.33

Thailand

9.51

127.29

China

20.2

80.76

15.39

114.22

India

2.51

69.92

Philippines

4.07

106.51

Vietnam

11.22

147.66

Pakistan

3.24

67.06

Bangladesh

0.62

62.82

Indonesia

!For Irish companies in selected markets

Source: Asian Development Bank, Basic Statistics 2014

for whom in previous times the logistics of exporting to Asia would have been prohibitive, this is a very significant development. For higher income and more developed consumer markets – particularly those characterised by consumers with a curiosity and taste for western brands – a whole world of opportunity is arising. Just one example of success in this regard is Inis Meáin, a company using webmarketing to sell high quality knitwear around the world, including to high income purchasers in Japan, South Korea and Hong Kong.!

As Figure 7 shows, hundreds of millions more consumers in Asia will enter this space over the coming decade. As one would expect, more westernised economies like Hong Kong, South Korea and Malaysia are already at high levels of internet usage per 100 persons. However other countries, such as Thailand, China, Philippines and Vietnam, are catching up quickly, while countries like Bangladesh, Pakistan, India and Indonesia – countries with a combined population of almost 2 billion – are at the start of this journey. !

Figure 7! Internet Users per 100 persons and GDP per capita! Internet#Users#per#100#persons#&#GDP#Per#Capita#

90# SK#

80#

SG#

HK#

70#

ML#

60#

High#internet# usage#

50# 40#

CH#

VT# PH#

Catching#up#

30#

TH#

20#

INDO# IND# PK# BG#

10#

GeKng#started#

0# 0#

10,000#

20,000#

30,000#

40,000#

50,000#

60,000#

BG: Bangladesh, CH: China, HK: Hong Kong, IE: Ireland, IND: India, INDO: Indonesia, JP: Japan, ML: Malaysia, PH: Philippines, PK: Pakistan, SI: Singapore, SK: South Korea, TH: Thailand, VT: Vietnam ! Source: Penn World Table version 8.1, Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2013), “The Next Generation of the Penn World Table” ! Asian Development Bank, Basic Statistics 2014!

However, it is important to point out that much like the leapfrogging of old technologies seen with the uptake of mobile phones over fixed lines, users in Asia are bypassing fixed line internet with smartphone penetration growing at a rapid rate. Looking at Indonesia as an example, mobile Internet has the

potential to transform the lives of the population by providing them with affordable access to the web. Estimates in 2011, outlined that mobile internet accounts for over 70 per cent of internet usage in Indonesia15, the relative affordability of smart phones has seen ownership rise to 21.3 per cent of mobile owners in 2014 and is expected to double over the next 5 years to 42.6 per cent16.! The growing mobile internet infrastructure and ownership rate in highly populated countries like Indonesia and India will open up huge opportunities in the etail sector, online banking and other areas where mobile technologies can allow consumers to access new services and products.! For far sighted business strategies leveraged on good use of internet technology, Asia is a key place to be. And perhaps the most interesting place to be right now is in the centre of the chart shown in Figure 7 where both income per capita and levels of internet use are both poised at the “take off” thresholds for many goods and services.!

! 3. Urbanisation! !

Another obstacle for any small country exporting over distance relates to the logistical challenges of distributing goods. There are many facets to this challenge but a critical one is the lack of urbanisation. Asia’s population has always been vast. But compared to the EU where over 70 per cent of consumers live in well clustered urban centres – Asia’s population has historically been diffused in rural communities and hard to reach. Until now, that is, Figure 8 charts the rise in urbanisation in China and Indonesia. !

Figure 8 ! Asia’s Convergence with EU Levels of Urbanisation (% of population)!

China World

European Union

Indonesia

India

1960

1970

1980

1990

2000

2010

Source: World Bank (World Development Indicators), 2014!

As well as converging with higher income per capita, Asia’s population is now rapidly converging with western levels of urbanisation. According to a recent report by the United Nations Development Agency17, China surpassed the 50 per cent share of population living in urban areas in 2011 for the first time. Moreover this report estimates that in a development that is “unprecedented in human history” some 310 million Chinese will have migrated to urban areas by 2030. Indonesia’s rate of urbanisation will also see an impressive rise by 2030. Both China and Indonesia are now at the average global level of urbanisation but likely to surpass this in the coming decade. And while slower and more subtle in form, the process of urbanisation in India is also significant as the spread of road, rail, internet, satellite television and more diverse forms of employment brings “urban life” to many smaller villages and towns previously defined by subsistence agriculture. In varying degrees, these processes are also significant in the “Next 11” countries identified in the report. While in all cases they offer profound opportunities for Irish business.! Asian urbanisation has also seen the birth of many new mega cities with more expected before 2030. These massive urban centres are now considered economies in their own right given their scale. With

Deloitte - Access Economics Report - ‘The Connected Archipelago: The Role of the Internet in Indonesia’s Economic Development’ - December 2011 16

Statista - ‘Share of population in Indonesia that use a smartphone from 2012 to 2018’ - 2014

China National Human Development Report 2013 “Sustainable and Liveable Cities: Toward Ecological Civilisation”, UNDP 2013

unique characteristics, they offer unique opportunities for trade and investment. ! Support from government agencies has been crucial in achieving the progress made to date and will remain so in the future. Co-location between Enterprise Ireland, the IDA, Bord Bia, Tourism Ireland and the Department of Foreign Affairs has enabled the government to pursue a “Team Ireland” approach to assist Irish companies in the region. Support offices currently exist in Beijing, Shanghai, Hong Kong, Seoul, Tokyo, Singapore, Delhi, while new embassies have been opened in Indonesia and Thailand, as well as a consulate in Hong Kong. Enterprise Ireland’s “Pathfinders” programme assists firms in guiding access to new markets by providing valuable connections and expertise for a key “bandwidth” of sectors in which Ireland has comparative advantage. ! Targets for securing new customers, inward buyers and new FDI from the region have also been worked into the Action Plan for Jobs with state agencies and departments called upon to diversify export markets and deliver 10,000 new jobs from new FDI including from emerging markets. The influence of the UK in Asia has also been successfully leveraged by facilitating joint mission visits by the UK Trade and Industry department, Invest Northern Ireland and Enterprise Ireland to

Singapore last February, with government visits planned for ASEAN (Indonesia and Malaysia) and China before the end of 2014. ! Another way to unlock the potential of urbanisation is to fully exploit the business potential of twinning arrangements between Irish and Asian cities. Dublin, Galway, Cork and Fingal are twinned, respectively, with Beijing, Qingdao, Shanghai and Chengdu in China. The potential of twinning with cities with strong connections to Ireland, such as Dalian (where a large number of Chinese migrants to Ireland come from) should be explored. Twinning and partnerships should also expand beyond China, to include other major urban centres across Asia. Capital city twinning relationships offer particular opportunity as the national gateways to drive investment, education and tourism.! The Dublin Beijing Business Summit of June 2014 is just one example of where such agreements can create foundations for strong business links. Such agreements can underpin regional advantages and opportunities. Dublin has, for instance, been relatively recent in pioneering the development of a strong financial services industry and have preserved it through a difficult crisis. Knowledge and skills developed in Dublin’s financial services sector are highly relevant to Asian countries, who are adapting their own financial services sectors to meet the needs of growing consumer and business activity. The financial services sector holds many opportunities in terms of service exports for Ireland including aviation finance, along with regulatory, compliance and fund administration management. !

! ! ! ! ! ! ! Ireland’s Opportunity !

! With Irish goods exports to the countries identified in this report accounting for just over 6 per cent of total exports, there is huge scope, even within goods markets, to expand significantly. This 6 per cent of total exports is still dominated by trade from multinational companies. For indigenous exporters, as measured by those working with Enterprise Ireland, total exports to the Asia Pacific region18 last year amounted to just over €1 billion or just over 1 per cent of total trade.

Even taking the total export figure, the scope for expansion is considerable. It can be quantified by taking IMF forecasts for growth in a selection of 13 Asian country imports from the rest of the world and considering the question, “what would happen to Ireland’s exports to those countries if they simply kept pace with the forecasted import growth?” ! As a country which is “underweight” in exports to the region, Ireland should be aiming to beat these growth rates rather than simply keeping pace with them. For instance in their most recent forecast on Irish exports, HSBC have predicted that the share of Irish exports to China will double between now and 203019. With this level of forecasted growth, it would be easy to set lofty targets for the entire region. Whereas, adopting a conservative benchmark by simply keeping pace with export growth would secure a substantial gain, see Figure 9 for a full breakdown. !

! ! !

Refers to countries in the Asia-Pacific that are not included in the list of countries in this report.

HSBC, March 2014 “Ireland’s Trade Confidence soars as Export Growth of 6% predicted”

Figure 9!

Target Export levels and growth for 201920! Total forecast for growth in demand for imports (2014-2019)

Share of   countries listed

Relative size (  GDP) of countries   listed

5.6

0.1%

1.0%

12.1%

122.3%

12.4

China

1418.2

26.2%

44.2%

6.3%

53.4%

2175.5

Hong Kong

521.2

9.6%

1.1%

7.8%

68.8%

886.5

India

281.3

5.2%

18.5%

8.7%

78.9%

503.2

Indonesia

75.6

1.4%

4.3%

6.2%

52.2%

115.1

Japan

1692.1

31.2%

15.9%

5.0%

41.0%

2385.7

Malaysia

197.7

3.6%

1.6%

3.8%

30.2%

257.4

Pakistan

28.4

0.5%

1.8%

5.2%

42.6%

40.5

Philippines

79.8

1.5%

1.4%

10.1%

96.0%

156.4

Singapore

559.9

10.3%

1.1%

6.6%

56.7%

877.4

South Korea

321.4

5.9%

5.4%

9.7%

90.6%

612.6

Thailand

137.6

2.5%

2.4%

4.2%

33.8%

184.1

Vietnam

94.5

1.8%

1.3%

11.5%

114.2%

202.4

Total

5413.2

100.0%

58.5%

8635.3

Bangladesh

Our exports  2013   (€ million)

Average forecast for  growth in demand for imports   2014-2019

Benchmark export level  2019! (€ million)

Source: IMF World Economic Outlook 2014, CSO Trade Statistics 2014

As Figure 9 shows, the expected growth in the next five years, i.e. between 2014 and 2019, is as impressive as trends seen in the previous five years between 2009 and 2013. Over the next five years, Ireland’s major trading partners in East Asia are expected to see solid growth in exports with China expected to grow by 53 per cent, Japan by 41 per cent, while in South Korea import demand is expected to grow by 122 per cent. In South Asia, demand in

India (78.9 per cent growth), Pakistan (42.6 per cent) and Bangladesh (122.3 per cent) is expected to grow considerably. Similarly, Southeast Asia is expected to see solid export growth, with Vietnam (114.2 per cent) and the Philippines (96 per cent) the standouts in terms of growth rates, while Singapore (56.7 per cent), Indonesia (52.2 per cent) and Malaysia (30.2 per cent) are expected to see solid growth also. These higher rates of growth reflect the low base from which many emerging Asian economies’ import levels are starting. Notwithstanding, whether from a low

Of the 16 countries considered in this report, 4 (Cambodia, Laos, Mongolia, Myanmar) are omitted from the above chart and from some later analysis due to inconsistent data availability.

base or not, rates of growth of this magnitude represent major opportunities for Irish exporters.!

2019 still be in a position of exporting less than one tenth of all its exports to a region that will account for over one third of global GDP. !

Many of the countries listed above are developing countries with which Ireland does very little trade at the moment. This is partly due to the relative early stage of economic development and the lack of historical relations. During these early stages, growth tends to depend more on capital investment and less on consumer demand. By contrast more developed economies such as Japan, Singapore and Hong Kong – which are among the leading Irish trade partners in the region are markets where consumer demand is well developed and constitutes a larger share of overall economic output.!

The situation raises some key points for reflection:!

One possible benchmark to set targets for Ireland’s exports to the region over the next 5 years, is to take the value of Ireland’s current exports to Asian countries and assume that this value grows in line with that country’s expected import growth between now and 2019. If Irish exports keep pace with expected import growth, we should expect to see the total value of exports to the countries listed reach a total of €8.6 billion. One might expect import demand in Asia to be weighted towards “inter-Asian” trade and therefore this benchmark approach might overstate Ireland’s potential. This underlines the importance of focussing on areas where Ireland’s comparative advantages are well developed – education, food production, technology and its tourist potential.! In 2013, Ireland exported ten times the targeted value of goods (€8.69 billion) – a total of €86.9 billion - to the rest of the world, one and a half times that amount to Great Britain and Northern Ireland (€14.0 billion), four times that amount to Other (Non UK) EU states (€35.6 billion) and over twice that amount to the NAFTA21 countries (€19.9billion). Assuming some growth in the total of Irish exports to Asia between now and 2019, Ireland would by

Should we in Ireland be satisfied with this level of exports to Asia? ! If not, what can be done about it?!

