Date posted: 29/11/2017 10 min read

Economic prosperity rankings improve in Asia

Hong Kong, Singapore and Malaysia outperform some G20 nations on economics, but not on personal freedoms, a new paper by CA ANZ finds.

In Brief

  • Singapore and Hong Kong perform highly on economic measures and Malaysia scores well on education.
  • The Quest for Prosperity: Shaping the Future of Our Regions says the importance of these three Asian markets as investment destinations is growing.
  • Personal freedoms have fallen in Hong Kong and Singapore ranks low on this score, down near Zambia.

By Garry Shilson-Josling

As the importance of the Asian region grows as an investment destination, the whole world is watching as Asian economic growth powers along, led by China. Here close by in Australia, Prime Minister Malcolm Turnbull recently pointed out there’s great scope for prosperity in the Indo-Pacific region. 

The epicentre of opportunity is shifting closer to Australia within Asia, he told a meeting of the Asia Pacific Regional Conference in Perth this month. “Our treasury projects that Asia accounts for two-thirds of global economic growth by 2030.”

So Asia continues to lead the global economy, with strong growth forecast at 5.6 per cent this year and 5.5 per cent in 2018, according to the International Monetary Fund (IMF). But what does this mean for Australia? And will this Asian growth be shared equally amongst its citizens?

The message in a new report from CA ANZ, The Quest for Prosperity: Shaping The Future Of Our Regions, is that there are plenty of positives for Australia’s relationship with Asia, more similarities than differences and that real efforts are being made to clear away the barriers.

The Quest for Prosperity: Shaping The Future Of Our Regions

CA ANZ paper reveals story behind the improving prosperity rankings in Asia

The report, launched during an Asian roadshow tour hosted by CA ANZ executives in October, focuses on six key markets for CA ANZ members – Australia, New Zealand, the UK, Singapore, Hong Kong and Malaysia – with a strong emphasis on the three Asian economies. 

The importance of these three markets is increasing. Together, Hong Kong, Singapore and Malaysia accounted for annual trade in goods and services with Australia worth $56.64 billion in 2016, according to data collated by the Department Foreign Affairs and Trade. That’s one in every 12 of Australia’s export and import dollars.

The value of direct investment by Australian entities also totalled $29.64 billion in 2016 - $19.77 billion in Singapore, $5.60 billion in Malaysia and $4.27 billion in Hong Kong, Australian Bureau of Statistics figures show. 

While these three account for just five per cent of the current value of Australia’s direct overseas investments, they have attracted 22 per cent of the flow of direct investment from Australia over the past decade.

“The report shows all six regions – where we have a large number of our members -- doing well on economic indicators,” CA ANZ Policy and Thought Leader Geraldine Magarey says.

After a recent tour across the region, she identifies a thread running through her conversations. “I think the common theme is that people will agree that business - and chartered accountants - have a role in future prosperity of their country, and making sure that prosperity is shared amongst all.”  

Reports like the Quest for Prosperity and indicators like the Legatum Prosperity Index on which it is based, can help to inform businesses looking to the region for opportunity. The Index is based around nine diverse “pillars”, which measure prosperity in ways that go beyond more than bank balances and GDP. Those pillars are Business Environment, Economic Quality, Health, Safety and Security, Social Capital, Education, Natural Environment, Governance, and Personal Freedom.

The good news is that all the six markets rank highly among the 149 markets gauged by the index. Even Malaysia, ranked lowest of the six in 38th spot, is only one place short of a top quartile ranking. Importantly, all six rank among the top 23 markets on the Economic Quality pillar, and among the top 16 for the Business Environment pillar. But there are clear differences among the three Asian markets.

Hong Kong falls in personal freedom rankings

As a Chinese territory, Hong Kong is an autonomous business hub and enjoys a high standard of living. “In Hong Kong, we talked a lot about the work they’re doing in fintech and startups - they are very keen to attract those sorts of businesses,” says Margarey.  

However, Hong Kong should consider focusing on securing better personal freedoms for its citizens, says the CA ANZ and the Legatum Institute report. Freedom is necessary for prosperity and Hong Kong has logged a decline on this score over the last decade. Fewer personal freedoms may have knock-on effects, for areas such as such as economic quality and the business environment, the report finds. 

