Sportswear Investments in the Middle East

Sportswear Investments in the Middle East

The Middle Eastern sportswear market was valued at $5 billion in 2020 and is expected to grow with a compound annual growth rate (CAGR) of more than 6% from 2021 to 2025. The sportswear market gained rapid growth during the global COVID-19 pandemic in 2020 as a result of an increased focus on health and wellness. Manufacturers and retailers have expanded their business in production and categories in sportswear as a result.

Sportswear or activewear is clothing, including footwear, worn for sport or physical exercise. Sports clothing is divided into 3 main sectors which are women’s wear, men’s wear, and children’s wear. Women’s sportswear is the top sector in terms of growth, and it is projected to continue to grow up to 7% by 2025. The sportswear market is projected to grow to over $17 billion by 2028. In this article, J&A will analyze the capital market activity conducted within the sportswear market in the Middle East between 2011 and 2022.

 

Overview of the Middle East Sportswear Market

Key Segments of the Industry

  • Sportswear in the Middle East maintained a market size of $5 billion in 2020 with more than 6% CAGR; it is projected to reach more than $17 billion by 2028.
  • Puma led the overall sportswear market in 2020 with market share followed by Nike and Adidas.
  • Women’s sports clothing is one of the crucial categories of sportswear that has growth potential. The sector is forecast to expand at a CAGR of 7% between 2021 and 2025.
  • The COVID-19 pandemic in 2020 affected the wealth and wellness market, which drove sportswear manufacturers to expand into new verticals and product offerings.
  • Strategic partnerships and the technology in the textile industry will grow the market.

The Middle East’s Sportswear Market by Key Categories

The sportswear market is categorized into sports clothing, sports footwear, and sports accessories. Sports clothing accounted for the largest share in 2020, followed by sports footwear and sports accessories. Sports clothing share has been increasing and it is expected to grow at a slow pace during the forecast period.

  • The Middle East’s sports clothing includes women’s wear, men’s wear, and children’s wear, with a 57% market share. Women’s wear is expected to show the highest growth rate during the forecast period. In 2020, activewear was the dominating sportswear type, followed by sports-inspired cTasual wear and technical sportswear types.
  • The Middle East’s sports footwear includes women’s footwear, men’s footwear, and children’s footwear, with a 32% market share. Women’s footwear is expected to show the highest growth rate during the forecast period, while children’s footwear showed the lowest growth rate.
  • The Middle East’s sports accessories include bags, sunglasses, hats, scarves, gloves, belts, and other accessories. Sports accessories have 11% of the market share. In 2020, sports-inspired casual wear was the dominating sports accessories type, followed by technical and active sports accessory types.
  • Global capital deployed in the sportswear sector increased by 262% between 2012 and 2022.
  • In the sector, $10.432 billion was deployed across 178 deals, with an average deal size of $586 million. Significant acquisitions in 2012, 2019, and 2020 drove the fluctuations within the amount of deployed capital.
  • The 2020 focus on health and wellness, due to the global pandemic, led to a spike in deal flow in the sector. In that year 14 deals were done in the space and over $5 billion was invested in the sector.
  • There was a notable decrease in 2021, but in the first five months of 2022 over $2 billion has been invested into the sector, a trend that J&A anticipates will continue.
  • So far in 2022, eight IPO deals were announced in the sportswear sector in the Middle East.
  • Over 80 deals occurred within the private equity sector showing the growing maturity of the market. Venture and pre-venture capital represented 45% of capital deployed in the sector (113 deals). This trend highlights the potential in the sportswear sector as new entrances into the market receive notable capital deployment.
  • There were 48 mergers and acquisitions announced within the sportswear sector. This indicates that there are large firms that are interested in mergers and acquisitions deals.