The answer to the first question is arguably no, which clearly means the challenges raised by the second question need to be addressed.!

Assuming even modest growth in Irish goods exports between now and 2019, from last year’s €86.9 billion to €100 billion, Ireland should be targeting an Asian export share of at least 15 per cent. That would still leave Ireland relatively “underweight” in Asia when benchmarked against Asia’s weight in world trade which, by 2019, is likely to exceed one third. That would be consistent with a targeted level of exports of roughly €15 billion in total, or nearly double the target suggested by the analysis above. For instance compared to the €1.4 billion exported from Ireland to China last year, Denmark – a country of comparable size to Ireland - exported over €2.6 billion to China last year. Denmark has set itself ambitious goals with Chinese exports targeted to grow to over €7 billion (over half of which are from Food and Agricultural sectors) by 201722.! Is such an ambitious goal possible? Yes it is, and a sectoral analysis of Asian country imports provides substantial evidence of the potential for growth. In both goods and services markets, the extent of growth in specific sectors far outstrips the rate of both macroeconomic growth in Asian countries and their overall import growth. Unlike Ireland’s dominant trading partners, most of whom are steady-state developed countries – many Asian countries are undergoing rates of demographic and microeconomic change that are so rapid as to create opportunities of an unprecedented scale. This is attracting the attention of export oriented economies seeking to benefit from these rapid changes. The challenge for

US, Canada and Mexico

www.denmark.dk - Focus Denmark no. 3 - ‘Danish exports to China’ 2012

Ireland is to be one of the first movers in this process before competitor nations gain an early advantage. Ambitious targets are worth setting, given that within the SME sector there are smart sustainable Irish companies with unique global USP that can find partners and new business within niche sectors of Asian markets.!

! Goods exports - Focus on Food!

these sectors significantly below western levels, there is still considerable capacity for rapid scale growth. In spite of this recent growth, recent CSO trade statistics24 list no exports to any other country but China under the exportable chilled and frozen meat categories which in 2013 were worth over €330 million combined. A factor in this could be the Japanese ban on beef imports, which was lifted in December 2013 during the Taoiseach’s visit to Tokyo. The Japanese beef export market is valued at an initial €15 million with further growth forecasted.

Despite an economy that has diversified and modernised substantially from its agricultural base, an obvious area of export opportunity for Ireland, and a sector in which Ireland remains “underweight” in terms of exports to Asia, is food. Ireland produces 15% of the global supply of baby formula, it is the 4th largest global exporter of beef (1st in the EU), and has the capacity to feed 50 million people, as well as being the only country in the world to score zero per cent in the UNs water s t r e s s r a t i n g c o n d u c t e d b y Ya l e University23. Recognising the opportunity in the sector, Ireland has set ambitious targets to increase dairy production by 50% in the next five years following the lifting of the EU dairy quotas, the growing demand for dairy products across Asia is an obvious market for this increased production. ! For instance, a total of €3 billion was exported from Ireland in 2013 under the heading “meat and meat preparations”. Realistically, logistics confine the feasibility of meat exports to Asia to a subset of this total. Nonetheless, the fact that a mere €90 million was exported to the 13 economies listed in Figure 9 - just 3 per cent of total meat exports – suggests a relative underperformance in a market that is growing rapidly. Between 2009 and 2013, demand for meat imports rose by 95 per cent in India, by 248 per cent in China and by a staggering 390 per cent in Thailand. Despite starting from a low base meaning that per capita consumption in 23

Water Stress Index, Yale University, 2010

Trade statistics 2013, Central Statistics Office, March 2014

Figure 10!

Growth Trajectory for Irish Food and Drink Exports 2010-2020!

! ! !

The agri-food and drink sector accounts for!

Exports to China were almost!

7%!

40%!

of Ireland’s economy! wide GVA!

higher at!

11% !

€390m!

of Ireland’s exports and !

which means trade ! has trebled ! with China since 2010

8.6% ! of total employment

Source: Bord Bia - “Exports Performance Prospects” 2014

Similarly, out of the €1.9 billion total of dairy products exported by Ireland to the world in 2013, the amount exported to the aforementioned Asian countries in the same year was just €101.5 million, or just 0.5 per cent of total exports in the sector.! From an examination of two of Ireland’s most traditional and long established export sectors, meat and dairy products, it is clear that Ireland’s full potential in the region has yet to be achieved. Measures are being put in place through the efforts of state agencies to support the food and agri-tech industries. Bord Bia for instance have targeted greater demand in the Chinese and Indian markets in their ‘Pathways for Growth’ programme, which sets out ambitious growth targets for food and drink sector export growth by 2020 (see Figure 10). The programme aims to leverage Ireland’s natural advantage, the top international standard of quality assurance in its food production and a combination of growing consumer demand and supply challenges in emerging

! © Asia Matters 2014

markets. Thus far, the programme has set up a China hub (in Shanghai) to support food and drink exports into China. Exports to ! China grew by over 40%, with values trebling over the last three years to reach €390 million in 2013. In terms of international markets these significant increases to China and parts of South East Asia have offset reduced exports to the United States, Saudi Arabia and South Africa.! Figure 11! Food and Drink Industry Share of the Irish Economy and Chinese Market Growth!

Fourth Year of Consecutive Growth 12

12bn 10.5

10bn

8.85bn 9.1bn

7.5 6

7.88bn 7.1bn 2009

2010

2011

2012

2013

2020

Source: Bord Bia - “Exports Performance Prospects” 2014

In terms of strategically developing Ireland’s potential here, China is a priority country, as outlined by Bord Bia’s long term strategy. This is due to the relatively advanced state of urbanisation, the better consolidation and concentration of retail markets and an improved infrastructure and connectedness of different submarkets. A particularly interesting market is that for baby formula which, due to difficulties with indigenous production in Asia in recent years has given Ireland a major opportunity. With names like Danone, Pfizer and Abbott located here, Ireland is a leading global supplier in baby formula as it produces 15% of global output. The Chinese government’s recent decision to relax the one child policy can only enhance opportunities here. ! In this sector and the wider dairy sector Ireland faces stiff competition from other small open economies such as Switzerland and New Zealand, whose food giants, Nestle and Fonterra have made substantial inroads to meet demand in the sector. Significantly both countries have signed bilateral trade agreements with China, putting them at a distinct advantage over Ireland. In terms of EU competition, as stated previously, Denmark has set itself ambitious targets of over €7 billion worth of exports to China by 2017 (over half of which from Food and Agricultural sectors) and has mobilised major resources on the ground in China through its embassy and network of consulates to support these efforts.! In India, the requirement to fully or partially co-locate production remains an obstacle to direct engagement, as does the more fragmented nature of the population and the retail sector. However, India has its own and differing potential for Ireland as outlined in the country by country overview section (on page 28). !

! ! 24

Services exports! For obvious reasons, i.e. the lesser or non-existence of logistical obstacles for internationally traded services, Ireland is making faster progress in the area of services exports. In fact, Asia’s share of Ireland’s total services exports, 12 per cent, is double the share of goods exports. The distribution between Asian countries reflects a better performance of China as a recipient country with nearly one quarter of all exports, some €2.4 billion, destined there. Nonetheless, 12 per cent of total services exports remains a relatively underweight share when consideration is given to the rapid rates of growth in Asian country service imports. ! Figure 12 shows the level of services exports to selected (mainly higher income) countries. Growth in such exports has, over the last half decade, been in complete defiance of the global recession. While country by country analysis is conducted in the next section, in overall terms, it is already clear that these markets – which are more accessible via greater internet penetration and the growth of e-commerce – present strong opportunities across a range of sectors.! Figure 12!

Services exports from Ireland! To t a l s e r v i c e s exports (€ million) 55,028

To t a l s e r v i c e s exports (% of total) 60.9%

North America

9,195

10.2%

Asia

10,854

12.0%

Other*

15,218

16.9%

Total

90,295

100.0%

Europe

Source: Exports and Imports of Services Classified by Geographic Location, CSO 2014 ! *Total is non-additive in this table as some export destinations are excluded for presentation purposes!

It is also clear from Figure 13 that the strategic selection of target areas is significant. For instance, construction in mainland China experienced a decline, between 2009 and 2013 (inclusive), due to the base effects of a very large emphasis on capital investment in years preceding the recession (annual investment flows nonetheless remain huge and offer opportunities regardless of these declines). In contrast,   © Asia Matters 2014

neighbouring Hong Kong’s construction service imports grew by 170 per cent between 2009 and 2012 (inclusive).Financial services growth in mainland China, at 427 per cent, reflects the powerful demographic impact of a rising financially conscious middle class. While tourist markets in traditional high

value countries, such as Japan, have been hit by exchange rates and other economic factors, China, Indonesia, Malaysia, Singapore and South Korea continue to show strong growth in demand for overseas travel.!

! !

Figure 13! Growth in Imports of Services 2009-2013 in Selected Countries of a Rising Financially Conscious Middle Class. ! China

Hong Kong

India

Indonesia

Japan

Malaysia

Singapore

Total services

107.9% 36.1%

59.5%

50.4%

9.5%

60.5%

48.3%

33.4%

Transportation

102.5% 37.9%

65.3%

99.1%

15.9%

52.3%

45.4%

21.7%

Travel

194.4% 35.1%

26.6%

37.5%

-12.5% 82.6%

48.4%

44.5%

Communications services*

33.5%

106.2%

-5.3%

53.8%

20.2%

N/A

47.4%

Construction services*

-33.3% 170.7%

24.1%

6.8%

-41.5% 142.6%

107.9%

38.4%

Insurance services

95.4%

61.2%

58.4%

-20.0%

24.9%

34.3%

70.7%

8.4%

426.9% 34.7%

35.9%

18.5%

31.1%

79.0%

31.5%

83.7%

4.4%

14.8%

32.6%

31.9%

40.2%

N/A

56.6%

Royalties and license fees*

89.6%

18.8%

112.2%

10.5%

5.3%

24.6%

42.6%

33.5%

Other business services*

39.1%

32.5%

72.0%

38.5%

28.9%

59.5%

40.4%

35.4%

Personal, cultural and recreational services*

166.7% 18.8%

118.9%

110.4%

7.5%

-7.4%

7.7%

54.3%

Government services, n.i.e.*

38.2%

14.3%

45.2%

126.3%

4.1%

-28.0%

3.5%

54.5%

Commercial services

108.3% 36.2%

59.6%

49.5%

9.5%

61.2%

48.4%

33.2%

Financial services Computer and information services*

94.7%

South Korea

Sources: ITC, UNCTAD, TWO ("Trade Map (or Market Access Map, Investment Map and Standards Map, respectively), International Trade Centre, www.intracen.org/marketanalysis".) ! *Data for Hong Kong up to 2012 for some sectors

Travel and Tourism!

airports by 2018 to serve as a centre for air connectivity in the Asia Pacific.!

A tantalising prospect for Ireland is that Asia generated just €47 million euro in revenue during 2013 under the “tourism and travel” category, much of which reflects the large number of students from China in Ireland.!

