HIDE
LEARN MORE
pharmaceuticals in PGIM’s ‘Emerging Markets at the Crossroads’ report.
about the emerging-market trends driving growth in healthcare and
LEARN MORE
growth in PGIM’s ‘Emerging Markets at the Crossroads’ report.
about how Southeast Asia’s emerging middle class is driving
visit site
read more from pgim
Investors will need to take a different approach to emerging markets than in the past. Read PGIM’s ‘Emerging Markets
at the Crossroads’ report to find out how investors can harness these new engines of growth.
HIDE
structure of
thai automotive
industry
Source: Thai Autoparts Manufacturers Association, 2014
structure of thai automotive industry
EXPAND
50%
THAILAND
28%
INDONESIA
14%
MALAYSIA
5%
VIETNAM
3%
PHILIPPINES
Thailand Leads Auto Production
Note: 12 months through July 2016
Source: ASEAN Automotive Federation
“
ASEAN manager | LMC Automotive
We expect to see growth in Oceania, since Toyota will stop production in Australia at the end of this year and import
from Thailand.”
2
1
“We expect to see growth in Oceania, since Toyota will
stop production in Australia at the end of this year and
import from Thailand,” says Titikorn Lertsirirungsan,
ASEAN Manager at market intelligence company
LMC Automotive.
Rapid urbanization across the region will continue to
propel auto demand, and with Asia-Pacific forecast to
be home to three-quarters of the global middle class by 2030—compared with only 17 percent in Europe —rising incomes will mean ever-increasing consumer power
and ever-declining dependence on developed markets.
The U.S. and Europe already account for less
than one-third of vehicle imports into Thailand.
Thailand is also moving beyond its role as an assembly
center. Fresh government investment incentives are
persuading carmakers to invest about $590 million into developing hybrids and electric vehicles in the country
over the next two years, heralding a new wave of
opportunity for the industry.
But the landscape is changing. In 2015, other countries within the Association of Southeast Asian Nations (ASEAN) absorbed about a quarter of Thai vehicle exports, at a time when import taxes in the region were as high as 50 percent. Duties are being phased out, and in 2018 car import taxes will be cut to zero as part of the ASEAN Economic Community agreement. In Vietnam, duty reductions already prompted a 65 percent rise in vehicle imports from Thailand in 2016, and the revival in economic growth also saw auto sales jump last year in the Philippines and Indonesia.
Even within emerging Asia-Pacific markets, manufacturers are responding nimbly to opportunities. Mitsubishi opened a new plant in Indonesia in 2017, where it began assembling the popular Pajero Sport vehicle and other models that were once imported from Thailand. The Japanese automaker also opened a plant in the Philippines, a booming market where vehicle sales jumped 25 percent last year. The exports Thailand loses to those countries should be counterbalanced by shipments to Australia and New Zealand.
Foreign automakers from Mercedes-Benz
to Toyota, Triumph and Kawasaki have been lured
to Thailand for decades by tax and tariff incentives
and a relatively high localization rate. The policies
have worked, and now Thailand produces half
of all vehicles made in Southeast Asia. Through
its workforce, the auto industry lifts local
incomes and domestic consumer demand.
In the year through April 2017, almost 3.8
million four-wheeled vehicles and motorcycles
rolled off Thai production lines, representing
15.5 percent of the country’s total export value.
Titikorn Lertsirirungsan,
LEARN MORE
growth in PGIM’s ‘Emerging Markets at the Crossroads’ report.
about how Southeast Asia’s emerging middle class is driving
6
visit site
read more from pgim
Investors will need to take a different approach to emerging markets than in the past. Read PGIM’s ‘Emerging Markets
at the Crossroads’ report to find out how investors can harness these new engines of growth.
demand will surge
as Indonesia’s middle class continues
to expand.
By 2020,
about 30 million households will pass the $10,000 annual
income threshold, while real disposable income will grow
6 percent, according to Deloitte.