Deal Spotlight: The Giving Movement


THE COMPANY

Dominic Nowell-Barnes made the UAE his home in 2017, where he found his purpose for making a change. Seeing the fashion industry’s impact on climate changes and in some areas unethical practices he made it his mission to create a vehicle of positive change that everyone can be a part of. The Giving Movement launched in April 2020, created as a way to alter the way fashion is consumed and to shed light on conscious consumerism. The goal was to create a new model where sustainability is curated for youth, a disruptive brand that creates meaningful apparel — making an impact with every purchase.

RECENT FUNDRAISING

The Giving Movement, a sustainable sportswear company, raised $15 million of Series A venture funding in a deal led by Knuru Capital on March 13, 2022. Other undisclosed investors also participated in the round. The funds will be used to further its category growth to include children’s wear, and the recently announced baby wear lines, as it eyes expansion into new markets.

Global trends towards health and wellness will continue to drive demand for sportswear products. J&A predicts a continued increase in capital market activity within the sportswear sector in the Middle East as economies become more interconnected and companies expand into new international markets.
Sources: PitchBook Data, Data Bridge, Global Data.


Cross Border Investments: The Middle East and China

The Middle East and China

This report investigates cross-border investments made between the Middle East and China since 2020. The Middle East serves as a strategic economic hub due to the strength of the energy sector and geographic positioning. Countries like the United Arab Emirates and the Kingdom of Saudi Arabia have held strong historic ties to the West, but are experiencing increased levels of economic relations with China. With current oil and gas shortages and rapidly increasing prices, the Middle East will continue to be a valuable economic battleground.

Capital deployed by Chinese-based investors in the Middle East focused on early-stage companies, with 81% of deals in the sector occurring in venture capital transactions. This highlights the desire to invest in the future growth of the region.
Many deals in the sector are unannounced, so this data may under-represent actual deal volume and size. This report outlines the type, deal count, dollar volume, and industries of Chinese investments in Middle Eastern companies. 

Chinese Investors Capital Market Activity: Middle Eastern Companies

Since 2020, 132 cross-border deals were announced between Chinese investors and Middle Eastern-based companies, in which a total of $9.7 billion was deployed. The chart below shows the deal count and capital raised in this cross-border category.

  • Deal count within the sector remained consistently ranged between 10 and 20 deals per quarter, with a mean value of $7.35 million. Chinese investors’ mean value of deals with Middle Eastern companies has increased over time, showing an increased appetite to invest in the Middle East.
  • The graph excludes the $4.31 billion secondary investment into Saudi Aramco (pipeline business) conducted by China Merchant Capital and Silk Round Fund, as well as a syndicate of other institutional investors including BlackRock, which skews the data.
  • Capital deployment peaked in Q1 2021 with a total of $4.74 billion, including the secondary transaction into Saudi Aramco (pipeline business), and over 14 investments. In 2020, Q1, which largely occurred before the pandemic, was the next most active period.
  • Information technology was a leading sector for deal counts conducted by Chinese investors in Middle Eastern companies. Over 45% of transactions in the categories were in the information technology sector, though it received less than 13% of capital deployment.
  • The energy sector received the most significant capital deployment of over 44%, mostly due to the Saudi Aramco transaction.
  • The health care sector received significant capital, 27%, through 27% of deals conducted by Chinese investors. This shows the high level of interest that Chinese investors have in the Middle Eastern health care sector.
  • Chinese investors deployed $3.37 billion into venture capital deals in the Middle East since 2020 in over 107 transactions. Of the total deal flow, 36% went into later-stage venture capital deals while early-stage venture capital and seed investments received 34% and 11% of the deal count, respectively.
  • The secondary deals sector received the most significant capital deployment of over 45%, mostly due to the Saudi Aramco transaction, but contributed to less than 5% of the total deal count.

Investor Spotlight: MSA Capital


The Company

MSA Capital, formally known as Magic Stone Alternative Investments, was founded in 2014 and has made 127 investments. MSA Capital is headquartered in Beijing, China, and invests in global companies from seed to early growth phases.