This is just 1.5 per cent of total tourism and travel revenues. With the tourism spend of the Asia-Pacific region expected to grow substantially over the next 10 years, driven to a large degree by the rapid demand from Chinese tourists, the region will increase its share of global tourism spend to 40% in 2023 from the 25% share in 2012. This will see the spend reaching over $750 billion by 202325.! Asia’s relatively small share of Irish tourist revenues combined with ongoing and expected future growth in per capita incomes suggests significant potential for Ireland provided its distinctive brand can be highlighted and leveraged accordingly. Strong links developed between immigrants and students from India, China and other countries in the region are an asset in this regard. While Migration flows between Ireland and Asia are also a potential source of future business relations in areas beyond tourism. Speaking at the ‘Dublin Beijing Business Summit’ at Asia Business Week Dublin 2014, Kevin Toland, CEO, Dublin Airport Authority, detailed the potential of greater air connectivity to Beijing and the wider Asian region in both tourism and trade. According to IATA Airport IS database, demand for Ireland-China flights is on the rise with 46,000 two way passengers estimated in 2013 and a market that “can exceed 105,000 passengers by 2017 at current growth rates”26, according to Mr. Toland. This link will target key markets beyond Beijing and its surrounding areas, as the city plans to expand its aviation infrastructure to have two state of the art

Financial Services ! In financial services (where Ireland has a small presence in China), insurance (where it has a small presence in Japan and an even smaller one in China and South Korea) and legal, architectural, accounting and management services (where our export presence is low or negligible) Ireland is arguably not utilising our innate strengths. This is especially so in Singapore and Malaysia, which will be important hubs for such activities in the pivotal ASEAN region in the future. ! Though small in scale by Asian standards, the financial services sector in Ireland has many positive attributes to attract Asian investment and cooperation. Ireland can offer Asian financial institutions best in class services as an EU centre for fund management and compliance. Asian banks and investors are already entering Ireland via the Aviation Finance sector, where Ireland’s core expertise is making it a significant global hub. It is estimated that 50% of the world’s commercial aircraft fleet is now managed from Ireland, this amounts to €83 billion in assets and over 1,000 high skilled jobs. In addition, Ireland is home to 9 of the top 10 global aircraft lessors, with significant Asian financial institutions setting up in Ireland, these include Sumitomo Mitsui Banking Corporation (SMBC), Industrial and Commercial Bank of China, Bank of China, and Mitsubishi UFJ. ! With Aviation Finance being of considerable strength for Ireland, other new areas are being explore, these include Islamic Finance, where the Irish stock exchange has seen a rise in Shariah compliant funds and sukuks, and Green Finance, itself an emerging sector. Finally, in terms of financial services skills and professional standards, Irish institutions, such as the ‘Institute of Bankers’, offer top class industry training and professional competency training for expanding Asian financial institutions.

According to a report commissioned by travel technology firm Amadeus in 2014

Asia Matters: ‘Summary Report - Dublin Beijing Business Summit’, 2014

Education and Skills! Areas where this is beginning to change is in the areas of education, business services and software. Looking at education as an example, University College Dublin and Trinity College Dublin, have already established respective brand presence in China and India, with the Dublin-Beijing International College receiving many plaudits for the quality of its programmes and engagement in China. Dublin Institute of Technology, Irelandâ&#x20AC;&#x2122;s largest third level institute, opened its own office in Hainan in 2013 to coordinate its efforts on the ground in China. The office marks a significant step to building DITs partnerships across China. !

Qingdao, illustrate the vast potential in city to city engagement as rapid urbanisation and internationalisation have seen periods of rapid economic growth.â&#x20AC;Š

Other opportunities are available in key markets in the education sector, for instance, Indonesia with a population of 250 million (and an average age of 28 years old) spend 20% of their annual budget on education and skills. Ireland and Indonesia have recently opened discussions for a government to government Memorandum of Understanding (MOU) in the field of education. This will facilitate students on Indonesian government scholarships to study in Ireland. The opening of a new embassy in Jakarta will provide an impetus to successfully conclude this bilateral agreement. In other areas, transport for instance, Dublin Airport Authority is active in providing aviation and airport management services in India, Dublin Port are providing training and assistance in Indonesia.! In other sectors, companies like Taxback and China HR are successful in providing services in the areas of taxation, human resource management and recruitment. Meanwhile, twinning agreements between Ireland and China are beginning to generate business opportunities and connections through events such as the Dublin-Beijing Business Summit, highlighting the role of Dublin city in driving national economic growth. Other agreements, like those between CorkShanghai, Fingal-Chengdu, GalwayÂŠ Asia Matters 2014

Country by country overview

! A clear overview of key markets for Ireland underlines how our trade with Asia remains in an early stage of development relative to potential. This section examines the extent of Ireland’s exports to significant Asian export destination countries, the key components of those exports, provides a brief commentary on the rate at which key sectors have grown in recent years and the rate at which overall imports demanded by the relevant countries are expected to grow. As information related to services exports for individual countries is limited, the information provided below is for goods only. Note also that GDP per capita data is cited for the year 201127.! The country by country reports also feature key leveraging points giving Irish businesses an advantage in each country, while also highlighting the success stories of ‘trailblazing’ companies and individuals on the ground in each country.!

! !

To enhance comparability and ensure that GDP estimates are as free from possible retrospective revision as possible, 2011 data are used to compare countries income per capita levels.

China A Rising Giant ! With a population of over 1.3 billion, over half of whom are in the workforce and with a 2011 GDP per capita level of over $8,000 (in 2005 constant price purchasing power adjusted values), China is without doubt the largest potential market for Ireland. In 2013, Irish exports to China amounted to €1.4 billion or about one quarter of all exports to the region but only 1.5 per cent of total global exports. Key (but not exhaustive) components of that trade are shown in Figure 14.!

! !

Figure 14!

Ireland’s goods exports to China in 2013 by main category!

Category

Value € million

Electrical machinery & appliances

320.6

Organic chemicals

208.0

Oﬃce Machines & data processing

170.6

Medicinal & pharmaceutical products

145.9

Miscellaneous food products & preparations

110.4

Meat preparations & Dairy products

109.6

Total*

1,418.3

Source: CSO 2013 Trade statistics, March 2014! *Total is non-additive in this table as some export destinations are excluded for presentation purposes!

A clear profile of dominance by multinational sectors is evident from this profile and given the foregoing analysis, there is major untapped potential for indigenous exports to grow significantly. Demand for meat and dairy products rose, respectively, by 248 per cent and 401 per cent in China between 2009 and 2013. However, our total exports in these categories do not fully reflect this potential. There are also many sectors in which Ireland has no presence but where Chinese demand is growing strongly. For example, demand for fish products, where Ireland has demonstrated capacity, grew by 66 per cent between 2009 and 2013. Demand for beverages, confectionary and glassware all exhibited high rates of growth well over 100 per cent over the period.! In the area of services, financial services grew by a robust 427 per cent and with the exception of construction services, which declined, all other services witnessed robust annualised growth rates in excess of 5 per cent a year and most in excess of 10 per cent a year between 2009 and 2013. Unlike manufacturing, trade in financial services remains affected by the fragmented structure of international agreements. Investment relations between China and the EU are governed by a patchwork of 26 separate treaties negotiated by individual member states since the 1980s. As well as direct bilateral efforts to boost trade, such as the effective Ireland-China double taxation agreement in place since 2001. This is a reminder of the importance of working within the EU context to achieve a consolidated common approach such as with the EU-China Investment Agreement currently under negotiation. Given Ireland’s status as a leader in Foreign Direct Investment, it could make a meaningful contribution to the negotiations. ! In terms of more traditional industries, imports of goods and services to China are, according to IMF forecasts, expected to grow by 53.4 per cent between 2014 and 2019.!

! “Ireland’s status as a friendly neutral country, with a relatively large number of Chinese students, an English speaking country, a member of the euro zone and it’s competitive and pro-business economic model, may signal Ireland’s potential future as an entry port to the rest of the EU for this emerging giant”!

! In February 2012, the current President of China Xi Jinping visited Ireland in his capacity as Vice President. There are three immediate significances of this visit and one longer term significance. In the immediate term, Ireland was the only EU country visited by the Chinese delegation. Xi Jinping is a student of agricultural method with a deep interest in modernising this sector in China. With milk quotas set to cease in 2015, Ireland is set to produce vast quantities of dairy products to meet China’s rapidly expanding demand. In the longer term, Ireland’s status as a friendly neutral country, with a relatively large number of Chinese students, an English speaking country, a member of the euro zone and it’s competitive and pro-business economic model, may signal Ireland’s potential future as an entry port to the rest of the EU for this emerging giant. In addition to these factors, Ireland received a huge amount of positive media coverage in China surrounding the visit, helping to shape a positive image of Ireland among the Chinese public.! At an EU level, as mentioned above, negotiations of the landmark EU China Investment Agreement was launched in November 2013. China is the EU's biggest source of imports and has also become one of the EU's fastest growing export markets. China and the EU now trade well over €1 billion a day. Investment flows show great untapped potential, especially considering the size of the two respective economies. China accounts for just 2-3% of overall European investments abroad, whereas Chinese investments in Europe have risen rapidly since the global financial crisis, despite starting from a low base. This comprehensive agreement aims to tap into this potential to create better market access and protection for investors on both sides.

China Facts & Figures ! ! !

€1b !

Population 1.3b 50%+ workforce

! ! ! !

worth of trade between EU and China on a daily basis

Sectors to watch

Meat

Dairy

Beverages

Fish

Financial Services

! !

Imports of goods & services predicted to grow 53.4% between 2014 - 2019

Confectionary

! ! Irish Trailblazers !

China HR is the largest Irish owned employer in China, with over 2,600 staff in its 179 branches across 26 cities in China. Owned by Denis O’Brien and Leslie Buckley, China HR is a market leader in the online recruitment business in China, a sector that is growing substantially owing to the sustained levels of growth, rapid urbanisation and the rapid penetration of smart phones offering greater internet connectivity. !

In June 2014 during a trade visit by Richard Bruton TD, Minister for Jobs, Enterprise and Innovation, China HR announced a new investment of €30 million, bringing its overall investment to €100 million, making it one of the biggest players in the highly competitive online recruitment Chinese market.

Irish Trailblazers ! PCH International was founded in Cork in 1996 by Liam Casey with just $20,000 capital investment, today it is a global company with a staff of 2,800 employees. Its corporate headquarters are in Cork, while its operational headquarters are in Shenzhen, China. ! PCH started as a small sourcing company and in just a few years had evolved far beyond merely importing products. PCH has become a key enabler, turning ideas into a physical product in the hands of the consumer while optimising quality, cost, and time-to-market in their production cycle. PCH is the partner behind-the-scenes responsible for some of the most successful consumer electronics accessories on the global market. They combine an end-to-end services with a unique understanding of China and the Chinese market. 30 © Asia Matters 2014!

India Pro-Business Reform Opening Opportunity With a population of 1.2 billion and approximately half a billion in the workforce, India’s 2011 level of GDP per capita, at about $3,600 (in 2005 constant price purchasing power adjusted values) remains lower than that of China. Total exports to India amounted to €281 million. Key (but not exhaustive) components of that trade is shown in Figure 15. !

Figure 15!

Ireland’s goods exports to India in 2013 by main category!

Category

Value € million

Oﬃce Machines & data processing

73.6

Miscellaneous manufactures

50.1

Not classified

49.6

Other transport equipment

42.4

Plastics in primary forms

27.1

Medicinal and pharmaceutical

15.5

Total*

281.0

Source: CSO 2013 Trade statistics.! *Total is non-additive in this table as some export destinations are excluded for presentation purposes!

The profile of Irish exports to India clearly reflects the lower GDP per capita and the more challenging retail environment in terms of exporting food, which is largely absent from the figures. Less   32

understandable, however, is the near absence of India from Irish service export statistics. India is a leading provider of global services in areas where Ireland can be a valuable partner. ! Likewise, India’s need to develop third level education services, farm technology and management, air travel management capacity and improved sanitation, nutrition and medical devices at national and local level, provide Ireland with enormous opportunities of a different but equally exciting nature to that of China.! In the area of education, the quality of Irish education is well recognised in India and appreciated in certain sectors of government and business with many senior figures educated by Irish religious orders. This generation of highly educated professionals with a close affinity to Ireland offers unique opportunities and a level of knowledge that later generations will not have, making it a valuable source of connectivity for Team Ireland on the ground. ! Given Ireland’s traditions in agriculture and close cultural affinity with India, the agricultural services industry is one with particularly interesting potential. Ireland’s relatively small sized family run farms and its experience in navigating a period of development similar to that being experienced in India today makes it an ideal partner in improving technology, productivity, hygiene and safety on Indian farms.! Imports of goods and services to India are, according to IMF forecasts, expected to grow by 78.9 per cent over the next five years.!

! India is a leading provider of global services in areas such as ICT, Pharma and Medical Technology, each are areas where Ireland can be a valuable partner!