Source: Bloomberg Intelligence
Indonesia Points to Future of Emerging Markets
Indonesia’s growth in internet use is helping to drive
e-commerce
DIGITAL
BOOM
6
4
5
3
2
1
Sourcing: Organization for Economic Cooperation & Development Thailand’s Bank of Ayudhya Industry Report Financial Times
Free Malaysia Today World Bank Forecast Indonesian Ministry of Trade
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PFI of the United States is not affiliated with Prudential plc, which is headquartered in the United Kingdom.
The PGIM logo and the Rock design are service marks of PFI and its related entities, registered in many jurisdictions worldwide.
Indonesia’s trade with the mature ASEAN economies of Thailand, Malaysia and Singapore dipped between 2012 and 2016, likely because of slowing growth in those countries. However, there are signs of improvement, as first-quarter 2017 exports to Thailand surged 18 percent from a year ago, and exports to Malaysia climbed 23 percent during the same period.
Indonesia’s electronics and electrical devices industry has driven this expanded inter-ASEAN trade, and met the needs of the country’s burgeoning middle class. While the local operations of international brands, like Japan’s Sharp and Panasonic, and South Korea’s LG and Samsung, are the lynchpins of the domestic and export markets, local companies Polytron and PT Masipon are growing in stature, providing electronics and household appliances for aspirational Indonesians.
International manufacturers with factories on the Indonesian island of Java will look to increase exports with the expansion of the port of Tanjung Priok near the capital, Jakarta, while President Joko Widodo’s plan to develop 24 seaports, 15 airports and thousands of kilometers of new railways across the sprawling archipelago will extend the reach of consumer companies to the country’s far-flung islands.
5
Indonesia’s young and growing population, improving road and port infrastructure, and attractiveness for
foreign investment position it as a manufacturing hub for electronics exports across Southeast Asia.
With the world’s fourth-largest population, Indonesia’s economy has surged in the 21st century. Growth peaked
at a record 7.2 percent in the fourth quarter of 2004, and is forecast to expand 5.2 percent in 2017. Until recently, Indonesia depended mainly on domestic consumption for growth, but now it's adopting a new economic role as a finished-goods provider to its neighbors in the Association of Southeast Asian Nations.
The value of Indonesia’s non-oil and gas exports to the Philippines, ASEAN’s third-largest economy, rose
by 7 percent from 2012 to 2016, according to Statistics Indonesia. Trade with Vietnam, the region’s
sixth-largest economy, increased by the same percentage during that period. Within ASEAN, the Philippines
is expected to grow trade by 7 percent in 2018, and Vietnam by 6.4 percent, according to the ASEAN
Macroeconomic Research Office.
After decades of growth, Indonesia is adopting a new economic role alongside its Southeast Asian neighbors
In a relatively short time, India has become the world’s pharmacy. From $5 billion in 2005, annual revenue from the country’s drug-making industry is forecast by the India Brand Equity Foundation to reach $55 billion by 2020.
Exporting to more than 200 countries, India is the world’s third-largest pharmaceuticals producer by volume.
Relaxed foreign investment policies and tougher production standards, combined with a recent acquisition spree by
major Indian manufacturers like Sun Pharmaceuticals, Dr. Reddy’s, Lupin and Cipla, are furthering the government’s “Pharma Vision 2020” goal to make India a global leader in end-to-end drug manufacturing.
The country’s dominant position in lower-cost generics is well-established, but the biggest growth in that sector is likely
to come from sales in other emerging nations, which, according to a PriceWaterhouseCoopers report, represented a
third of the global market in 2016 and will “play a vital role in sustainable growth” in the future. The same survey
projected Southeast Asia will be the world’s “most relevant” pharmaceuticals market in 2018, and a major growth
market for Indian drugs.