  • MSA Capital completed 10 deals since 2020 with Middle Eastern companies.
  • MSA Capital has an industry focus on apparel and accessories, commercial services, healthcare technology, pharmaceutical and biotechnology, retail, and software.
  • The firm’s median capital invested is $15.6 million and has deployed capital into 53 companies in the last 12 months.
The expansion of capital market activity between the Middle East and China is something that firms in both regions will help drive growth in global markets. Large energy deals dominated total capital deployment by Chinese investors into Middle Eastern companies since 2020. However, over 80% of deals in the sector were in venture capital deals, demonstrating the demand to invest in the future of the region. J&A expects the capital market activity between China and the Middle East to increase over time as these emerging markets continue to develop.


Fintech Capital Market Activity in the Middle East and Southeast Asia

Fintech Capital Market Activity in the Middle East and Southeast Asia

The fintech industry in the Middle East and Southeast Asia is poised for strong growth. Innovative payment processors, financial services companies, and digital transaction management platforms are already disrupting the traditional finance sector and are gaining traction in domestic and international financial markets.

Blockchain companies and investments dominated Southeast Asian fintech capital market activity while Middle Eastern investors preferred later-stage investments within the sector. Jahani and Associates (J&A) forecast the continued expansion of Middle Eastern and Southeast Asian fintech companies and capital market activity.
J&A is an international investment bank headquartered in New York City with offices and operations across the Middle East, Southeast Asia, and Central America. J&A specialized in cross-border capital market activity between the regions in which we operate.

  • USA-based fintech companies conducted significantly more capital market activity than their Middle Eastern and Southeast Asian counterparts in 2021. The abundance of capital has accelerated the growth of USA-based fintech companies, but a burgeoning set of growth companies in these emerging markets will drive global fintech capital market activity in 2022 and beyond.
  • USA-based fintech companies conducted 2,978 deals in 2021 with a total of $178 billion and a median deal size of $60 million. Middle Eastern and Southeast Asian fintech companies conducted 244 and 411 deals respectively and raised a combined total of $21 billion in 2021.
  • USA-based investors have been more active in the fintech sector than Middle Eastern and Southeast Asian investors in 2021 in absolute terms. However, Middle Eastern and Southeast Asian investors conducted significantly higher deal counts in proportion to the number of fintech company deal counts in their domestic markets, demonstrating an appetite for investments.
  • Average check size deployed by Middle Eastern and Southeast Asian investors in fintech deals in 2021 was significantly lower than USA-based investors. Early-stage companies in the emerging markets are receiving significant deal flow showing the growth potential of these regions.
  • Community management platforms, which include several key blockchain companies, experienced the largest capital deployment in the Middle Eastern and Southeast Asian fintech markets in 2021. Grab dominated deal size with a $5 billion PIPE conducted in December 2021.
  • Payment processing services and financial services are growing sectors in both emerging markets and received approximately $5 billion and $2.6 billion respectively. Vietnam Payment Solution conducted a $250 million round in July 2021, the largest transaction in the payment processing sector.

2021 ASEAN Fintech Deals by Month

Fintech companies headquartered in Southeast Asia conducted significant capital market activity in Q4 of 2021. The sector has produced consistent deal flow despite strict economic lockdowns and travel restrictions. Blockchain transaction dominated deal count among the Southeast Asian fintech market. The growth of early-stage venture capital deals in the sector highlights the emergence of new companies in the market and the growth potential of the Southeast Asian fintech sector.

  • $17.28 billion was deployed into Southeast Asian fintech companies across 411 deals in 2021 with a median deal size of $5.3 million. December 2021 saw the largest capital deployment of over $5 billion representing approximately 29% of capital deployed over the period.
  • The largest deal in the sector was the $750 million acquisition of OVO, a developer and operator of payment and financial services platforms Grab, which was announced on October 4, 2021.
  • Cryptocurrency dominated deal count among the Southeast Asian fintech market with 351 deals, or approximately 80%, in the sector where cryptocurrency-related deals focused on seed and early-stage venture capital funding.
  • Approximately 34% of capital raised by Southeast Asian fintech companies was deployed into early-stage companies. This showcases the emergence of new companies, an increase in competition, and the growth potential of the sector.
  • Mergers and acquisitions, including the acquisition of OVO, raised 21% of capital invested into Southeast Asia despite only seven deals being conducted.
  • Sixteen Southeast Asia fintech companies raised late-stage venture capital funding, demonstrating the emergence of mature companies and a well-balanced funding ecosystem.

