I wrote about the challenges of putting a price discovery process ahead of a market development step. When I look into markets like China, US or even India, market development is very much the main process because they are likely able to produce many different types of commodities and hence anyone who needs something would or could scour the market in search of that commodity or product.
Now if it is difficult to obtain the product because of limited number of producers, you would then undertake the activity of actually developing the supply chains and producing it, assuming that you are able to line up all that is required to start producing it. We are now all operating in the same market, so it would make sense for large corporations because that reflects growth, and for governments as well because it creates jobs and boost economic activities.
Basically, if the market is underdeveloped, instead of buying off the market, you will have to somehow build it yourself. And that means building out the entire value chain. Because going out to ask for a quote will likely give you ridiculous figures from traders and potentially scalpers.
Smaller economies that are unlikely to be able to build supply chains and produce within their own economies would likely have to go elsewhere to seek out the product or commodity. This means finding out where there are already markets already available, getting a sense of the cost, factoring it into their considerations, or developing a full supply chain into their own economies by themselves.
Trading economies like Singapore and Hong Kong are really strong at the price discovery portion, focusing on short term cost reductions, seeking out the most cost-competitive sources. Perhaps the mature, yet geographically disadvantaged economies like Korea and Japan in particularly is really strong at the longer term approach of developing the full supply chain into their own economies and strengthening real economic linkages across borders.
What this means is that Hong Kong and Singapore may be disadvantaged by their approach towards markets when it comes to sustainability and the transition. Part of the reason is that being trading nations, most of the genuine manufacturing base is not actually in the country (demand pushes doesn’t work so well); and for the limited activities that are to be ‘decarbonized’, the ability to do so with domestic resources is limited. When the demand side such as Europe or America starts demanding for ‘decarbonised’ products through various policy instruments or corporate targets, especially when the green fuel, green electricity markets are not sufficiently mature in Asia Pacific, some of those supply chains and relationships will shift.
Japan is able to develop these value chains and build up the ability to connect resources back to their economy mainly because of the strength of their corporates which dominates their domestic economy and also string up a lot of their local supply chains including small-medium enterprises. The large corporations can then draw the resources and potentially even raw materials back into their domestic economy to feed inputs to the other domestic players who could produce for the rest of the world.
Perhaps one day I’d conduct more research into the economic strategies and growth paths of these various Asian economies and what it means for the emerging Asia economies in Southeast Asia.