! The new Indian government of Narendra Modi has established priorities that are particularly relevant to Ireland with reforms expected in the education sector, greater transparency in government, steps to facilitate easier customs clearance and granting of visas, growth in trade and commerce and the development of power supply (ESB International has done significant work in Bangalore establishing a trail for Irish energy companies) and infrastructure. This creates opportunities for construction, engineering and project management services and also for machinery exporters. However, the establishment of opportunity for food exporters appears, due to the fragmented nature of retail in India, a more long term prospect. ! At an EU level, negotiations for a FTA began back in 2007 but have hit stumbling blocks in May 2013 as both sides failed to agree on substantial issues. These included the status of India’s I.T. industry players in the EU, as well as access for skilled professionals to work in the EU, while duties on car industry parts and components, as well as tariffs on EU wines and spirits remained contentious issues. Both sides have been urged to get the proposed EU India Bilateral Trade and Investment Agreement (BTIA) back on track given their deep economic connectivity. !

! !

India Facts! & Figures ! ! 2013: Exports Irl-India ! ! GDP per capita

! !Population 1.2b 0.5b Workforce

€281 m $3600

Bilateral trade Irl-India €667 m

! !

PREDICTED OPPORTUNITIES

Imports of goods & services predicted to grow 78.9%

Construction Engineering Project Management

Machinery Exports

Education Power Supply 2014

2019

Irish Trailblazers ! CRH has operations and offices across Asia, including China, India and ASEAN (with operations in Malaysia and its regional headquarters in Singapore).! In May 2008, CRH entered the Indian building materials market through the acquisition of a 50% stake in My Home Industries Limited (MHIL), a cement producer headquartered in Hyderabad with modern production facilities, strong market positions and excellent reserves in central and eastern Andhra Pradesh. Since then MHIL, has expanded its market footprint to include the rapidly growing Orissa and West Bengal markets, while also consolidating itself as the market leader in Andhra Pradesh.! CRH positioning itself in the Indian market is based on the rapid development of the Indian economy, which will see the emergence of more sophisticated construction markets. This is expected to drive demand for a wide range of value-added construction products, enabling CRH to roll out a broader range of products across the industry.! In October 2013, as an Illustration of CRH’s commitment to the region, it set up regional headquarters in Singapore to oversee the expansion of its existing interests in India and China, and to pursue further development opportunities across Asia.

Japan Ireland’s Leading Asian Trading Partner With a population of 125 million, Japan’s population is less than one tenth of that of China but its 2011 level of GDP per capita, over $30,000 (in 2005 constant price purchasing power adjusted values), is nearly four times higher than that of China and is ten times higher than that of India. ! For this reason, Japan remains Ireland’s most important trading partner in the region. Exports amount to €1.7 billion and are more diversified than any other Asian export destination. Key (but not exhaustive) components of that trade are shown in Figure 16.! Figure 16!

Ireland’s goods exports to Japan in 2013 by main category!

Category

Value € million

Organic chemicals

451.3

Photographic, scientific & controlling apparatus

410.0

Professional, scientific & controlling apparatus

184.5

Oils, perfumes and toiletries

181.0

Medicinal and pharmaceutical

106.3

Total*

1692.0

Source: CSO 2013 Trade statistics.! *Total is non-additive in this table as some export destinations are excluded for presentation purposes!

The profile of Irish exports to Japan reflect a more developed diversified range of export demand encompassing exports with a heavy multinational component but also those from the indigenous manufacturing sector. The low presence of food demand reflects the fact that at the time when Japanese demand for western food brands were rising most strongly – the 1960s and 1970s – Ireland was not a player in the world export market. Ireland needs to learn from this missed opportunity to ensure maximum trade penetration in other key Asian emerging markets.! Interestingly, in terms of food exports, the Taoiseach’s visit to Japan in December 2013, accompanied by Simon Coveney, Minister for Agriculture had a very positive outcome for Ireland. It was announced that access to the Japanese market was reopened to Irish beef with immediate effect, opening up a market worth €15 million a year with the potential for much more. ! Japan is a key market for Irish service exports with a value of €2.7 billion in 2013. This trade is dominated by multinational flows in the area of computer services, while service exports in other sectors such as insurance and financial services are credible if not below potential.! Imports of goods and services to Japan are, according to IMF forecasts, expected to grow by 41 per cent over the next five years. !

“As a pillar of economic and political stability in the region Japan is and will remain an essential trading partner for Ireland. The strategy towards Japan must be to retain and deepen this valued trading relationship.”! In terms of FDI, Japan remains a key partner for Ireland. As of 2014, the IDA have 25 client companies investing in Ireland from Japan but according to Japanese embassy figures there are over 70 Japanese companies operating in Ireland in areas such as ICT, pharmaceuticals, and research and development. These companies contribute significantly to employment and growth in the Irish economy.! On an EU level, the Economic Partnership Agreement (EPA) between the EU and Japan has significant consequences for Ireland-Japan trade and investment. The comprehensive EPA is rapidly moving through negotiations (6 rounds completed from April 2013 to July 2014) and will increase trade and investment, as well as offering EU firms greater access to Japan as a gateway to Asia-Pacific markets and global value chains, as Japan enters the US-backed Trans Pacific Partnership (TPP). The EPA aims to eliminate nontariff measures (NTMs) in key sectors (e.g. Automobile, Pharmaceutical/Medical Devices, Food safety), open up government procurement for European companies and address regulatory issues on both sides. The Japanese government aims to have a basic agreement in place by 2015. ! Ireland has the opportunity to make a meaningful contribution towards the EPA through initiatives supporting thought leadership and connecting businesses to discuss key topics related to the EPA. IDA Ireland supported initiatives, such as the Second and Third EU Asia Top Economist Roundtables, held in Dublin and Tokyo in May and November 2013 respectively, featured valuable contributions from key Irish, EU and Japanese stakeholders on the potential of the EPA. At an industry level, Glen Dimplex CEO, Sean O’ Driscoll, sits on the EU Japan Business Roundtable, a powerful business forum to drive closer EU Japan relations. ! As a pillar of economic and political stability in the region Japan is and will remain an essential trading partner for Ireland. The strategy towards Japan must be to retain and deepen this valued trading relationship. Deepening it requires exploring markets for high quality brands that can command a premium and - drawing on models established with American companies in Europe - can forge new supply chain links with Japanese businesses in the broader Asian region. An additional element to the Ireland Japan trade relationship could be the renewal of the successful Fás Overseas Graduate Programme. This programme afforded young Irish professionals the opportunity to work in Japan, build valuable networks and knowledge of the Japanese market.

Japan Facts & Figures

Population GDP per capita

125 m

Imports of goods & services predicted to grow 41%

$30,000

Irl-Japan exports

€1.7 b

Irish beef exports

€15 m

Irish services exports

€2.7 b

2014

2019

The EU-Japan EPA aims to eliminate non-tarif measures in key sectors: Automobile, Pharma/ Medical Devices, Food Safety Irish Trailblazers ! Glen Dimplex is a leading international industrial group, with over 30 businesses and 10,000 employees around the world. They are a market leader in low carbon heating, cooling and ventilation products, as well as owning leading brands in the cooking, cleaning refrigeration and entertainment sectors. Japan was a first entry point into Asia for Glen Dimplex with a successful partnership with ‘Globally Incorporated’, a subsidiary of ‘House Building Group’ in the mid 1980s. An expansion in the Asian market took place in the late 1990s, through the establishment of offices in Hong Kong and mainland China, though Japan remained a key marketplace, further consolidated with the establishment of Glen Dimplex Japan in 2006. Through a comprehensive range of low-energy and low carbon systems, ‘Dimplex Japan’ markets and distributes intelligent electric thermal storage, radiant panel heaters and home appliances in Japan. Today, the Japanese company represents 5 per cent of the Glen Dimplex group with an annual turnover of €70m, seven offices, five distribution centres and 120 employees.

Irish Trailblazers ! FEXCO are one of the most recent trailblazers to enter the Japanese market with its announcement last year of a multi-million Euro deal with the Tokyo based ‘Mitsubishi UFJ NICOS Co. Ltd. (MUN)’, one of the largest credit card groups with the largest merchant network in Japan. The deal will provide MUN with Dynamic Currency Conversion (DCC), a financial service in which holders of credit cards have the cost of a transaction converted to their local currency when making a payment in a foreign currency. DCC provides consumers with a rate of exchange at point of sale rather than waiting for a statement at the end of the billing cycle. FEXCO was chosen due to its proven global DCC experience, financial services risk profile and commitment to build local resources in Japan. In addition to their recent entry in Japan, Fexco has demonstrated a commitment across Asia, as well as a commitment to supporting Irish networks in the region through their continued sponsorship of the annual Fexco Asian Gaelic Games tournament. 36 © Asia Matters 2014!

South Korea Dynamic Partnership Potential With a population of 48 million, South Korea has a GDP per capita of over $27,000 (in 2005 constant price purchasing power adjusted values) and an economy that is the 14th largest in the world according to the World Bank. South Korea is a significant trading partner for Ireland.! Irish exports to South Korea amount to €321.4 million. Key (but not exhaustive) components of that trade are shown in Figure 17.!

! Figure 17!

Ireland’s goods exports to South Korea in 2013 by main category!

Category

Value € million

Medicinal and pharmaceutical

99.3

Photographic, scientific & controlling apparatus

41.4

Electrical machinery and appliances

38.4

Professional, scientific & controlling apparatus

27.7

Oils, perfumes and toiletries

25.4

Total*

321.4

Source: CSO 2013 Trade statistics.! *Total is non-additive in this table as some export destinations are excluded for presentation purposes!

The profile of Irish exports to South Korea is not dissimilar to that of Japan in reflecting a greater degree of diversification. Unlike Japan, Ireland has a modest presence in the fish market in South Korea. While not referred to in the table because of its modest size, Ireland exported €11.7 million worth of fish and crustacean products to South Korea last year. Curiously, South Korea is one of the few countries 38

registering a presence in this category, a fact that might warrant further investigation as to the potential for expanding this industry in the region.! Like Japan, the strategy with South Korea must be to retain and deepen a valued trading relationship with high quality brands targeted at high income individuals. In terms of FDI, large Korean MNCs see Ireland primarily as a small domestic market and efforts are required to promote Ireland as a potential EU operations hub. South Korea holds an additional advantage for Irish companies as it is the only Asian country with a Free Trade Agreement (FTA) in place with the EU, which lifts trade barriers for exporters and also allows SMEs a point of entry to global value chains in the region. More detail on this FTA and others under negotiation are available in Annex 1 on page 45.! Imports of goods and services to South Korea are, according to IMF forecasts, expected to grow by 90.6 per cent over the next five years.! !

! Korea Facts & Figures

Population

48 m

GDP per capita Irl-Korea exports

Imports of goods & services predicted to grow 90.6%

$27, 000 €321.4 m

EU exports rise since FTA

23% 2014

2019

The only Asian Country with a Free Trade Agreement with the EU Irish Trailblazers ! Flahavan’s is targeting a modest entry to the Korean market in 2014 with sales of up to €160,000 expected in a bid to introduce its products to the market. The company is targeting oatmeal as a rice substitute and have thought up some innovative recipes to help familiarise Koreans with oatmeal. Launched during the St. Patricks day visit by Minister Frances Fitzgerald and Ambassador Aingeal O’Donoghue at the upmarket Hyundai Department Stores in Seoul, Flahavan's will be stocked at the popular Lotte Mart and Hyundai Department Stores. ! Flahavan’s entry is part of an initiative led by ‘Gateway Korea’, which is introducing Irish products to the Korean retail market. Gateway is also bringing mackerel and Irish made Jelly Beans to Korea. The ‘Jelly Bean Factory’ is expected to sign a lucrative new deal to see Jelly Beans stocked in ‘Home Plus’ supermarkets across the country.

38 © Asia Matters 2014!

Singapore Strategic MNC Hub for Asia With a population of 5.3 million, similar to that of Ireland but with an economy roughly one and a half times that of Ireland’s, Singapore boasts one of the highest GDP per capita rates in the world with a 2011 level of $51,644 (in 2005 constant price purchasing power adjusted values). ! An independent city state and crucial hub for transport, communications and finance in Southeast Asia, Singapore is a strategic location of great value for Ireland. ! Irish exports to Singapore last year were €560 million, which is considerably large given its relative size in proportion to other Asian countries considered. This is due in large part to Singapore and Ireland’s similar open economic models. Key (but not exhaustive) components of that trade is shown in Figure 18.! Figure 18!

Ireland’s goods exports to Singapore in 2013 by main category!