2021 ASEAN Deal Spotlight: Alami – Sharia Compliant Financing for SMEs

The Company

Alami is an Indonesia-based fintech platform designed to serve small to mid-sized businesses with access to sharia-compliant financing organizations. Alami’s platform provides in-depth data analytics to businesses regarding financing from various institutions allowing them to make informed and up-to-date transactions.

Recent Fundraising

  • Alami completed a Series A round of $17.5 million on August 13, 2021, at an undisclosed valuation.
  • Quona Capital and EV Growth led the round with Dubai International Financial Center and other undisclosed investors participating.
  • Alami had previously raised $24.7 million through three rounds of seed funding.

2021 Middle East Fintech Deals by Month

Fintech companies headquartered in the Middle East have conducted notable capital market activity over 2021 with peaks in April and December. The sector has produced consistent deal flow despite strict economic lockdowns and travel restrictions that have eased and resurged over the year. J&A forecasts continued growth in 2021 Q4 activity into 2022 and beyond.

  • In 2021, $4.66 billion was deployed into Middle Eastern companies across 251 deals, with a median deal size of $3.1 million.
  • November 2021 saw the largest deal count with 25, but low capital deployment of $400 million representing approximately 8% of capital deployed over the period.
  • Notable deals in the sector include the PIPE, private investment into a public company, and subsequent reverse merger of Pagaya, an online lending platform provider, on September 15, 2021.
  • Approximately 30% of capital raised by Middle Eastern fintech companies was deployed into early-stage companies.
  • Middle Eastern Fintech companies conducted notable IPOs in 2021. The largest IPO was that of the Saudi Stock Exchange (SAU: 1111), on December 8, 2021, in which over $1 billion was raised.
  • Mergers and acquisitions, as well as reverse mergers, accounted for 18% of capital market activity in the space. The acquisition of Simplex, the Israeli bitcoin payment processing company, by Nuvei, was one of the largest Middle Eastern fintech acquisitions in 2021.

2021 Middle East Deal Spotlight: Tarabut Gateway Dubai Banking Regtech

The Company

Tarabut Gateway is a Dubai-based financial technology and software development company that has created a platform to regulate the banking sector. The platform is designed to connect a regional network of banks and other fintech companies through a universal applications programming interface (API). Tarabut’s platform utilizes the API to assist in the transfer of data and to create a greater level of integration within the finance sector in the region.

Recent Fundraising

  • Tarabut Gateway completed a pre-Series A round of $12 million on November 2, 2021, at an undisclosed valuation.
  • Tiger Global Management led the round with Dubai International Financial Centre and other undisclosed investors participating.
  • Tarabut Gateway had previously raised $13 million through seed funding in February 2021, which was also led by Tiger Global Management.

2022: What to expect this year

Southeast Asia and the Middle East are two of the world’s best-performing emerging markets. Financial markets are becoming increasingly sophisticated in these regions and the disruption of the traditional financial sector is a trend that will continue and accelerate in 2022.
The cryptocurrency sector experienced a high level of deal flow in Southeast Asia in 2021. Later-stage Middle Eastern fintech companies saw significantly larger capital deployment than early-stage competitors.
Fintech companies should be mindful of the commercial and financial opportunities available in these regions and the appetite that investors in the markets possess for early-stage deals. Companies operating within these markets will continue to grow and become attractive acquisition targets for strategic acquirers looking to enter the market.
J&A forecasts the continued expansion of capital market activity within the Southeast Asian and Middle Eastern fintech markets.