view
the world’s
pharmacy
domestic healthcare provider
view
RISING Research costs at the largest firms
domestic healthcare provider
view
RISING Research costs at the largest firms
view
While the focus is largely on India’s status as an exporter, the country has the world’s fastest-growing domestic healthcare market. About 70 percent of 400 companies in a UBM India survey said they expect domestic Indian sales will be the industry’s main growth driver in the next five years as incomes increase, lifestyles change and the country’s healthcare sector becomes more “gentrified.” The domestic industry will be worth about $280 billion a year by 2020, compared with $45 billion in 2008. Thailand, Singapore and India account for 90 percent of Asia’s thriving medical tourism market. Dramatic cost gaps mean the benefits of Indian healthcare for patients from developed markets get much of the attention; a heart valve in India costs about $15,000 versus $150,000 in the U.S. But India’s expertise advantage over its regional neighbors, and the growth of budget air travel within Asia, draws many patients from emerging nations nearby. In 2015, patients from Bangladesh and Afghanistan comprised one-third of international patients coming to India for treatment. The country has been aggressively promoting the expertise of its doctors, the high standards and short waiting times at its private hospitals and the low costs. Surgeries cost an average $2,000 less than even market leader Thailand, according to insurer Pacific Prime, and these kinds of savings are expected to help Indian medical tourism revenue grow to $8 billion by 2020, from $3 billion in 2015.
the world’s
pharmacy
RISING Research costs at the largest firms
view
the world’s
pharmacy
domestic healthcare provider
RISING Research costs at the largest firms
Source: Bloomberg Intelligence
Source: Bloomberg Intelligence
view
New rules coming into effect in 2018 that enforce international quality standards and allow 100 percent foreign investment, as part of the government’s “Make in India” initiative, will drive modernization of the medical-device manufacturing
industry and position the country as a supplier of high-quality, low-cost devices to a booming domestic and Asian market.
make
in
india
The growing middle class in Asian emerging markets is demanding more health services and India holds an advantage in expertise
India Profits From Healthcare Growth in Asia
LEARN MORE
pharmaceuticals in PGIM’s ‘Emerging Markets at the Crossroads’ report.
about the emerging-market trends driving growth in healthcare and
(USD TRILLION)
(PPP $)
GDP
PER CAPITA
(BILLIONS)
POPULATION
GDP
CURRENT
Source: Bloomberg Intelligence
Economic size, Population and wealth
HIDE
4
3
China is Malaysia’s largest foreign investor; Chinese are the biggest buyers of Malaysian real estate, pouring in $2.1 billion in the past three years; and thousands of Chinese nationals have taken up the government’s invitation to settle and school their children in the country under the “Malaysia My Second Home” program.
From rubber and tin in the colonial period to oil, gas and palm oil (and still rubber) in the modern era, Malaysia has been
overdependent on resource exports,
and the DFTZ is part of the government’s effort to move the country up the value chain to become a high-income,
multi-sector economy.
EXPAND
With strengthened ties to China and Southeast Asia, Malaysia sees its future in logistics, not commodities
Malaysia’s ties with China and Southeast Asia are strengthening.
Malaysia is migrating its economy
away from commodities.
2
1
China accounts for almost 13 percent of Malaysian exports, and 20 percent of Malaysia's imports. Of the top 10 recipients of Malaysian exports in 2016, only two—the U.S. and Australia—were outside Asia, and they represented less than 14 percent. The figures reinforce Goldman Sachs’s findings this year that the economies of emerging nations will be minimally affected by any potential U.S. trade barriers erected by the Trump administration, simply because their exports no longer compete heavily with U.S. labor.
The project is emblematic of two trends.
In March 2017, the Malaysian government announced the launch of a Digital Free Trade Zone (DFTZ) near the capital, Kuala Lumpur. The aim of the project is to become the biggest logistical hub for internet and e-commerce companies doing business in Southeast Asia.
Over the years, the Malaysian government has launched successive projects with similarly grand ambitions, and mixed results. This one is different, because front and center of the DFTZ is Jack Ma, founder of Alibaba, who a few months earlier had invested $1 billion to buy Southeast Asian e-commerce platform Lazada, the company’s biggest-ever acquisition.
