Asian persuasion

Besides being culturally diverse and rich in Eastern traditions, as the world’s largest and most populated region Asia incorporates many countries that have boasted the most advanced economies on earth for much of recorded history. STUART MOIR explores how the manufacturing powerhouses of Asia are set to become the largest economies in the world.

As a concept, the entity referred to as Asia originated in the West. The people of ancient Persia, China, Japan, India, Southeast Asia, Indonesia and the Philippines have never perceived themselves collectively. From their standpoint, they were and continue to be vastly varied civilisations, different and unique. The Great Wall of China remains a global structural icon, and with its unsurpassed architectural beauty the Taj Mahal is regarded as one of the eight wonders of the world, yet each is symbolic of very different cultures.

Asia is also home to several diverse language families and many language isolates, with most countries in the region having more than one indigenous language. According to Ethnologue, more than 600 languages are spoken in Indonesia, in excess of 800 languages in India and more than 100 in the Philippines. In China, too, languages and dialects differ from province to province.

Because of the region’s prodigious range of cultures, historical ties and governmental systems, the wealth of Asia differs greatly from country to country. Currently, after North America and Europe, the region has the third largest nominal gross domestic product (GDP) of all the world’s continents. In its own right, China is the world’s second-largest economy and looks set to strengthen this position even further in the near future.

All this has obvious implications for the region’s truck industry, particularly because Asian economies tend to recover quickly from periods of recession. This was admirably demonstrated after the recession of the early 1990s, with truck sales more than doubling between 1998 and 2004. As Global Insight’s director of heavy truck industry research, Richard Walles, points out, “The Chinese market took a leading role in this recovery as demand for trucks soared on the back of major infrastructure investment projects. China’s share of regional sales has risen to over 50% from less than 40% in the 1990s.”

Like many European and North American commercial vehicle manufacturers, South Korean and Japanese automotive companies have plants in other parts of Asia to take advantage of abundant supplies of relatively cheap labour and well-developed infrastructure. In China alone, significant investments in manufacturing plants have been made by Daimler, Isuzu, Volvo, and Hino amongst others.

According to Walles, another important development is that India has replaced Japan as the second-largest consumer of trucks on the continent, accounting for 21% of recent truck sales in Asia. This is due in some part to the restructuring of Japan’s transport industry, leading to a decrease in the demand for trucks and an output far below historical levels.

Walles’ forecast for the next five years anticipates that the strongest growth in the Asian truck market will come from India. Global Insight expects a 500% spike in truck sales in that country by 2013, as compared to forecasted sales for 2000. Although China’s sales are likely to slow somewhat between 2012 and 2013, they are nevertheless projected to be more than 350% higher than in 2000. By contrast, the truck market in Japan is expected to remain at the same level as 2008.

China’s large domestic market gives the country a distinct advantage over Japan, which exports approximately 60% of its output. India’s manufacturers, too, are heavily dependent on the domestic market, which has accounted for a 55% increase in heavy-duty sales.

According to Walles, Asian chassis manufacturers are also competing internationally: most notably in Russia, where TATA, Isuzu and several Chinese companies are now doing business.

As economies across Asia continue to strengthen, both individual governments and the Asian Development Bank (ADB) are setting projects in place aimed at improving living and working conditions for the continent’s people.

In China, an already-comprehensive transport system developed under communist rule is being extended and improved. As part of an effort to re-establish railway traffic between Cambodia and Thailand, thanks to a US$42 million (R324 million) World Bank loan, Cambodia’s war-damaged railway network is being reconstructed after decades of neglect. Three other Southeast Asian countries are jointly opening highway truck routes aimed at facilitating lower-cost cross-border freight transport.

In 2009, the United Nations Economic and Social Commission for Asia and the Pacific collaborated with the International Road Transport Union (IRU) to organise a truck caravan along what is known as the Asian Highway, starting in Tokyo and passing through the Korean Peninsula, China and Central Asia before arriving in Istanbul. The caravan successfully demonstrated how an international road network can facilitate access to regional and international markets, raising the profile of member countries regionally and internationally. The epic journey also marked the Asian Highway’s 50th anniversary.

Nevertheless, the transport system in some parts of Asia still leaves a great deal to be desired. In India, where there has been a 10% per annum rise in the demand for road and rail transport, the existing network is under such pressure that it could impact negatively on economic growth. India has the largest railway network in Asia and the fourth most heavily used system in the world, carrying 14 million passengers a day. As a result, the movement of freight has shifted from railways to roads, which are now responsible for carrying almost 65% of India’s freight. However, while the density of the country’s road and highway network is similar to that of the United States, most Indian roads and highways are narrow and congested, with poor surface quality; 40% of India’s villages have no access to all-weather roads at all.

Although the World Bank has committed loans totalling US$4.95 billion (R38.2 billion) to upgrading India’s transport infrastructure, this will need to be stretched very thinly if it is to cover the entire road and rail network as well as address road safety and transport efficiency shortcomings.

And what of the future? Rapid economic development has resulted in the fastest growth in annual greehouse gas emissions ever recorded, with obvious implications for global climate change. Because Asia is home to more than half the world’s poor and it is these very people who will be most vulnerable to the adverse impact of climate change, Asian Pacific countries are working hard to develop strategies and programmes to address the issues entailed and to facilitate adaptations to new energy sources. With this in mind, the ADB is committed to helping fill gaps in financing and knowledge.

So, as various countries across Asia continue their climb up the ladder of international economic power, the rest of us – industrialists and environmentalists alike – would do well to watch with keen interest.