E-Commerce

E-Commerce

E-commerce has experienced a surge in capital market activity driven by an increase in demand due to the COVID-19 pandemic. From 2019 to 2020, e-commerce capital transactions increased from $42 billion to $57 billion. The expansion has escalated in 2021, with capital raised already increasing by 28.6%, surpassing $73 billion by the end of Q3 and expected to increase substantially before the end of the year.

J&A has tracked the activities of the market to find e-commerce trends relevant for retailers, brands, and potential investors seeking opportunities. This report analyses historical data and explores upcoming trends in the post-pandemic e-commerce world.

Why Companies Have Opted for E-Commerce

Traditional retail required updates to meet the needs of the current globalized and tech-savvy world, especially in 2020 due to the effects of the COVID-19 pandemic. Retail trends are moving towards e-commerce in developed nations, and the effects of economic lockdowns accelerated the process. Established retailers use cross-border e-commerce as a strategy to broaden their business presence, enlarge their customer base, strengthen brand awareness, and tap into new markets.

Digital connectivity enabled marketplaces and online shopping platforms to thrive. Globally, 48% of people own a smartphone, and 60% have regular internet access. That access has empowered 80% of consumers to make purchases online. With B2B purchases also on the rise, J&A expects the revenue generated from businesses to hold a larger revenue share than B2C sales.

  • The global e-commerce market is expected to generate close to $5 trillion in 2021.
  • Pre-pandemic expectations for e-commerce sales in 2021 will be exceeded by over $147 billion.
  • In 2021, an estimated 19.5% of all sales revenue will be generated from online sales, increasing by 45.8% in just two years.
  • In 2024, 21.8% of all retail sales are forecasted to be from online sales.

E-Commerce Capital Market Activity

Capital markets transitioned in 2019 and 2020 to sustain the changes generated from the COVID-19 pandemic.

  • Private equity and venture capital-funded deals saw a decrease from 2017 through 2020.
  • In 2021, private equity and venture capital activity increased by 130% due to the sector’s increased customer engagement and thus, revenue increases per company.
  • Mergers and acquisitions transactions yielded over $8 billion more capital in 2020.
  • IPO activity increased by 390% and reached $12 billion in 2020.
  • All capital raised by every transaction type increased post-pandemic, while the overall deal count plateaued.
  • Mergers and acquisitions activity increased by almost 75% in 2021 as e-commerce platforms increased their customer base through the COVID-19 pandemic.

E-Commerce Segments

Segments that raised capital from private equity and venture capital in the e-commerce industry vary in trends. Non-essential online shopping and e-commerce platforms acquired more financing than traditional staple online sales. The low interest in food products from investors reflects this trend. J&A expects this trend to amplify the overlap between non-essentials and day-to-day products.

E-Commerce-Related Industries

  • As catalogs are often showcased in marketplaces and websites, catalog retail is the most common industry related to e-commerce.
  • Platform software includes large firms like Shopify, WooCommerce, BigCommerce, Ecwid, FastSpring, and others. Capital raised and M&A deals for online marketplaces are close to 10% of all e-commerce deals, and J&A expects this trend to hold for the upcoming years.
  • Clothing, along with application software services, comprises over 13% of the e-commerce capital market activities.

The Future of the E-Commerce Sector

The e-commerce market changed visibly throughout the COVID-19 pandemic. Most trends, such as the interest and capital deployed from investors, allowed the market to get more visibility and exposure to new deals. J&A expects e-commerce platforms and marketplaces for non-essential products will continue overshadowing the online shopping trends for consumer staples.


Middle Eastern Investors and USA Startups

Middle Eastern Investors and USA Startups

Fintech as a sector increased its cross-border capital market activity in 2021. The first 10 months of 2021 saw a 300% increase in capital deployed by Middle Eastern investors into USA startups at 2020 levels. (In this report, startups are classified as private organizations that raise capital through venture capital or growth-stage private equity rounds.) Middle Eastern investors have an appetite to invest in USA-based early-stage fintech companies. Stripe and Square may be grabbing the headlines, but smaller companies have been successful in raising early-stage funding internationally.

