The Asia Pacific Foundation of Canada's Stewart Beck sees big opportunities in Asia for small and mid-sized Canadian businesses
Ken Su is the National Operations & Deals Leader for PwC Canada’s China Business Network practice. He has in-depth knowledge of the Chinese market and had spent 12 years in PwC's Shanghai and Beijing offices. Ken founded PwC's Outbound Investment Services group which was the first dedicated team of its kind focused on advising Chinese clients on overseas investments.
Canadian entrepreneurs are ideally positioned to benefit from the expanding middle classes in Asia. Now they need to wake up to the opportunity and grasp its complexities, says Stewart Beck, President and Chief Executive Officer of the Asia Pacific Foundation of Canada (APF Canada). “We’ve had a problem trying to understand Asia, whether it’s Japan in the 1980s, or China in the 1990s and 2000s, or whether it will be India in the next decade,” Beck says. “We haven't been able to make that pivot consciously.” It’s time to develop a new mindset, he argues.
Few Canadians understand the region better. Before taking the helm at Vancouver-based APF Canada, a research organization that produces policy advice on Canada-Asia relations, Beck lived in New Delhi, where he was Canada’s High Commissioner to India. He has spent about half of his 30-year career in public service at Asian posts, serving in Taiwan and China for the Department of External Affairs and International Trade, and in Shanghai as a former Consul General.
The ex-diplomat has witnessed dramatic shifts in the structure of Canadian trade with Asia. Traditionally, Canada’s exports to the region were clustered in the country’s resource sector, and trade occurred between big public companies and Asian state-run agencies. Now, as incomes rise in emerging powerhouses like China and India, demand for resources has been eclipsed by an appetite for consumer products and services. Trading activity has shifted to regional and local businesses that must compete with each other and foreign companies in today’s dynamic Asia, which will represent 54 per cent of the world’s middle class within five years, according to the International Monetary Fund.
Canadian small and medium-sized companies will need to insert themselves into these new streams of commerce if they want to thrive, says Beck, who warns that focusing on north-south trade with the U.S. exclusively will no longer be sufficient. He believes there are several steps that Canadian entrepreneurs can take to access fast-moving Asian consumer markets.
For many, capitalizing on Asia’s rise must begin by becoming savvier about the trade zone, travelling or living there, and recognizing the societal differences that exist between and within Asian countries, Beck says. “Trying to understand [Asia] from Canada, you’ll go, ‘Wow, it’s crazy.’ But living there, it’s a bit different,” he explains.
Entrepreneurs who become better acquainted with Asia also soon discover that in the vast region, so-called niche second-tier markets might be based in cities of more than five million people. Focus on these markets within markets is required and can be richly rewarded.
For Beck, another key theme is collaboration, which Canadians are already perceived to be skilled at, he says. Partnering with a local enterprise is probably the most effective route a small to medium-sized foreign company can take into Asia, he continues. “The normal instinct is, ‘I have a product and I want to sell it to you,’ and then it becomes a function of price,” Beck says. In Asia, though, competing with locals on price is a recipe for failure.
Instead, Canadian businesses should to find ways to bring their strengths – in technical expertise or training, for example – to existing products and companies. “The question becomes: What is it that you need? How can we work together? It’s just a way of thinking more than anything else,” Beck says.
To better navigate Asian markets, Canadian companies should also collaborate with each other, he adds, even if they’re rivals at home. APF Canada urges would-be competitors to link arms and seek integration into Asia’s supply chains together. “We’re too small,” Beck notes. “We have very few big corporates that will pull a whole supplier network with them, so we need to present a bigger picture.”
Canada’s relative smallness also factors into Beck’s support of the pending Trans-Pacific Partnership (TPP) trade agreement, which will protect interests important to Canada’s new economy, he contends, including the movement of people, legal services and e-commerce. Moreover, signing such a deal ought to make Canada’s business community more confident about its prospects in Asia, he suggests.
Encouraging networking between companies with experience in the region and novices that need some hand-holding is another tactic that can make the Asian challenge appear less daunting, Beck points out. But those networks must also extend to Asian companies that want to enter Canada. Ultimately, closer person-to-person relationships can help Canadian firms to spot the drivers that will have a profound influence on trade dynamics and global markets.
In time, Beck hopes that Canadian entrepreneurs will be ahead of the curve enough to see exciting opportunities arise in Asia, like those represented by today’s digital trading platforms. The widespread adoption of Alibaba in China and Flipkart in India has reduced the cost of entering those markets, and yet few Canadian businesses are selling online so far, despite the concurrent demand for high-quality Western goods, Beck says. “Canadians never think about online,” he observes. “When we think about online, we think about buying online as opposed to selling online.”
The Asia Pacific Foundation has future generations of Canadian entrepreneurs in mind at the heart of some of its pursuits. Currently, 3 per cent of Canadians go abroad as a part of their post-secondary education, and of these, only 1 per cent head to Asia, Beck reports. Besides supporting programs for university students to study or complete an internship in Asia, APF Canada is lobbying to make Asian civilization and culture a larger part of a Canadian high-school education. “We grew up with ancient Greek and Roman civilizations in our curricula. Now let’s talk about dynasties,” says Beck, who wants tomorrow’s business leaders to analyze developments in Asia through the lens of history.
In the nearer term, APF Canada has called for special trade promotion initiatives for a subset of Canadian industries: agriculture and agricultural logistics, clean technologies and digital media. However, it will be the most innovative companies that succeed in any category, Beck stresses.
For entrepreneurial firms, making it in Asia is all about having the right new technology, strong management and plenty of patience, he says. “If you are willing to take the risk and you have enough money to withstand one to two years of agony and heartbreak, it’s a huge opportunity.”