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Asia Can Unlock $5 Trillion Create 230 Million Jobs

An earlier UN report identified $12 trillion in market opportunities and the creation of up to 380 million jobs globally. Asia accounts for more than 40% of these opportunities
Of the $5 trillion in business opportunities in Asia, around $2.3 trillion could be found in China alone, $1.1 trillion in India,  and $1.1 trillion in developing and emerging countries.Of the $5 trillion in business opportunities in Asia, around $2.3 trillion could be found in China alone, $1.1 trillion in India,  and $1.1 trillion in developing and emerging countries.

Businesses in Asia could unlock at least $5 trillion in market opportunities and create 230 million jobs by 2030 by implementing a few key development goals, global business and finance leaders said.

Asia's unprecedented economic growth has helped to reduce poverty, but future growth, prosperity and stability "are all under threat from the impact of a swelling list of environmental and social burdens," according to a report released Monday by the UN's Business and Sustainable Development Commission, Reuters reported.

"There is the opportunity to shape a safer, more prosperous world," the report said.

Asia, home to two-thirds of the world's population, is extremely vulnerable to weather-related disasters, whose frequency and intensity could worsen as a result of climate change.

Meanwhile, more than 80% of the region's population lives in countries where inequality has risen over the past 20 years, according to the Asian Development Bank.

Pursuing strategies in line with the United Nations' Sustainable Development Goals would turn these threats into opportunities and provide "the chance to consolidate and sustain the region's regeneration", the report said.

The 17-point SDGs, launched last year, include targets on eliminating poverty, providing clean energy, creating better jobs and tackling economic inequality by 2030.

The report identified four key areas with the most significant opportunities—cities, energy and materials, food and agriculture, and health and well-being—and specific projects such as affordable housing, renewable energy, reducing food waste and sustainable aquaculture.

The $5 trillion value is conservative and more value could come from other sectors including information and communication technologies, education and consumer goods, it added.

Market Opportunities

The cost of realizing these opportunities in the four key areas would likely require $1.7 trillion of annual investment, the report said.

The commission said "blended financing", where public and philanthropic bodies take on high risk and more policy-sensitive investment, could fill the funding gap.

The report follows an earlier study that identified $12 trillion in market opportunities and the creation of up to 380 million jobs globally in the same time frame. Asia accounts for more than 40% of these opportunities, the latest report said.

Of the $5 trillion in business opportunities in Asia, around $2.3 trillion could be found in China alone, $1.1 trillion in India, and $1.1 trillion in developing and emerging countries, the report said. The rest are in developed countries such as Australia, New Zealand, Japan and South Korea.

US Investors Underweight on Asia

While the opportunity in Asia is substantial, investors are not yet taking full advantage. Generally, they not only under allocate to Asia but then invest in the “wrong kind of Asia”, thereby missing out on the potential of some of the region’s fastest growing sectors, marketrealist reported.

There is a mismatch between Asia’s share of world GDP (over a third) and its share of world stock market capitalization (under one-fifth). Over the long-term this may provide a substantial opportunity for investors.

Although American investors have focused on domestic markets in the past, investors seeking long-term capital appreciation need to focus on Asia as well.

But investors do not allocate even this proportion of their assets to Asia. At present, US mutual fund investors still have over three-quarters of their equity allocations in the domestic market. Most of the rest is in non-US or global portfolios. Assuming these funds have an implicit Asian exposure equal to the region’s index weight, the aggregate investor exposure to Asia is still below 10%, under half of the region’s share of the world’s market capitalization. Just 1% of equity mutual fund assets are in dedicated Asian regional funds.

However, despite the globalization of the financial system and huge opportunities, US investors remain underweight on Asia, missing long-term capital appreciation opportunities. The MSCI All Country World Index, which invests in companies in 23 developed markets and 23 emerging markets, has low exposure to Asia, excluding Japan. In fact, as of March 31, 2017, none of its top ten constituents were Asian.

 

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