Category

Value € million

Oﬃce Machines and Data processing

123.6

Professional, scientific & controlling apparatus

119.8

Medicinal & pharmaceutical

59.8

Organic chemicals

33.4

General Industrial machinery

33.3

Total*

559.8

Source: CSO 2013 Trade statistics.*Total is non-additive in this table as some export destinations are excluded for presentation purposes!

Like Japan and South Korea, Irish exports to Singapore reflect a more diverse mature trading relationship. Surprisingly perhaps, given its urban nature and relatively easy access to its market, exports of food play a relatively absent role in Irish exports to the country, accounting for just â&#x201A;Ź16.6 million, less than 3 per cent of total exports.! Singapore does not register in export statistics as a destination for Irish service exports. Yet Singaporeâ&#x20AC;&#x2122;s imports of services grew between 2009 and 2013 by 48.3 per cent with particularly strong growth in construction services (107.9 per cent) and financial services (79 per cent). Imports of goods and services to Singapore are, according to IMF forecasts, expected to grow by 56.7 per cent over the next five years.! Ireland has strong resources on the ground in Singapore to leverage its engagement with the country and other actors across ASEAN. The embassy in Singapore hosts the ASEAN offices for Enterprise Ireland and IDA Ireland. It is regularly visited by Ministers, high level officials and trade missions. Other points of leverage to Ireland in Singapore are the Asia-Europe Foundation (ASEF), an international organisation of which Ireland is a founding member, and the DFA supported Farmleigh Fellowship programme which between 2010 and 2014 sponsored over 100 Irish graduates to study and work in Singapore and further afield. The networks and connection from these initiatives offer Ireland more paths to improve connectivity between Ireland and Singapore and the rest of the region.! It is important to acknowledge that Singapore is a key competitor with Ireland for FDI from large MNCs in key sectors for both economies including pharma and medical devices, ICT and financial services, and most notably aviation finance. Both countries have established themselves as regional hubs for MNCs operations in Europe and the Asia Pacific respectively. Given the competition between these innovation islands, both sides should seek to operate at a global level in areas where Ireland and Singapore can complement each other for a win win. One example could be the emerging area of green finance as both countries are seeking to be major drivers in the sector. ! At an EU level, a comprehensive FTA was initialled in September 2013, with approval and ratification underway. This will create more conducive conditions for the almost 9,000 EU companies established in Singapore and for Singaporean investment into the EU.!

ÂŠ Asia Matters 2014

Singapore Facts & Figures   2000+ US$1.43b Bilateral Trade with Ireland (2013)

Irish Citizens Reside in Singapore

One of highest GDP per capita rates in the world

Population

5.3 m

GDP per capita

$51,644

Irl-Singapore exports

€560 m

GDP Growth (2013)

4.1%

Imports of goods & services predicted to grow 56.7%

2014

2019

Irish Trailblazers ! Singapore is home to many of Ireland’s big players in Asia including Kerry Group, CRH, PM Group, Glanbia, who keep regional offices or their Asia-Pacific headquarters in the city state. In addition, there are a number of SMEs operating on the ground in diverse fields from financial services, construction, pharmaceuticals to digital media. One such Irish owned operation is Fine Grain Property, a Singapore based property asset manager, which is focused on repositioning historic commercial properties and older office properties. ! Fine Grain invests in property, and manages property investments on behalf of investors in Singapore and internationally. The company is headed by Irish entrepreneur Colin MacDonald, an active member of Singapore’s Irish community and experienced developer having overseen the restoration of the iconic Fullerton Hotel in Singapore from the historic General Post Office colonial era building.! Fine Grain started out in 2007 with a majority of Irish investors. However, in the latest round of fundraising, Fine Grain has attracted more Singapore co-investors through the ‘family office’ model to attract investment from private wealth management advisory firms that serve ultra-high-net-worth investors. This model is emerging across Asia as investment and management of intragenerational wealth is guided by Confucian principles placing great value on the family as the key fabric of society. In a recent round of fundraising, Fine Grain accumulated a total of €17.5 million, which makes up the first stage of investment to build a 300-room ‘Premier Inn’ hotel in the city state. The development will mark the first foray into the southeast Asian market for the UK’s largest hotel brand. © Asia Matters 2014 42

Hong Kong Asia’s Financial Services Hub With a population of 7 million, Hong Kong, like Singapore, holds one of the region’s highest levels of GDP per capita a 2011 level of $38,569 (in 2005 constant price purchasing power adjusted values). A “special administrative region” (SAR) within China, Hong Kong enjoys considerable freedom to conduct its commercial and economic affairs. A crucial hub for transport, communications and finance; Hong Kong’s use of English, its common law and highly developed service economy make it an excellent gateway to mainland China for Irish companies. Irish exports to Hong Kong last year were out of proportion to Hong Kong’s relative size reflecting its long standing status as a developed area and total €525 million. Key (but not exhaustive) components of that trade is shown in Figure 19. !

Figure 19!

Ireland’s goods exports to Hong Kong in 2013 by main category!

Category

Value € million

Oﬃce Machines and Data processing

135.4

Miscellaneous food products and preparations

107.0

Photographic apparatus, optical goods watches & clocks Medicinal and pharmaceutical

48.4

Electrical machinery and appliances

35.8

Meat and meat preparations

35.7

Total*

521.1

45.6

Source: CSO 2013 Trade statistics.  *Total is non-additive in this table as some export destinations are excluded for presentation purposes

! What is immediately interesting when looking at Irish exports to Hong Kong, is how exports of food and meat products amounted last year to a total of €142.7 million. Essentially one quarter of Ireland’s exports to Hong Kong are from a largely indigenous and traditional exporting sector. This is a very significant indicator for the entire region, as a lead economy in Asia’s development, Hong Kong illustrates what other converging Asian economies – or at least their rapidly growing urban powerhouses - could look like in a decade or more in terms of their demand profile for western produce.! With a population of 7 million people in Hong Kong, small in contrast to the other countries considered in this report, imports of Irish meat and food preparations – a market which amounted to €277.8 million across the entire region – accounted for almost half of this figure. ! Hong Kong does not register in our export statistics as a destination for Irish service exports. But its imports of services grew between 2009 and 2013 by 36.1 per cent with particularly strong growth in construction services (170.7 per cent) and communication services (106.2 per cent). Imports of goods and services to Hong Kong are, according to IMF forecasts, expected to grow by 68.8 per cent over the next five years.!

Hong Kong Facts & Figures

! ! Population ! GDP GDP ! per capita

7m $381 b $38,569

50%

GDP growth (2013) Irish exports to HK Food prep & meat exports

3% €525 m €143 m

of Irish meat and food preparation

exports to Asia in 2013 went to Hong Kong

Irish Trailblazers ! Much like Singapore, Hong Kong’s open competitive economy mirrors many aspects of the Irish model. This ensures that many of the same global MNCs and Irish giants have a presence there. Though not an Irish organisation, the Multitude Group was founded by Irish entrepreneur Bill Condon, a trailblazer in his own right.! Having first moved to China in 1999, Condon set up the MBC foreign study business, to cater for Chinese students seeking further education abroad. The company expanded into restaurants, leisure and art. He has been heavily involved in the Irish community in Hong Kong through his involvement in the Chamber of Commerce and Ireland Fund of China. ! The Multitude Foundation was established in 2011 out of the necessity for a genuine and sustainable cultural dialogue between the different regions of Asia. It supports Asian contemporary artists and engages with young people through creative projects. The foundation plays an important role in raising awareness of contemporary culture throughout Asia and explores the relevance of art during this period of enormous geopolitical change across the region. The internationally acclaimed Multitude Art Prize (MAP) is the first major undertaking of the Multitude Foundation. © Asia Matters 2014 44!

Malaysia Dairy Export Potential ! With a population of 29 million and a 2011 level of GDP per capita of $13,469 (in 2005 constant price purchasing power adjusted values), Malaysia is at an exciting stage of development in terms of demand for goods and services of specific products.! Strategically located at the heart of Southeast Asia between China, Indonesia and India and enjoying cultural links with all three it is a location of great importance. Irish exports to Malaysia last year amounted to €197.7 million. Key (but not exhaustive) components of that trade is shown in Figure 20.!

Figure 20!

Ireland’s goods exports to Malaysia in 2013 by main category!

Category

Value € million

Electrical machinery

42.3

Oﬃce machines and automatic data processing

34.7

Oils perfumes toiletries

24.0

Medicinal and pharmaceutical

19.7

Dairy products

17.2

Miscellaneous food products and preparations

16.8

Total*

197.7

Source: CSO 2013 Trade statistics.! *Total is non-additive in this table as some export destinations are excluded for presentation purposes!

Following on from the example of Hong Kong where exports of food and meat products are a significant component of Irish trade, Figure 20 underlines the potential for Ireland. At more modest levels of GDP per capita than that of the example Hong Kong (as mentioned above), Malaysia’s living standards are on average roughly one third of Hong Kong’s but are climbing, while dairy and food exports there reflect this rising potential.! Malaysia does not register in our export statistics as a destination for Irish service exports, but its imports of services grew between 2009 and 2013 by 60.5 per cent with particularly strong growth in construction services (142.6 per cent) and communication services (94.7 per cent).Imports of goods and services to Malaysia are, according to IMF forecasts, expected to grow by 130.2 per cent over the next five years.On an EU level, an FTA is under negotiation and is targeted for completion in early 2015. !

! Malaysia Facts! & Figures

GDP (PPP) 2013 GDP per capita:

US$525 b US$13,469

GDP Growth rate 4.7% Irish exports to Malaysia $197.7m Sectoral Breakdown

US$390 m Bilateral Trade with Ireland (Jan-Nov 2013)

11% Agriculture Industry Services

48% 41%

Irish Trailblazers ! Kerry Group ! With operations established in 24 countries across five continents, Kerry Group’s sales to Asia Pacific markets account for 18% of total group annualised sales of approximately €5.8 billion. The Group’s first venture into the Asian market began with the acquisition of ‘SDF Foods’, a Malaysian based food ingredients processing business. Further development in Malaysia occurred in March 2001 with the opening of the new state-of-the-art manufacturing facilities in Johor Bahru, Malaysia, across the causeway from Singapore. This served as an important platform for the Group’s expansion in the dynamic and fast growing markets of China, Japan, Singapore and Indonesia. The enhancement of the Johor Bahru plant makes it the largest and most technically advanced food ingredients processing facility of its kind in the Asian market. ! From its established operations in Malaysia, Kerry Group has sought to expand across the region, culminating in two major developments in 2013. The first was its announcement to strengthen its foothold in the Chinese market through its food technology capabilities. Secondly, Kerry Group has opened a global technology and innovation centre in Singapore together with regional centres in China, India and Thailand, further consolidating its presence across the region. © Asia Matters 2014 46

Thailand Transport Hub Connecting Asia ! With a population of 70 million and a 2011 level of GDP per capita of $8,491 (in 2005 constant price purchasing power adjusted values), Thailand is also at a stage of development where demand for goods and services is accelerating.! Irish exports to Thailand last year amounted to €137.6 million. ! While substantial categories are too few to tabulate, key (but not exhaustive) components of that trade are accounted for in Figure 21.! Figure 21!

Ireland’s goods exports to Thailand in 2013 by main category!

Category

Value € million

Oﬃce machinery and data processing equipment

32.7

Medicinal and pharmaceutical products

30.9

Oils, perfumes and toiletries

19.7

Total*

137.6

Source: CSO 2013 Trade statistics.! *Total is non-additive in this table as some export destinations are excluded for presentation purposes!

Thailand does not register in our export statistics as a destination for Irish service exports. ! Imports of goods and services to Thailand are, according to IMF forecasts, expected to grow by 33.8 per cent over the next five years. Thailand is also positioning itself as a transport hub linking the ASEAN Economic Community and key partners in South Asia and East Asia. It has a number of large scale infrastructure projects underway and in the planning stages to better connect the region by road, rail and sea. This will make Thailand a key logistics hub for global value chains. ! At an EU level, negotiations for an FTA began in 2013 but have been suspended since the most recent coup in August 2014. Bangkok is also home to the European ASEAN Business Centre, which supports business connectivity between the EU and Southeast Asia. !