Alibaba’s logistics facility in the DFTZ will be its first outside China, and is part of
Ma’s Electronic World Trade Platform vision that aims to dismantle barriers to
trade for smaller companies and emerging-market countries. Projections for the future value of e-commerce in Southeast Asia by 2025 range from $88 billion to $238 billion, compared with about $5.5 billion in 2015. That kind of growth
depends on e-commerce companies overcoming the region’s considerable
logistical hurdles, and explains why Malaysia and Alibaba are placing such
large bets on the DFTZ.
Malaysia Bets
on Digital Future
In 2012, iconic Italian luxury motorcycle maker Ducati opened an assembly plant in Thailand, its first outside
Italy. The company’s workers in Bologna worried that jobs were shifting to Asia so that Ducati could make its high-end machines for export back to developed markets. By 2015, however, sales of Ducati bikes in Bangkok outstripped every other city in the world–a sign not only of the growing influence of emerging markets, but of the potential of middle-class demand.
Source: Thai Autoparts Manufacturers Association
Thailand's auto industry employs about 550,000 people and more than 2,000 wholly owned or majority Thai-owned companies
Southeast Asia’s Assembly Line
thailand
15. INDIA
7,904.13
Trading Partner
Total Trade ($m)
14. U.A. EMIRATES
8,628.70
Trading Partner
Total Trade ($m)
13. SWITZERLAND
9,207.58
Trading Partner
Total Trade ($m)
12. PHILIPPINES
9,449.28
Trading Partner
Total Trade ($m)
11. GERMANY
10,591.87
Trading Partner
Total Trade ($m)
10. South Korea
11,842.19
Trading Partner
Total Trade ($m)
10. South Korea
11,842.19
Trading Partner
Total Trade ($m)
9. HONG KONG
12,644.84
Trading Partner
Total Trade ($m)
8. VIETNAM
13,199.11
Trading Partner
Total Trade ($m)
7. SINGAPORE
13,253.47
Trading Partner
Total Trade ($m)
6. AUSTRALIA
14,756.11
Trading Partner
Total Trade ($m)
5. INDONESIA
15,025.22
Trading Partner
Total Trade ($m)
4. MALAYSIA
21,054.30
Trading Partner
Total Trade ($m)
3. UNITED STATES
41,600.40
Trading Partner
Total Trade ($m)
2. JAPAN
50,984.50
Trading Partner
Total Trade ($m)
1. CHINA
80,910.90
Trading Partner
Total Trade ($m)
SELECT A REGION
TO VIEW THAI RANKING
AND VALUE
Bloomberg World Trade Flow
The trade between these emerging markets sustains middle class growth throughout the region because increasingly affluent Thai consumers are buying products and services from Malaysia and Indonesia, creating jobs in those countries. In turn, those Malaysians and Indonesians are visiting Thailand as tourists, as well as buying goods produced there. This entire cycle exists entirely outside the developed-market-to-emerging-market model and creates exciting opportunities for investors with an intimate knowledge of these markets.
Source: Bloomberg, AUGUST 2017
OF TRADE
A Holistic View of Emerging Markets Reveals Opportunities for Informed Investors
WINDS
THE NEW
For a long time, investors have subscribed to a traditional model of emerging markets that is focused on exports to developed countries.
That model is not just inaccurate, it's preventing investors from seeing major opportunities created by trade between emerging markets.
Source: Bloomberg Intelligence
70%
60%
50%
40%
30%
20%
10%
0%
The engine behind this growth is the expansion of the middle class in emerging markets. A holistic view of emerging markets in Asia reveals the dynamic that's turning investors' ideas about emerging markets on
their head, as these new middle class consumers create investment opportunities in tourism, healthcare and pharmaceuticals, financial services, aspirational consumer durables and recreation.
“The biggest story in the world—economically and financially—remains the rise of the so-called emerging market consumer, especially in China, but also elsewhere,” Jim O'Neill, economist and commercial secretary to the U.K. Treasury, told Bloomberg. “It is easily more important than the U.S. and Europe for the future of the world.”