There’s also a keen focus in Hong Kong on sharing prosperity. “One of the roadshow panellists laid down the challenge for everyone in the room to make sure that prosperity is shared equally,” says Magarey. Speakers at the roadshow there aired concerns about entrepreneurs facing a lack of inclusion and called for education around sustainability to be addressed for the future. 

Hong Kong ranks a lowly 123rd out of 149 when gauged on whether working hard will result in someone getting ahead. By the same measure, Singapore ranks 88th, although Malaysia comes in at a not-so-bad 37th.

Hong Kong should also consider lifting its environmental performance, the report recommends. A plan to improve air quality is underway, but Hong Kong still ranks a lowly 98 on the Index’s Natural Environment pillar. Hong Kong faces the perennial problem of trying to address international environmental problems with national policies. “Pollution’s actually coming from other countries – it’s not a thing that they can necessarily control,” says Magarey. 

Poverty rankings

The three Asian regions do score highly on the measure of relative poverty – the proportion of the community living below the national poverty line. Malaysia (15), Singapore (24) and Hong Kong (32) are all in the top quartile by rank and all outperform at least nine of the G20 nations, including their giant neighbour, China, whose rank for relative poverty is 46.

So despite the misgivings of their populations, these countries seem to be doing a reasonable job of sharing some of the benefits of prosperity. And the report shows these economies are working to foster growth and encourage both trade and investment.

Singapore and press, religious freedom

One pillar the report highlights for Singapore is Personal Freedom, where the island nation’s rank is a worrying 97, right below Turkey, Venezuela and Zambia. 

While applauding an improving trend in political participation, the report says there are some concerns, including press freedom, which need to be protected more effectively. 

“Singapore also has governmental religious restrictions, so more can be done to remove these restrictions,” the report says. In Singapore, there’s a recognition that there is no reason to kick back and relax, says Magarey. “I think that people felt that things are going well, but they can’t be complacent.”

Malaysia – trade and education

When it comes to lowering trade barriers, Malaysia has seen the greatest gain, rising 31 places over the decade to 9th spot. In terms of anti-monopoly policy, Malaysia also scored well, moving up 12 places to 16th. 

Her recent roadshow in Malaysia confirms the appetite for cutting red tape there, especially for audit requirements, remains strong, says Magarey. “They are keen to reduce some of that red tape and help some of their smaller businesses.”  

However, its performance in non-economic terms is a different matter. “When you’re looking at, say, Malaysia, they are very much focused on the education system, making sure that they are able to overcome them and make sure that education sets them up for the future,” says Magarey.

Within the education pillar, Malaysia’s rank for youth literacy is down 79 places at 84, and technical and vocational education enrolment, while up 12 places, is still a mediocre 79. “There is a strong need for skills in science, mathematics, engineering and technology,” the report says.

With Malaysia’s rank for personal freedoms down one place at 112, the report warns the country needs strong protections for human rights and respect for the rule of law to foster increased prosperity. 

Looking ahead

It’s a mistake to look just at narrow indicators of the business or economy when assessing markets like Singapore, Hong Kong or Malaysia, warns Magarey. “I think having a broad view of prosperity, your licence to operate, those cultural differences - I think they’re all important if you’re going to succeed as a business.

“So I think if you concentrate more on the traditional business aspects, you’re probably not going to do as well as if you had a broader view.” Of course those indicators on which businesses have traditionally focused will be important, but so are other indicators, like education, for example, because companies employ local talent.

It’s also important to bear in mind cultural differences, such as attitudes towards religion and freedom of political expression that vary across the region. “To make sure to extract benefits, you need to understand the culture and how business is conducted. That’s very important.”

Despite such differences, healthy attendance at recent CA ANZ events in Asia confirms there is room for Australian businesses in the region. “A lot of the people who were at the events are working for some large Australian companies like Westpac up in Singapore,” she says.

“There are obviously a lot of opportunities - a lot businesses have embraced that and are doing well."

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