! ! Thailand Facts & Figures

Population GDP (PPP) 2013

70 m US$387 b

GDP per capita: GDP Growth rate

US$8,491 2.9%

GDP growth 2010-2014 400

US$705.3 m Bilateral Trade with Ireland (2013)

Billion US$

318b

345b

365b

387b

200

2010

2011

2012

2013

Irish Trailblazers ! Carbery/ Synergy! Carbery is an international food ingredients, flavours and cheese manufacturer headquartered in Ballineen, Co. Cork, Ireland. It is owned by four Irish co-operatives, employs approximately 530 people and has a turnover of €318.3 million (2013). Carbery operates from nine global locations including Ireland, the UK, the USA, Brazil and Thailand. It’s Thai operations were opened in 2013 by Synergy, a subsidiary of Carbery, with the opening of a new manufacturing facility in Samut Prakarn, Bangkok, Thailand. The choice of Thailand was based on its advantages in terms of strategic location, vast raw materials and good basic infrastructure.! Synergy entered the Asian market in 2009 supplying food and beverage producers with liquid flavourings, spray-dried flavourings, yeast extracts and dairy ingredients. With the potential surrounding the ASEAN Economic Community (AEC), the company is focussed on expanding into Indonesia and the Philippines, two of the biggest emerging markets in the region, in the short term. Longer term penetration into the Southeast Asian market could include expansion to Myanmar but that could depend on the country’s development in the medium term. © 48Asia Matters 2014

Vietnam

Opening Up Opportunities

With a population of 88 million and a 2011 level of GDP per capita of $3,448 (in 2005 constant price purchasing power adjusted values), Vietnam is experiencing one of the fastest rates of growth in imports in the region.! Irish exports to Vietnam last year amounted to €94.8 million. ! While substantial categories are too few to tabulate, key (but not exhaustive) components of that trade are accounted for in Figure 22.! Figure 22!

Ireland’s goods exports to Vietnam in 2013 by main category!

Category

Value € million

Dairy & misc. food products and preparations

30.7

Medicinal and pharmaceutical products

25.5

Oils, perfumes and toiletries

11.5

Total*

94.8

Source: CSO 2013 Trade statistics.! *Total is non-additive in this table as some export destinations are excluded for presentation purposes!

One of the countries that Ireland has successfully targeted for food exports, Vietnam shows that – while aggregate exports remain relatively low thus far – efforts to benefit at an early stage of development can pay off in sectors dominated by indigenous exports. Speaking at the ‘Asia Ireland Trade and Investment Summit’ event in Dublin in June 2014, H.E. Bui Thanh Son, Vice Minister for Foreign Affairs, outlined some key reforms taking place in Vietnam to make the economy more receptive to trade and investment. © Asia Matters 2014

These included the short term restructuring and reform of three key sectors for economic growth: (i) banking, (ii) public investment, and (iii) state owned enterprises, while medium term strategies focused on investment in both physical infrastructure and human capital through education, training and skills development. ! Imports of goods and services to Vietnam are, according to IMF forecasts, expected to grow by 114.2 per cent over the next five years.! At an EU level, FTA engagement with Vietnam has moved on at considerable pace having completed 6 rounds of negotiation in the last two years. This agreement will address issues relating to customs and trade facilitation, technical barriers to trade, competition (anti-trust & mergers), market access and aspects of sustainable development to name a few.

Vietnam Facts & Figures Population GDP (PPP) 2013

88 m US$358.8 b

€182.96 m Bilateral Trade with Ireland (2013)

GDP per capita GDP Growth rate

US$3,488 5.7%

Imports of goods & services predicted to grow 114.2%

2014

2019

Irish Trailblazers! 2014 marks the 27th year since ESB International began its first operations in Vietnam. ESB International has been on the ground to witness Vietnam’s transformation into a modern, high growth economy with a rapidly developing infrastructure.! ESB International has worked on training and consultancy projects in Vietnam over the past 27 years and have made considerable in roads in developing the countries infrastructure both physically and in terms of human capital. Significantly, the Vietnamese Deputy Prime Minister, Hoàng Trung Hải, was one of a group of Vietnamese executives sponsored by ESB to undertake a training programme at University College Dublin and Trinity College Dublin in the mid 1990s. The work of ESB International has been instrumental in developing lasting links between Ireland and Vietnam. © 50Asia Matters 2014

Philippines

Untapped Potential

! With a population of 95 million and a 2011 level of GDP per capita of $3,521 (in 2005 constant price purchasing power adjusted values) the Philippines is a potentially significant market to which Irish exports last year amounted to €79.8 million, roughly half of which are unclassified. ! Of exports which were classified the main sectors are outlined in Figure 23.! Figure 23!

Ireland’s goods exports to The Philippines in 2013 by main category!

Category

Value € million

Electrical machinery and appliances

19.2

Oﬃce machines and data processing equipment

13.2

General industrial machinery

9.0

Total*

79.8

Source: CSO 2013 Trade statistics.! *Total is non-additive in this table as some export destinations are excluded for presentation purposes!

Imports of goods and services to the Philippines are, according to IMF forecasts, expected to grow by 96 per cent over the next five years, while clothing, beverages and aircraft parts were amongst the strongest growth sectors during the last five years.! Ireland’s relatively strong cultural affinity with the Philippines and the positive reputation of Irish missionaries is a good basis for developing strong links in the education and medical sectors, although © Asia Matters 2014

services exports to the Philippines from Ireland are negligible at present according to Central Statistics Office data. In addition, Manila is home to the Asian Development Bank, which is mandated to fight poverty in the Asia-Pacific. Ireland joined the ADB in 2006 and is the ninth largest shareholder among its non-regional members. This has opened the doors for Irish companies to bid on lucrative ADB contracts across multiple sectors in the region. Major opportunities exist for Irish companies who are committed to engage with and bid for contracts from the ADB in a number of development sectors from infrastructure building (engineering, renewable energy, water management) to education (training, skills and policy development). ! The Philippines has become a global hub for call centres and customer service, given the proficiency in English, and the outsourced business process sector is growing at a rapid rate accounting for 5 per cent of GDP. The Philippines is also unique in the world as over 8 per cent of GDP is generated from remittances sent by its large diaspora across the world. Over 13,000 of this vast diaspora are based in Ireland, including well respected health care professionals, and are a key resource for promoting greater Ireland Philippines engagement. Unfortunately, the Philippines embassy in Ireland was closed in 2012 and replaced by a consulate, the high number of Filipino citizens working in Ireland make a strong case to re-open an embassy and a reciprocal embassy could be considered in the near future.

Philippines Facts & Figures US$375.8 m Bilateral Trade with Ireland (2013)

Population GDP (PPP) 2013 GDP per capita: GDP growth rate

97 m US$454.3 b US$3,521 7.2%

Irish Trailblazers! The PM group is linked to the Philippines predominantly through Manila’s hosting of the headquarters of the Asian Development Bank (ADB), as mentioned above. PM group have been adept at winning contracts across Asia through the ADB and are regarded as one of the leading Irish companies engaging with the organisation. Despite having their Asia Pacific headquarters in Singapore (set up in 2007) and a China office in Shanghai (set up in 2011), PM group have committed to their engagement with the ADB and have won contracts across a wide range of sectors. To date, PM group have won notable contracts related to urban environment infrastructure and education in Vietnam and most recently an urban infrastructure contract in Mandalay, Myanmar in 2014.! In addition to their relations with the ADB in Manila, PM group have worked with some of the top pharmaceutical MNCs in the region, which included a major construction project at the Pfizer plant in the Philippines. © 52Asia Matters 2014

Indonesia

ASEANs Economic Powerhouse

Indonesia ! With a population exceeding 250 million, making it the fourth most populous country in the world behind China, India and the US. Indonesia has a 2011 level of GDP per capita of $4,339 (in 2005 constant price purchasing power adjusted values). Irish exports to Indonesia amounted to €75.6 million in 2013. Its young population – the average age is 28 – and its rising consumer classes makes Indonesia a market of huge potential for Irish exports. ! Of the exports which were classified the main sectors are outlined in Figure 24 below!

! Figure 24 Ireland’s goods exports to Indonesia by goods category by main Category ! Category

Value € million

Dairy Products

13.2

Oils, Perfumes and Toiletries

12.7

Not Classified

49.7

Total*

75.6

Source: CSO 2013 Trade statistics.! *Total is non-additive in this table as some export destinations are excluded for presentation purposes!

Imports of goods and services to Indonesia are, according to IMF forecasts, expected to grow by 52.2 per cent over the next five years, while manufacturing, agriculture and resources were amongst the strongest growth sectors during the last five years.   © Asia Matters 2014

Indonesia, as the economic powerhouse of ASEAN, represents a great opportunity for Irish business. As cited earlier, McKinsey estimate that by 2030, Indonesia will become the 7th largest economy in the world. It predicts that Indonesia will have a consumer class of 135 million people and an urban population of 71%. In addition, McKinsey predict a $1.8 trillion market opportunity in services, agriculture and fisheries, resources and education. As mentioned above, there are huge opportunities for training and knowledge transfer from Ireland, as 20% of annual government spending is allotted to education and skills development for Indonesia’s young population. With this level of spending, a Government to Government Memorandum of Understanding between Ireland and Indonesia should help unlock major opportunities for Ireland’s education sector. ! In addition, Ireland’s competitive advantage in aviation finance will see opportunities as Indonesia’s aviation sector takes off. It is estimated that 229 new airports will be built in the country by 2030 and only last year a regional carrier, Lion Air, made the largest ever order of Airbus planes with a $24 billion investment for 234 planes.! Indonesia’s recent announcement to invest US$23 billion to upgrade broadband connectivity over the next 5 years will open up new opportunities for Ireland’s ICT sector.! Indonesia also plays an important role in driving economic activity across ASEAN, as the region approaches its 2015 deadline for the ASEAN Economic Community (AEC). Jakarta is home to the ASEAN Secretariat, a regional body with growing influence as a stakeholder in driving economic integration and convergence across the region.! At the EU level, Indonesia and EU have signed a comprehensive Partnership Cooperation Agreement (PCA) which came into force in 2014 following 5 years of negotiation. The agreement ensures greater cooperation across education, the environment, transport, health and civil society. Intensive talks have begun on opening negotiations for an EU Indonesia FTA. Indonesia also hosts the EU supported ASEAN IPR SME Helpdesk which provides assistance on IP protection for EU businesses in the region. In 2014, the EU announced it will create a post for EU Ambassador for ASEAN, which will undoubtedly improve cooperation between the two regions.! !

! ! ! ! !

Indonesia Facts & Figures

US$171.8 m Bilateral Trade with Ireland (2013)

GDP (PPP) 2013: US$1.2 T GNP per capita: $4810 6.2% GDP growth Exports: 26.3% GDP

The World s Most Stable Economy in the last 5 years The Economist▴

1500000000

Billion US$

1.4b

9.3

1.2b

1000000000

7.1

6 3

10.6

500000000

5.3

300m 0

Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014

FDI has tripled since Q1 2010

China

India

240m Indonesia

World s 4th most populous country

★ Population 250 m (2014) ★ Average age 28 ★ Rising middle class consumers

Irish Trailblazers! Set up in 2010, Brandtone specialises in mobile solutions, brand marketing and is headquartered in Dublin with offices in 9 countries across the world - including China, India and Indonesia. They create large databases of permissioned brand shoppers to enable clients to engage with consumers via their mobiles. Working in emerging markets with high mobile and smart phone penetration, Brandtone have expanded to Indonesia in 2013 following a deal signed with Unilever in a bid to improve their reach via mobile marketing in key emerging markets. In terms of mobile internet access - Indonesia is the top country in Southeast Asia for mobile internet access per user. This is breeding a burgeoning e-commerce market that has opened opportunities for new players to enter the market. Through its groundbreaking ‘Konnect’ mobile marketing platform, Brandtone delivers instant insights into consumer behaviour and campaign results in the world’s fastest growing markets.

! ! ! !! !! !! !! !Pakistan, Mongolia, Bangladesh, Myanmar, Taiwan ! The countries chosen for analysis in this country by country section are selected for their strategic relevance to Irish companies at the present time arising from their combination of established links, infrastructure and vast potential for growth. Additional countries - Pakistan, Mongolia, Bangladesh, Myanmar, and Taiwan – also present unique opportunities for exporters. !