Growth of Asia’s
Middle Class
to Outpace
Other Regions
North america
Europe
Central & South america
asia pacific
Sub-Saharan Africa
Middle East & North Africa
2020
2030
Increasingly
Dominant
increasingly
dominant
Growth of Asia’s Middle Class
to Outpace Other Regions
2030
2020
Middle East & North Africa
Sub-Saharan Africa
asia pacific
Central & South america
Europe
North america
The engine behind this growth is the expansion of the middle class in emerging markets. A holistic view of emerging markets in Asia reveals the dynamic that's turning investors' ideas about emerging markets on their head, as these new middle class consumers create investment opportunities in tourism, healthcare and pharmaceuticals, financial services, aspirational consumer durables and recreation.
“The biggest story in the world—economically and financially—remains the rise of the so-called emerging market consumer, especially in China, but also elsewhere,” Jim O'Neill, economist and commercial secretary to the U.K. Treasury, told Bloomberg. “It is easily more important than the U.S. and Europe for the future of the world.”
0%
10%
20%
30%
40%
50%
60%
70%
Source: Bloomberg Intelligence
For a long time, investors have subscribed to a traditional model of emerging markets that is focused on exports to developed countries.
That model is not just inaccurate, it's preventing investors from seeing major opportunities created by trade between emerging markets.
THE NEW
WINDS
A Holistic View of Emerging Markets
Reveals Opportunities
for Informed Investors
OF TRADE
Source: Bloomberg, AUGUST 2017
The trade between these emerging markets sustains middle class growth throughout the region because increasingly affluent Thai consumers are buying products and services from Malaysia and Indonesia, creating jobs in those countries. In turn, those Malaysians and Indonesians are visiting Thailand as tourists, as well as buying goods produced there. This entire cycle exists entirely outside the developed-market-to-emerging-market model and creates exciting opportunities for investors with an intimate knowledge of these markets.
Bloomberg World Trade Flow
SELECT A REGION TO VIEW THAI RANKING AND VALUE
Total Trade ($m)
Trading Partner
80,910.90
1. CHINA
Total Trade ($m)
Trading Partner
80,910.90
1. CHINA
Total Trade ($m)
Trading Partner
50,984.50
2. JAPAN
Total Trade ($m)
Trading Partner
41,600.40
3. UNITED STATES
Total Trade ($m)
Trading Partner
21,054.30
4. MALAYSIA
Total Trade ($m)
Trading Partner
15,025.22
5. INDONESIA
Total Trade ($m)
Trading Partner
14,756.11
6. AUSTRALIA
Total Trade ($m)
Trading Partner
13,253.47
7. SINGAPORE
Total Trade ($m)
Trading Partner
13,199.11
8. VIETNAM
Total Trade ($m)
Trading Partner
12,644.84
9. HONG KONG
Total Trade ($m)
Trading Partner
11,842.19
10. South Korea
Total Trade ($m)
Trading Partner
10,591.87
11. GERMANY
Total Trade ($m)
Trading Partner
9,449.28
12. PHILIPPINES
Total Trade ($m)
Trading Partner
9,207.58
13. SWITZERLAND
Total Trade ($m)
Trading Partner
8,628.70
14. U.A. EMIRATES
Total Trade ($m)
Trading Partner
7,904.13
15. INDIA
thailand
Southeast Asia’s Assembly Line
Thailand’s auto industry employs about 550,000 people and more than 2,000 wholly owned or majority Thai-owned companies
Source: Thai Autoparts Manufacturers Association
In 2012, iconic Italian luxury motorcycle maker Ducati opened an assembly plant in Thailand, its first outside Italy. The company’s workers in Bologna worried that jobs were shifting to Asia so that Ducati could make its high-end machines for export back to developed markets. By 2015, however, sales of Ducati bikes in Bangkok outstripped every other city in the world–a sign not only of the growing influence of emerging markets, but of the potential of middle-class demand.
From rubber and tin in the colonial period to oil, gas and palm oil (and still rubber) in the modern era, Malaysia has been
overdependent on resource exports,
and the DFTZ is part of the government’s effort to move the country up the value chain to become a high-income,
multi-sector economy.