Capital Market Activity

Middle Eastern investors have deployed approximately $6.5 billion into early-stage fintech companies based in the USA since 2020. Within the segment, 164 announced deals have been conducted. Middle Eastern investors’ desire to diversify their portfolios away from oil and natural gases and into high-growth private companies drives the increase in market activity.

  • Deals between USA-based fintech companies and Middle Eastern investors increased significantly between 2020 and 2021. In 2020, a total of $1.45 billion was deployed across 67 deals. In the first 10 months of 2021, $5.1 billion has been deployed across 97 deals.
  • Between Q2 of 2020 and Q2 of 2021, capital deployment increased 10-fold while deal count more than doubled. In 2020, Q2 was the least active quarter of the year due to the economic effects of the global lockdowns. Deal count and capital deployment has increased steadily over the remainder of 2020 and 2021.
  • The largest deal in the sector was SpotOn’s $300 million Series E round. Mubadala Investment Company participated in the round, alongside Andreessen Horowitz and a consortium of other investors. The Series E saw SpotOn’s valuation increase from $1.875 billion to $3.15 billion, and the funds will be allocated towards acquisition financing.

Active Type of Transactions and Company Sizes

 

Active Investors and Their Latest Deals

Israeli venture capital funds lead the region with respect to deal count in the sector. Connections between the USA and Israeli capital markets remain strong with significant activity across software and technology sectors. Investors from the United Arab Emirates and other Gulf states are also increasing investments in USA-based fintech companies.

  • AltaIR Capital, a Tel Aviv–based venture capital firm with $600 million in assets under management, has conducted 14 deals with USA-based fintech companies since 2020.
  • Mubadala Investment Company, Abu Dhabi’s sovereign wealth fund, invested in eight USA-based fintech startups. The group maintains a median check size of $200 million across sectors.
  • VentureSouq is the only investor on the most active list whose most recent deal in the sector was a seed-stage investment. The Dubai-based venture capital fund has made 141 investments since its inception in 2013 and has a median check size of $4 million.
  • Later-stage venture capital deals dominated capital deployed by Middle Eastern investors into USA-based fintech companies. Later-stage venture capital accounted for 69% of capital deployment and 34% of the deal count within the sector.
  • Growth and early-stage venture capital deals saw the largest percentage of deals with 36%, while accounting for 20% of capital deployed.
  • Incubators, pre-seed, seed, and angle rounds were not a significant contributor in the sector. This highlights the need for a proven business model, established products and services, and small yet stable income streams before raising capital from international sources.
Overall, the fintech sector is progressively increasing its capital market activity. Despite the pandemic slowing down other businesses’ activities, fintech deals from the USA received over $5 billion in capital in the first three quarters of 2021 from the Middle East alone. As the need for strong technology increases in the Middle East, J&A expects deal size and deal count to increase over the upcoming years. As the early-stage companies develop and establish new technology trends, funding for acquisitions will increase for the entities with a longer presence in the international markets.

USA Investors and Middle Eastern Startups

USA Investors and Middle Eastern Startups

Middle Eastern fintech companies have experienced a boom in capital market activity since the start of 2021 and the reopening of the global economy. The fintech industry is rapidly developing and disrupting traditional banking and financial institutions. Fintech startups in the United Arab Emirates, Egypt, and Saudi Arabia have conducted significant capital market activity since the start of 2020. Notably, groups in the segment have attracted investments from USA-based venture capital sources.

This report explores the investments made by USA investors into Middle Eastern fintech startups since 2020. Only announced deals are analyzed. This report will outline the type, volume, and industry of deals conducted by USA investors into Middle Eastern companies.