! Bangladesh! With a population of 150 million and a 2011 level of GDP per capita of $1,554 (in 2005 constant price purchasing power adjusted values). Bangladesh is at an earlier stage of development to Pakistan. It is strategically located along an important transport corridor between India, ASEAN and China that is currently the subject of major infrastructure projects including an important road and train networks through Myanmar and Bangladesh. These plans will bring huge investment and great economic opportunity as the country is brought further into global supply chains.! Irish exports to Bangladesh last year amounted to just €5.6 million and these exports are unclassified by sector. Farm technology, nutrition and education may be the best strategic sectors for Ireland to consider for its long term growth strategy for the country.! Imports of goods and services to Bangladesh are, according to IMF forecasts, expected to grow by 123.3 per cent over the next five years, making it one of the fastest growing countries in the region. Taking the growth in Bangladesh’s imports from the rest of the world in the previous five years as an indication of where future growth might be located, food (particularly fish), dairy, printed publications, soaps and lubricants are among the faster growing sectors of demand.!

Mongolia! Mongolia has a population of 3.1 million and a 2010 level of GDP per Capita of $3,52228 (in 2005 constant price purchasing power adjusted values). Located in an critically strategic position between Russia and China, Mongolia has the potential to be a land transport hub between these two economic powerhouses. In addition, Mongolia is resource rich with large mineral resources and a rapidly growing mining sector. The ‘Mongolian Wolf’ has been cited as a new ‘Asian Tiger’ economy in the making as foreign investment and interest rises.!

! ! 28

The latest data for Mongolia and Taiwan for GDP per capita (from a consistent source) is for 2010

Myanmar! Myanmar has a population of 53 million, and a GDP per capita of $824.1929. Up until 2013, Myanmar was under sanctions from the EU, which greatly limited economic relations with the country. Since the lifting of the sanctions and government reforms set in place, economic activity in Myanmar has accelerated considerably, opening up huge opportunities as the country opens up and external trade and investment increases in this largely untouched market. The government is initiating a broad array of reforms to unify the exchange rate, improve monetary policy, increase tax collection, reorientate public expenditure toward social and physical infrastructure, improve the business and investment climate, develop the financial sector and liberalise agriculture and trade. These reforms will ensure that the business climate in Myanmar is conducive for greater investment and economic development continues apace, while major opportunities will exist in developing the infrastructure for growth.!

Pakistan! With a population of 177 million and a 2011 level of GDP per capita of $2,473 (in 2005 constant price purchasing power adjusted values), Pakistan is a country of exciting future potential. ! Irish exports to Pakistan last year amounted to €28.4 million most of which are unclassified.! Undoubtedly Ireland has future potential here in the area of food exports although similar concerns to India, namely fragmentation and of the retail sector and tariffs, are obstacles in the immediate term, while political instability is a factor impacting opportunities in the country. ! Imports of goods and services to Pakistan are, according to IMF forecasts, expected to grow by 142.6 per cent over the next five years, making it the fastest growing country in the region in terms of demand for foreign goods and services. In so far as growth in Pakistan’s imports from the rest of the world in the previous five years are any indication of where future growth might be located, food (particularly fish), printed publications, jewellery and manufacturing offer strong possibilities, as well as rail stock and shipping.!

Taiwan! Taiwan has a population of 23 million and a 2010 level of GDP per capita of $32,105 (in 2005 constant price purchasing power adjusted values). It is a respected and successful trading partner for many western economies, with a highly developed economy. Key sectors of the Taiwanese economy include Information Technology, Agriculture and Energy. Ireland’s exports to Taiwan in 2013 amount to €130 million, which is a small rise on 2013 figures.!

! ! 29

According to World Bank Figures for 2011, the population figures are drawn from the latest 2014 World Bank reports.

! ! Risks For business plans of significant size, planning for both positive and negative economic scenarios as they might impact relevant markets is advisable. Economic scenarios influencing export demand should outline more than just scenarios of macroeconomic growth. Currency fluctuations, structural changes in markets and regulations, corporate governance issues and adverse financial or political conditions raise the possibility of businesses in Asia not meeting financial obligations e.g. due to a banking crisis. For example, the IMF have raised concerns about the potential threat of shadow banking within the Chinese economy, along with vulnerabilities associated with regional property bubbles. Property sales in China are estimated to account for 12% of GDP according to Citigroup, while Moody’s Analytics argues that the figure is 23% of GDP when construction and house renovation are factored in30. Given the economic interconnectivity in Asia, a substantial slowdown in China, would have a knock on impact across the rest of the region.! South East Asia has experienced its fair share of economic shocks, most notably during the Asian financial crisis of 1997 and 1998, and exporters to the region should be aware of economic financial and banking risks. A precise analysis of country by country financial risk can offer a relative ranking of the aforementioned countries using important summary measures of overall economic risk. Further study on the nature of the market and various political, economic, social, technological and business challenges and opportunities are key requirements to accompany any business plans under consideration.! The first thing to note is that Asia’s experience of the global financial crisis was 30

different from that of the US and the EU in two respects. Firstly, it was less severe and, secondly, it impacted more on the real economy. There are several reasons for this. Asia has a significantly lower degree of home ownership and mortgage financing, consequently, its banks are less exposed to real estate bubbles. In contrast to the U.S. and to some extent the EU – where monetary and fiscal policies were loose - monetary and fiscal policies in Asia were generally more responsible and prudent. Where financial crisis in the US and the EU reflected financial markets that had become too sophisticated for their own good, Asia’s financial markets are characterised by their underdevelopment (this consideration is a major challenge in some countries as capital constraints may be holding back growth and demand).! Finally, Asia had already applied the lessons from its earlier currency crises of 1997 and 1998. This is not to say, of course, that similar errors could not be repeated. Vigilant risk management in financial institutions is as badly needed as ever. But at least Asia is in the advantageous position of being able to draw lessons from its own - and from the US and the EU’s – crises in avoiding or minimising the risk from future ones. Efforts have begun to create region wide mechanisms to monitor and provide safety nets in times of crisis, such as the Chiang Mai Initiative Multilaterization (CMIM) currency swap initiative and the ASEAN+3 Macroeconomic Research Office (AMRO). ! Consequently, credit ratings across most Asian economies remained stable or in some cases improved during 2014. China’s outlook remains stable and most ASEAN economies are also stable or improving, particularly Indonesia and the Philippines where sovereign debt was promoted to investment grade in 2011 and 2014 respectively. In India and Pakistan, issues relating to structural reform and persistent fiscal and current account imbalances place them at the higher end of risk. In India’s case, a new reform minded government is a positive sign for the future.! To present a picture of relative risk positioning Figure 25 ( page 60, overleaf) shows – in declining order of

Wall Street Journal, 19 June, 2014, ‘How a Slumping Property Market Could Drag Down China’s GDP’

perceived overall financial stability – the latest Standard and Poor ratings for sovereign debt risk. ! What is immediately clear is that Ireland’s dominant trading partners in the region – Hong Kong, Singapore, China, Japan and South Korea - are at the top of that list. It is also clear that in terms of expected speed of future growth in demand for exports from these countries, the countries shown to have the greatest opportunities in this regard (see Figure 9 on page 21) also seem to possess the greatest overall risk from a macroeconomic stability point of view.!

financial, banking, currency or macroeconomic trouble. ! Even when these overall warning signs are absent – when the overall economy is stable – the targeted sector may not be stable or as attractive as overall growth rates would suggest. Which is why detailed in depth study not just of economic, but also market, political and other risks, is often warranted.

This suggests that – rather than the market opportunity alone - security and financial stability has been a conscious or unconscious additional determinant of export destination to date.! This suggests that measures to strengthen access to export credit insurance, access to working capital, investment in Enterprise Ireland/ IDA/ Department of Foreign Affairs and Trade support networks and linkages with major IDA client multinationals in the region can all pay off in terms of reducing export exposure to financial and economic risk.! Assessment of risk cannot be based on a photographic “snapshot” of Asia, nor on just one comparative metrics such as is presented in Figure 23 ( page 51) . Regular analysis of a dashboard of metrics encompassing monthly data on real exchange rate trends, stock prices, international reserves, terms of trade, interest rate spreads, capital inflows and fiscal metrics (deficit and debt) are warranted– depending on the size of the trade commitment being envisaged.! Figure 26 ( page 61) provides an example of some of these metrics. By differentiating high from low inflation countries, countries with prudent low deficit and low debt policies from those with stable debt and deficits, and those with current account balance positions from those for whom instability is present and persistent, we can help to identify warning signs of dormant © Asia Matters 2014

Figure 25 !

Standard & Poor’s sovereign debt rating! GG primary balance

Inflation

Current A/C

GG Gross debt

Bangladesh

7.1%

2.6%

41.8%

-1.2%

China

2.5%

2.1%

22.4%

N/A

Hong Kong

4.3%

3.1%

33.8%

0.6%

India

8.1%

-2%

66.6%

-2.7%

Indonesia

8.1%

-3.3%

26%

-2.2%

Japan

1.4%

0.7%

243%

-7.6%

Malaysia

3.2%

3.8%

58.2%

-2.7%

Pakistan

5.9%

-1%

60.1%

-3.5%

Philippines

4.1%

3.5%

38.3%

2.4%

Singapore

18.4%

103.8%

5.5%

South Korea

1.1%

5.8%

36.7%

0.1%

Thailand

1.7%

-2.8%

45.3%

0.6%

1.2%

-2.3%

104.5%

-4.1%

Vietnam

6.6%

55%

-4.3%

! Source: Standard & Poor’s, 2014!

Figure 26!

Indicators of Economic Risk! Local currency

Foreign Currency

Hong Kong

AAA

Singapore

AAA

United States

AA+

China

AA-

Japan

AA-

South Korea

AA-

A+

Malaysia

A-

Philippines

BBB

India

BBB-

Thailand

A-

BBB-

Indonesia

BB+

Bangladesh

BB-

Vietnam

BB-

Pakistan

B-

Comment Extremely strong capacity to meet financial commitments Extremely strong capacity to meet financial commitments Very strong capacity to meet financial commitments Very strong capacity to meet financial commitments Very strong capacity to meet financial commitments Strong capacity to meet financial commitments but   somewhat susceptible to adverse economic conditions Strong capacity to meet financial commitments but   somewhat susceptible to adverse economic conditions Lowest possible grade for investment in sovereign bonds, susceptibility to adverse economic shocks notable Lowest possible grade for investment in sovereign bonds, susceptibility to adverse economic shocks notable Strong capacity to meet domestic financial obligations,   but susceptible to possible adverse currency developments as regards foreign debt obligations Less adverse in near term but faces ongoing uncertainties in longer term regarding adverse financial, business and economic conditions Less adverse in near term but faces ongoing uncertainties in longer term regarding adverse financial, business and economic conditions Less adverse in near term but faces ongoing uncertainties in longer term regarding adverse financial, business and economic conditions More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments

Source: IMF World Economic Outlook, 2014

Key Conclusion: Why Asia for Ireland?!

! Where we are! • !Asia’s rise is reshaping the global economy as rapid urbanisation, rising consumer classes, improving technology and infrastructure. This is a long term trend and Ireland must be ready.!

• Competition is growing to meet the rising demand in Asian economies. Team Ireland is increasing its presence, enabling businesses to compete for exports and win new investment. !

• !Despite these efforts, in many key markets, Ireland does not have a significant profile and remains relatively unknown.!

! Where we want to be! • ‘Brand Ireland’ to be understood by a broader range of key Asian stakeholders and decision makers. !

• Ireland to be recognised in Asian Markets for its competitive advantage in the key sectors of Food and Agri-tech, Education and Skills, Tourism, ICT and International Financial Services.!

• Ireland to be seen as the Asian business valley for Europe, driving real economic and jobs growth at home. !

! What we need to do to get there ! • Ireland needs to coordinate a collective Team Ireland initiative to credibly build Asia competencies in Ireland and establish sustainable professional internship programmes in Asia.!

• We need to turn Ireland into a hub for Asia operations, driving FDI and expanding the role of existing MNCs.!

• We need to set ambitious targets for Team Ireland, and comprehensively update our Asia Trade Strategy for the next five years to maximise the business potential of key relations.!

• Ireland needs to clinically focus on key markets and sectors where it has unique expertise and competitive advantage. Smart and sustainable Irish SMEs should be strongly supported to become new and active players in key Asian markets.

Key points!

To unlock Asia’s potential, Ireland needs to:!

• Nurture a deeper understanding of the diverse region! • Set ambitious targets for growth! • Build the infrastructure to support Team Ireland, Irish businesses and key stakeholder groups at home and across Asia!

! The following section is a summary of what Ireland needs to do:!

! Build Asia Competencies! Building Asia competency in Ireland needs a multilayered approach in close coordination with key educational institutions, government agencies and the business community, we have identified three ways to achieve this.!