China is Malaysia’s largest foreign investor; Chinese are the biggest buyers of Malaysian real estate, pouring in $2.1 billion in the past three years; and thousands of Chinese nationals have taken up the government’s invitation to settle and school their children in the country under the “Malaysia My Second Home” program.
3
4
HIDE
about how Southeast Asia’s
emerging middle class is driving growth in PGIM’s ‘Emerging Markets at the Crossroads’ report.
LEARN MORE
Titikorn Lertsirirungsan,
Foreign automakers from Mercedes-Benz to Toyota, Triumph and Kawasaki have been lured to Thailand for decades by tax and tariff incentives and a relatively high localization rate. The policies have worked, and now Thailand produces half of all vehicles made in Southeast Asia. Through its workforce, the auto industry lifts local incomes and domestic consumer demand. In the year through April 2017, almost 3.8 million four-wheeled vehicles and motorcycle rolled off Thai production lines, representing 15.5 percent of the country’s total export value.
But the landscape is changing. In 2015, other countries within the Association of Southeast Asian Nations (ASEAN) absorbed about a quarter of Thai vehicle exports, at a time when import taxes in the region were as high as 50 percent. Duties are being phased out, and in 2018 car import taxes will be cut to zero as part of the ASEAN Economic Community agreement. In Vietnam, duty reductions already prompted a 65 percent rise in vehicle imports from Thailand in 2016, and the revival in economic growth also saw auto sales jump last year in the Philippines and Indonesia.
Even within emerging Asia-Pacific markets, manufacturers are responding nimbly to opportunities. Mitsubishi opened a new plant in Indonesia in 2017, where it began assembling the popular Pajero Sport vehicle and other models that were once imported from Thailand. The Japanese automaker also opened a plant in the Philippines, a booming market where vehicle sales jumped 25 percent last year. The exports Thailand loses to those countries should be counterbalanced by shipments to Australia and New Zealand.
“We expect to see growth in Oceania, since Toyota will stop production in Australia at the end of this year and import from Thailand,” says Titikorn Lertsirirungsan, ASEAN Manager at market intelligence company LMC Automotive.
Rapid urbanization across the region will continue to propel auto demand, and with Asia-Pacific forecast to be home to three-quarters of the global middle class by 2030—compared with only 17 percent in Europe —rising incomes will mean ever-increasing consumer power and ever-declining dependence on developed markets.
The U.S. and Europe already account for less
than one-third of vehicle imports into Thailand.
Thailand is also moving beyond its role as an assembly center. Fresh government investment incentives are persuading carmakers to invest about $590 million into developing hybrids and electric vehicles in the country over the next two years, heralding a new wave of opportunity for the industry.
1
2
We expect to see growth in Oceania, since Toyota will stop production in Australia at the end of this year and import from Thailand.”
ASEAN manager | LMC Automotive
“
Note: 12 months through July 2016
Source: ASEAN Automotive Federation
Thailand Leads Auto Production
PHILIPPINES
3%
VIETNAM
5%
MALAYSIA
14%
INDONESIA
28%
THAILAND
50%
structure of
thai automotive
industry
Source: Thai Autoparts Manufacturers Association, 2014
Malaysia Bets on Digital Future
In March 2017, the Malaysian government announced the launch of a Digital Free Trade Zone (DFTZ) near the capital, Kuala Lumpur. The aim of the project is to become the biggest logistical hub for internet and e-commerce companies doing business in Southeast Asia.
Over the years, the Malaysian government
has launched successive projects with similarly grand ambitions, and mixed results. This one is different, because front and center of the DFTZ is Jack Ma, founder of Alibaba, who a few months earlier had invested $1 billion to buy Southeast Asian e-commerce platform Lazada, the company’s biggest-ever acquisition.
Alibaba’s logistics facility in the DFTZ will be its first outside China, and is part of Ma’s Electronic World Trade Platform vision that aims to dismantle barriers to trade for smaller companies and emerging-market countries. Projections for the future value of e-commerce in Southeast Asia by 2025 range from $88 billion to $238 billion, compared with about $5.5 billion in 2015. That kind of growth depends on e-commerce companies overcoming the region’s considerable
logistical hurdles, and explains why Malaysia and Alibaba are placing such
large bets on the DFTZ.