  • USA investor activity in the Middle East slowed down in 2020, as it did for most other cross-border investments. After the normalization of the global capital markets, fintech startups in the Middle East capitalized on the USA investor appetite. Transactions grew steadily in 2021, leading to over 20 investments in four quarters, from Q3 of 2020 to Q3 of 2021.
  • In Q4 of 2021, the average capital invested per deal more than doubled. Due to this, the overall capital deployed increased by 1,750% in 2021 compared to 2020.

Cross-Border Fintech Venture Capital Investments: USA Investors and Middle Eastern Companies

  • Significant deal count (37%) and capital deployment (39%) by USA-based investors into Middle Eastern fintech startups occurred within seed-stage investments. This shows the development of new companies designed to serve an underserved market and the strong potential for growth in the space.
  • Incubator funding made up 39% of the total sector deal count but less than 1% of capital raised. This suggests that most deals in the incubation phase were conducted without capital being injected into the business.
  • Early-stage venture capital accounted for 22% of deal count and 69% of capital deployment. The growth and funding of Middle Eastern fintech startups will lead to a boom in the sector as traditional banking and financial institutions are disrupted.

Deal Spotlight: Tarabut Gateway

The Company

Tarabut Gateway is a financial technology and software development company that has created a platform to regulate the banking sector. The platform is designed to connect a regional network of banks and other fintech companies through a universal applications programming interface (API). Tarabut’s platform utilizes the API to assist in the transfer of data and to create a greater level of integration within the finance sector in the region.

Recent Fundraising

  • Tarabut Gateway completed a pre-Series A round of $12 million on November 2, 2021, at an undisclosed valuation.
  • Tiger Global Management led the round with Dubai International Finance Center and other undisclosed investors participating.
  • Tarabut Gateway had previously raised $13 million through seed funding in February 2021, which was also led by Tiger Global Management.
The fintech sector is rapidly developing in the Middle East, and early-stage companies will drive transformation within the banking and financial sectors. International investors should be mindful of the growth potential of the sector and the opportunities that well-funded startups can capitalize on. J&A forecasts the continued expansion of capital market activity between USA-based venture capital funds and Middle Eastern fintech startups.

Last-Mile Delivery and Third-Party Logistics

Last-Mile Delivery and Third-Party Logistics

Last-mile delivery and third-party logistics capital market activity has expanded by over 175% since 2019. The sectors, and related capital markets, have surged due to the increase in demand due to the COVID-19 pandemic. In this report J&A analyzes last-mile delivery and third-party logistics capital market activity and determines potential trends for the upcoming years.

Last-Mile Delivery

Last-mile delivery conducts the delivery of final products to end-consumers within the logistic supply chain. It most often accounts for 50% or more of the total delivery costs.

Last-mile delivery companies have experienced notable capital market activity and interest from venture capital firms. The sector experienced outsized deployment of capital from private equity firms and strategic investors in 2020. This was due to the increase in relevance for the industry during the pandemic, when most e-commerce sales carried a delivery fee directly to the end consumer.

  • Deal count increased by over 33% in the past decade, starting with three deals in 2012, and continuing with 40 deals closed so far in 2021. This number is expected to increase with additional deals announced in Q4 of 2021.
  • Private equity and venture capital invested over $900 million in 2018 and 2020 in the sector. The spike in 2020 was due to the increase of last-mile delivery usage for large companies all over the world as a result of the COVID-19 pandemic.
  • The years 2017 through 2019 saw an over 40% increase in deal count, from 15 to 35 deals in 2017 and 2019, respectively. J&A expects this to continue after 2021.

Companies with the Most Capital Raised

Omni Logistics, Jacobson Companies, and St. George Logistics raised over $1.5 billion in total between 2012 and 2021. Below is a summary of these companies, their operations, and their latest capital market activities.
  • Well-established, specialized logistics companies grew over the COVID-19 pandemic in 2020. The capital raised in 2021 grew by 174% compared to 2020.
  • Though 2020 had almost twice as many deals as in 2021 year to date, as of October the capital raised grew from $111 million to $305 million over the same period of time.
  • J&A expects capital market activity for third-party logistics companies to increase in Q4 of 2021 and in the first two quarters of 2022. After the pandemic effects recede, capital market activity might plateau and continue being active for several years thereafter.
The economic effect of COVID and lockdowns have rapidly escalated growth in the last-mile delivery and third-party logistics sector. Capital deployment into the sector more than doubled. J&A expects activities to remain as active as in the past year, and interesting developments to come as well-established companies acquire smaller entities in the same space.

