A new Commerzbank White Paper, titled “How German Corporates Can Harness Emerging Opportunities in Asia”, explores the implications in Asia for German businesses amid a global backdrop of economic uncertainty, evolving supply dynamics and the growing sustainability agenda. The diversification of trade and investment opportunities, particularly with an ever-increasing attention on sustainability, is top of mind for businesses from Germany and the world over.
Southeast Asian Nations (ASEAN) countries in particular stand out as having become an increasingly important link in global supply chains, given business-friendly environments, robust growth in the manufacturing sector, the rapid adoption of technological advancement, and untapped potential across ESG-focused projects. The signing of a bilateral economic cooperation between Germany and Singapore by Chancellor Olaf Scholz is the latest milestone in a long history for German corporates in Asia that signals the continuation of this trend.
With more than 2,000 German companies already operating in the Singapore market and around US$8.5bn in exports from Germany to the country, Roland Boehm, Divisional Board Member and Head of Corporates International at Commerzbank, commented: “The economic cooperation between Singapore and Germany will provide an extended platform by which German corporates can use Singapore as springboard to deepen their supply chains across the ASEAN region. We expect cross border collaboration, diversification, and sustainability to remain the priority for German and international corporates operating in the region.”
The White Paper highlights several market risks and opportunities, including in Vietnam, Indonesia, and Malaysia, where growth rates are expected to outstrip global peers and inflation appears more contained than elsewhere. Commerzbank expects healthy economic growth rates in these three countries next year at 6.2%, 5.0% and 4.2% respectively, compared to a predicted contraction in the US and flat growth in the UK. Commerzbank also estimates inflation to remain relatively benign and stable at 3.8% in both Vietnam and Indonesia and 2.5% in Malaysia.
Nick Johnston, Regional Board Member Asia at Commerzbank, commented, “German businesses should feel ready to meet the opportunities and challenges in Asia, where a strategy around diversification and risk management is clearly key, while maintaining solid relationships with established and trusted trading partners. China will continue its dominance as a manufacturing behemoth, but a “China Plus One” model should be considered as it shifts its economic model to its ‘dual circulation’ strategy.”
In addition to the opportunities expected across burgeoning manufacturing hubs in the region, Commerzbank predicts the rapid growth in green and sustainability linked loans to continue. Across Asia. regulators are implementing initiatives to drive access and ESG disclosure. In the first half of 2022, Green and Sustainability-Linked Loans in Asia Pacific tallied at 65bn USD, more the double the 27bn USD figure recorded in the same period last year. Sustainability-linked loans are especially popular in Asia, as they are utilised to answer the growing demand for waste management, renewable energy, and clean transport infrastructure or research into future tools to combat climate change.
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