The project is emblematic of two trends.
China accounts for almost 13 percent of Malaysian exports, and 20 percent of Malaysia's imports. Of the top 10 recipients of Malaysian exports in 2016, only two—the U.S. and Australia—were outside Asia, and they represented less than 14 percent. The figures reinforce Goldman Sachs’s findings this year that the economies of emerging nations will be minimally affected by any potential U.S. trade barriers erected by the Trump administration, simply because their exports no longer compete heavily with U.S. labor.
1
2
Malaysia is migrating its economy away from commodities.
Malaysia’s ties with China and Southeast Asia are strengthening.
With strengthened ties to China and Southeast Asia, Malaysia sees its future in logistics,
not commodities
EXPAND
From rubber and tin in the colonial period to oil, gas and palm oil (and still rubber) in the modern era, Malaysia has been overdependent on resource exports,and the DFTZ is part of the government’s effort to move the country up the value chain to become a high-income, multi-sector economy.
China is Malaysia’s largest foreign investor; Chinese are the biggest buyers
of Malaysian real estate, pouring in $2.1 billion
in the past three years; and thousands of Chinese nationals have taken up the government’s
invitation to settle and school their children in
the country under the “Malaysia My Second
Home” program.
2
Malaysia’s ties with China and Southeast Asia are strengthening.
3
4
HIDE
Economic size, Population and wealth
GDP
PER CAPITA
(PPP $)
Economic size
Source: Bloomberg Intelligence
POPULATION
(BILLIONS)
population
Source: Bloomberg Intelligence
Source: Bloomberg Intelligence
GDP
CURRENT
(USD TRILLION)
wealth
Gross domestic product is the total value of everything produced by all the people and companies in the country.
Gross domestic product is the total value of everything produced by all the people and companies in the country.
Purchasing power parity (PPP) is an economic theory that states that the exchagne rate between two currencites equal the ratio of the currencies' respective purchasing power.
INDIA PROFITS FROM HEALTHCARE GROWTH IN ASIA
The growing middle class in Asian emerging markets is demanding more health services and India holds an advantage
in expertise
make in india
New rules coming into effect in 2018 that enforce international quality standards and allow 100 percent foreign investment, as part of the government’s “Make in India” initiative, will drive modernization of the medical-device manufacturing industry and position the country as a supplier of high-quality, low-cost devices to a booming domestic and Asian market.
about the emerging-market
trends driving growth in healthcare and pharmaceuticals in PGIM’s ‘Emerging Markets at the Crossroads’ report.
LEARN MORE
Source: Bloomberg Intelligence
RISING Research costs at the largest firms
the
world’s
pharmacy
domestic healthcare provider
domestic healthcare provider
While the focus is largely on India’s status as an exporter, the country has the world’s fastest-growing domestic healthcare market. About 70 percent of 400 companies in a UBM India survey said they expect domestic Indian sales will be the industry’s main growth driver in the next five years as incomes increase, lifestyles change and the country’s healthcare sector becomes more “gentrified.” The domestic industry will be worth about $280 billion
a year by 2020, compared with $45 billion in 2008. Thailand, Singapore and India account for 90 percent of Asia’s thriving medical tourism market. Dramatic cost gaps mean the benefits of Indian healthcare for patients from developed markets get much of the attention; a heart valve in India costs about $15,000 versus $150,000 in the U.S. But India’s expertise advantage over its regional neighbors, and the growth of budget air travel within Asia, draws many patients from emerging nations nearby. In 2015, patients from Bangladesh and Afghanistan comprised one-third of international patients coming to India for treatment. The country has been aggressively promoting the expertise of its doctors, the high standards and short waiting times at its private hospitals and the low costs. Surgeries cost an average $2,000 less than even market leader Thailand, according to insurer Pacific Prime, and these kinds of savings are expected to help Indian medical tourism revenue grow to $8 billion by 2020, from $3 billion in 2015.