• The first step is to improve education on Asia, with language competencies a primary focus. Further steps are needed to develop a deeper understanding of the diversity of Asian cultures, religions, histories, political systems and economies. Supporting this at secondary and third level will prepare future generations with a valuable understanding of Asia’s global influence.!

! • Building on successful graduate placement programmes such as the Enterprise Ireland International Graduate Programme and Bord Bia’s fellowship programme, a ‘Team Ireland Graduates in Asia’ programme can place passionate, intelligent and culturally adaptable young Irish graduates in Team Ireland offices across Asia as part of a new coordinated traineeship programme. This programme could give valuable experience to young Irish graduates, support Team Ireland on the ground and build a network of Asia competent young Irish professionals. This programme will complement existing reciprocal programmes in Ireland that place young Asian graduates in Ireland, such as the Dublin City Council and Cork City Council twinning internship programmes with Beijing and Shanghai respectively.!

• Complimenting the ‘Graduates’ programme, a ‘Team Ireland Early Career Professionals in Asia’ programme, can play a valuable role in developing Irish competencies on Asia by placing experienced professionals in positions with Team Ireland and targeted companies across Asia. The closing of initiatives such as the Fás graduate programme and the Farmleigh Fellowship have had a major impact on developing Irish competencies in Asia. Placing early career professionals with key companies in strategic sectors for Irish Asia relations will have valuable implications for Ireland.

Transforming Ireland into a Hub for Asia Operations! With the right levels of Asia and key sector competencies in place, Ireland can engage with global MNCs to transform their interests in Ireland from EU management hubs to global hubs to include management of operations in Asia from Ireland in specific sectors. The success of this has been seen with MNCs managing their Middle East and North Africa (MENA) operations out of Ireland.!

Building these competencies enhances Ireland’s value proposition to retain global companies and will create positive opportunity for Irish SMEs supporting MNCs to expand supply into their Asian operations.!

An example of a key sector where Ireland has core competencies and is operating globally, with specific focus on Asia, is aviation finance. The skill set legacy of Ireland’s pioneering innovators in the aviation sector has led Ireland to become a global leader for aviation finance. With Asia experiencing an aviation sector boom, major financial institutions and investors are looking to Ireland for its core expertise and know how. !

Setting Ambitious Targets for Team Ireland ! Recent strategy papers from government departments and state agencies have acknowledged the significance of a rising Asia and set out ambitious targets for growth across Asia.!

• The Action Plan for Jobs 2014, for example, has outlined Enterprise Ireland’s new approaches to supporting Irish exporters to better target Asian markets with the addition of resources on the ground in China and in South Korea. The strategy also outlines the IDAs ‘Winning Abroad’ targets of 10,000 new jobs over the next 5 years with a new focus on winning jobs from emerging markets in Asia.!

• The announcement of new embassies in Indonesia and Thailand, with a new Consulate in Hong Kong were positive developments and will help grow business connections and will demonstrate Ireland’s commitment to Asia on the ground.!

• Tourism Ireland has a major role to play in positioning Ireland as a key destination for Asia’s rapidly rising tourism sector. The focus on China is correct with wins evident, yet there is a need to go beyond China to have representation on the ground in other key growth markets for the tourism sector. The ‘early career professional programme’ could assist in placing the right people on the ground to coordinate with Dublin to significantly grow tourist numbers from Asia and build on Ireland’s profile across Asia. Securing access via direct flight connections, ease of visa applications, payment methods, as well as service industry adaptability will be key for Ireland to attract more Asian tourists.!

• Bord Bia is also faced with a major opportunity to meet the rising demand for food and agritech across Asia. Ireland needs to highlight its market leader status in baby formula, dairy and meat products, and quality assurance and sustainability in the full production cycle.!

• Enhancing the work of embassies and state agencies, there is significant opportunities to fully exploit the business potential within the twinning relationships between Irish and Asian cities. Capital city twinning relationships offer particular opportunity as the national gateways to drive investment, education and tourism, these include twinning agreements such as DublinBeijing, and other significant regional city hubs e.g. Cork-Shanghai.

Asia Strategy: The Next Phase!

! For Ireland to be a step ahead in accessing key markets across Asia and winning investments, a comprehensive update on the 1999 - 2009 Asia strategy is needed to outline the next 5 years of engagement with key Asian stakeholders.!

! • The political, economic and cultural landscape across Asia is shifting at a rapid rate with rises in consumer spending, urbanisation rates, technology uptake and demographic trends playing a major role in shaping Asia’s continued rise.!

• Ireland’s efforts to unlock Asia’s potential need to be comprehensive, collaborative and innovative.!

• To ensure the effectiveness of this strategy, key stakeholders from the government, business and wider civil society should be engaged through regular consultations and the setting up of a steering committee of multi-sector stakeholders to assist with the development of the strategy.!

! Build Ireland’s Guanxi (关系) through Nemawashi (根回し)!

! Taking inspiration from Asia’s collectivist culture and the Chinese concept of Guanxi (personalised networks of influence) and Japanese concept of Nemawashi (laying the foundation for change by talking to the people concerned), Irish stakeholders need to build strong social connections and interdependence in their engagement with Asia. Ireland has its own term for community dependence, ‘ní neart go cur le chéile’ (there is no strength without unity), so it is a familiar concept in Irish culture.

• These social interactions and business networks should be built using a collective

approach with the support of key government agencies, the business community (both established MNCs and emerging SMEs), educational and cultural institutions.

• This support network can allow for the sharing of experiences, contacts and open new

trade and investment opportunities for Ireland in Asia.

• Ireland’s guanxi will mobilise the diaspora across Asia to connect Irish trailblazers and

those looking to begin in Asia. An active guanxi will enable Irish stakeholders to transform their networks into tangible business opportunities.

• In building an influential Asian business community at home, Ireland can leverage the

existing ‘Immigrant Investor Programme’. The investment ranges from €500,000 to €2 million for an initial five year family residency. Launched in 2012, it has been slow to take off but a concerted effort promoting Ireland’s investment potential, quality of life and education opportunities will appeal to Asian investors looking for investment/emigration opportunities.

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Focus on Sectors of Opportunities !

! Ireland has areas of competitive advantage that can unlock key Asian markets to meet ambitious targets for export and FDI growth.!

! Food and Agri-tech! Ireland needs to leverage its excellent reputation as a global leader and its production capacity in this sector to meet rising levels of demand across Asia. Exports in dairy and meat products, fish products, high end gourmet produce, as well as advanced agricultural technology and training are rising across Asia. These are areas where Ireland has unique competitive advantages, complemented by Ireland’s best in class reputation for quality assurance and sustainability in production, its position as the 4th largest global beef exporter, the volume of baby formula exports (currently 15% of exports globally) and a capacity to feed 50 million people annually. With the lifting of the EU milk quotas in March 2015 and dairy production expected to rise by 50% over the next 5 years, it is essential that Ireland capitalises on its unique advantage to meet rising Asian demand.!

! Education! Ireland’s education brand has huge potential but is lagging behind competitors in the race to capitalise Asia’s education boom. There is an urgent need for a national clearing house recognisable by Asian partners to ensure quality. This can be achieved through better coordination between third level institutions, establishing centres of excellence, partnering with Asian institutions and government MOUs to expand opportunities with key Asian countries. Given the value of educational links and Ireland’s quality in this field, ambitious targets need to be set to outline the sectors growth. This needs to go beyond third level and English Language institutions and focus on Ireland’s best in class professional education institutions such as the Institute of Public Administration, Irish Management Institute, Institute of Bankers, National Maritime Centre, Dublin Airport Authority (DAA) International and the new Sustainable Food Systems Ireland Initiative launched by government agencies following the success of Origin Green. With professional skills and accredited industry specific training in high demand in Asia, Irish institutes can achieve significant commercial success.!

! Tourism ! Asia is undergoing a rapid rise in outward tourism as growing middle classes are travelling further and more frequently. Ireland faces challenges in attracting Asian tourists, these include building flight connectivity and infrastructure, efficient visa processing, as well as language capacities and adaptability in hospitality services to meet specific needs of Asian travellers. The Irish tourism sector needs to diversify its targets to key markets across Asia and create an Irish brand that appeals to Asian tourists. The preparation of tourism toolkits could ensure Irish hospitality services cater adequately for Asian tourism. In addition, the sector needs to engage with large scale Asian travel agencies who bring high volumes of Asian tourists to multiple European destinations to ensure Ireland is top of the list.

ICT! Dublin is often cited as ‘Europe’s Tech Capital’ with top ICT companies, software developers and innovators setting up in Dublin’s ‘Silicon Docklands’. Ireland needs to leverage its position as an innovation hub to other tech capitals across Asia to build partnerships promoting greater trade, investment and R&D centres. The ‘internet of things’ has been cited as a key focus for Ireland. Opportunities in this new and exciting area are evident across new Asian markets where high rates of technological uptake have seen a rapid rise in e-commerce, social technology and e-healthcare. Irish tech players should encourage greater interaction, exchanges and entry into Asian markets.!

! International Financial Services! Ireland has built a credible International Financial Services centre. Though small in scale by Asian standards, there are multiple opportunities to expand Ireland’s connection with Asia in this sector and leverage Ireland’s strength in key areas. Ireland offers Asian financial institutions best in class services as an EU centre for fund management and compliance, while in terms of professional skills training, Irish institutions are among the best in the world. Asian banks and investors are entering Ireland via the Aviation Finance sector given Ireland’s core expertise in the area, while opportunities exist in the emerging fields of Islamic Finance and Green Finance. Ireland has much to offer Asian economies at they reform their financial sectors.

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Conclusion !

With Asia’s continued growth and consumer demand rising, the opportunities for greater trade and investment are growing. These opportunities bring with them intense global competition for Asia trade and investment. Ireland, as a small open economy reliant on exports and FDI, Ireland is doing relatively well and through a more collective and coordinated approach can do better.! Ireland has many competitive advantages in key growth sectors for Asia, leveraging the calibre of Ireland’s value proposition for targeted Asian markets will help to win more investment and grow our exports. ! It is essential that Ireland establishes a collective approach to Asia with Team Ireland, the business and academic communities all working together to diversify Ireland’s reach and deliver exports, investment and jobs growth at this critical juncture for Ireland’s economic recovery.

Singapore FTA initialled on 20 September 2013, negotiations on investment protection are on-going.

Thailand FTA negotiations launched in March 2013 with four rounds of negotiations completed to date.

FTA negotiations have been underway since 2007, 11 full rounds of negotiations have ben completed and a major push is expected with the incoming Modi government.

India

Mongolia PCA signed in April 2013, ratification underway.

Brunei Darussalam PCA negotiations launched on 26 April 2012. Fourth round of negotiations concluded on 12 November 2013. Brunei has expressed its interest in a bilateral FTA.

Philippines PCA signed on 11 July 2012, ratification underway. Philippines applied for GSP+ treatment

Vietnam PCA signed in June 2012, ratification underway. FTA negotiations launched on 26 June 2012 with eight rounds of negotiation have been concluded to date.

China PCA negotiations launched in 2007, stalled in 2011. Investment agreement negotiations launched at the EU-China Summit on 21 November 2013.

Japan FA and FTA negotiations were launched on March 2013 untitled the Economic Partnership Agreement (EPA). The 5th negotiation round was concluded in June 2014 and a deal is expected by summer 2015.

Malaysia PCA negotiations began in 2010 with the seventh round of negotiations held in April 2014. FTA negotiations launched in 2010 with seven Rounds completed to date.

Acronyms: FA = Framework Agreement FTA = Free Trade Agreement PCA = Partnership & Cooperation Agreement

Republic of Korea FA signed on 10 May 2010 and entered fully in force on 1st June 2014. FTA was signed on 6 October 2010 and entered into force on 1 July 2011.

Annex 1: EU Asia FTAs - State of Play

! ! ! ! ! ! ! ! Asia Matters Contacts! !

Martin Murray! Executive Director,! Asia Matters! E: martin.murray@asiamatters.eu! T: +353 87 268 8805!

R贸n谩n Lenihan ! Director of Operations and Development,! Asia Matters! E: ronan.lenihan@asiamatters.eu! T +353 87 799 2913!

Stephanie FitzGerald-Smith! Director of Marketing and Communications, ! Asia Matters,! E: stephanie@asiamatters.eu! T: +353 87 771 4316!

! ! ! ! !