RISING Research costs
at the largest firms
the
world’s
pharmacy
the world’s
pharmacy
In a relatively short time, India has become the world’s pharmacy. From $5 billion in 2005, annual revenue
from the country’s drug-making industry is forecast by the India Brand Equity Foundation to reach $55 billion by 2020. Exporting to more than 200 countries, India
is the world’s third-largest pharmaceuticals producer
by volume.
Relaxed foreign investment policies and tougher production standards, combined with a recent acquisition spree by major Indian manufacturers like Sun Pharmaceuticals, Dr. Reddy’s, Lupin and Cipla,
are furthering the government’s “Pharma Vision 2020” goal to make India a global leader in end-to-end drug manufacturing.
The country’s dominant position in lower-cost generics is well-established, but the biggest growth in that sector is likely to come from sales in other emerging nations, which, according to a PriceWaterhouseCoopers report, represented a third of the global market in 2016 and
will “play a vital role in sustainable growth” in the future. The same survey projected Southeast Asia will be the world’s “most relevant” pharmaceuticals market in 2018, and a major growth market for Indian drugs.
RISING Research costs
at the largest firms
domestic healthcare provider
After decades of growth, Indonesia is adopting a new economic role alongside its Southeast Asian neighbors
Indonesia’s young and growing population, improving road and port infrastructure, and attractiveness for foreign investment position it as a manufacturing hub for electronics exports across Southeast Asia.
With the world’s fourth-largest population, Indonesia’s economy has surged in the 21st century. Growth peaked at a record 7.2 percent in the fourth quarter of 2004, and is forecast to expand 5.2 percent in 2017. Until recently, Indonesia depended mainly on domestic consumption for growth, but now it's adopting a new economic role as a finished-goods provider to its neighbors in the Association of Southeast Asian Nations.
The value of Indonesia’s non-oil and gas exports to the Philippines, ASEAN’s third-largest economy, rose by 7 percent from 2012 to 2016, according to Statistics Indonesia. Trade with Vietnam, the region’s sixth-largest economy, increased by the same percentage during that period. Within ASEAN, the Philippines is expected to grow trade by 7 percent in 2018, and Vietnam by 6.4 percent, according to the ASEAN Macroeconomic Research Office.
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Indonesia’s trade with the mature ASEAN economies of Thailand, Malaysia and Singapore dipped between 2012 and 2016, likely because of slowing growth in those countries. However, there are signs of improvement, as first-quarter 2017 exports to Thailand surged 18 percent from a year ago, and exports to Malaysia climbed 23 percent during the same period.
Indonesia’s electronics and electrical devices industry has driven this expanded inter-ASEAN trade, and met the needs of the country’s burgeoning middle class. While the local operations of international brands, like Japan’s Sharp and Panasonic, and South Korea’s LG and Samsung, are the lynchpins of the domestic and export markets, local companies Polytron and PT Masipon are growing in stature, providing electronics and household appliances for aspirational Indonesians.
International manufacturers with factories on the Indonesian island of Java will look to increase exports with the expansion of the port of Tanjung Priok near the capital, Jakarta, while President Joko Widodo’s plan to develop 24 seaports, 15 airports and thousands of kilometers of new railways across the sprawling archipelago will extend the reach of consumer companies to the country’s far-flung islands.
Sourcing: Organization for Economic Cooperation & Development
Thailand’s Bank of Ayudhya Industry Report Financial Times
Free Malaysia Today World Bank Forecast Indonesian Ministry of Trade
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DIGITAL
BOOM
Indonesia’s growth in internet use is helping to drive
e-commerce
Indonesia Points to Future of Emerging Markets
Source: Bloomberg Intelligence
demand will surge as Indonesia’s middle class continues to expand.
By 2020, about 30 million households will pass the $10,000 annual income threshold, while real disposable income will
grow 6 percent, according
to Deloitte.
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Investors will need to take a different approach to emerging markets than in the past. Read PGIM’s ‘Emerging Markets
at the Crossroads’ report to find out
how investors can harness these new engines of growth.
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