Logistic Technology in Southeast Asia

Logistic Technology in Southeast Asia

Southeast Asia is one of the world’s best-performing emerging markets. The combined GDP of the region has grown from $29 billion in 1970 to $2.97 trillion in 2020, a remarkable 10,116% increase. International trade has been a driving force behind the region’s development. Several Southeast Asian countries rank among the most open to trade with the highest GDPs per capita of any nation.

Southeast Asia is strategically poised to link the manufacturing centers of the East to the consumer base in the West. This article outlines trade in Southeast Asia, the key role of technology within the sectors, and capital market activity in Southeast Asian logistic technology

Market Overview

In 2020, $2.8 trillion of international trade occurred in Southeast Asia. The region has increased the quantity of internal trade through the Association of Southeast Asian Nations (ASEAN) and strengthened external trade.

  • Southeast Asia’s largest trading partner is the Asia Pacific region, which compromises over $1 trillion in trade annually.
  • The United States and the European Union are significant partners. Over $300 billion of trade was conducted between each of these regions and Southeast Asia.
  • Internal trade between members of ASEAN (which includes Singapore, Indonesia, Malaysia, Thailand, the Philippines, Vietnam, Laos, Brunei, Myanmar, and Cambodia) accounted for $600 billion, or 22% of total international trade.

The logistics market in Southeast Asia is being driven by technological innovation. Logistics technology companies increase the speed, ease of use, and transparency of the supply chain process for customers, businesses, and logistics companies. The continued development of the region’s logistic technology will be a key factor in the market’s future growth.

Capital Market Activity in Southeast Asia – Logistic Technology

  • Capital deployed in the freight technology sector increased 17-fold between 2014 and 2021 and was largely insignificant before 2014 in Southeast Asia.
  • More than $27 billion was deployed in the sector across 302 deals, with an average deal size of $9 million. Deal count and capital deployment have increased steadily over time, and the first three quarters of 2021 have seen the most significant market activity over the period.
  • Ninja Van is a last-mile logistics technology platform that has conducted several investment rounds over the period. The most recent raise was a $578 million Series E round, in which B Capital Group, Brunei Investment Agency, Burda Principal Investments, Carmenta Management, and five other groups invested.
  • Late-stage venture capital deals represented 71% of capital deployed in the sector. This shows the abundance of growth-stage companies in the market.
  • Mergers and acquisitions represented only 5% of capital deployed since 2010 in the sector. Most acquisitions have been conducted by large logistics corporations, but the limited activity shows a lack of consolidation in the market.
  • Just 6% of capital deployment went to early-stage venture capital deals. This statistic shows that early-stage companies are present in the sector, but funding is difficult to acquire.
Southeast Asia is one of the world’s best-performing emerging markets, and trade has provided the basis for the region’s growth. Logistic technology will play a critical role in improving the efficiency and transparency of supply chains and the delivery process. Southeast Asia logistics firms will need to remain globally competitive and logistics technology will allow them to do so. J&A forecasts an increase in capital market activity in the Southeast Asia logistics technology market in 2022 and beyond.

Latin American Agtech Deals from 2010 to 2020

Latin American Agtech Deals from 2010 to 2020

The agriculture technology (agtech) industry encompasses all companies that apply technology to farming activities. Technology-assisted farming, from complex water management solutions to modern genomics, has been around since the early ages of civilization. Advancements in agtech drove the food industry, and the management systems developed for farms and crops can be applied to other industries, like resource management and big data. The agtech industry can be segmented into inputs, production, selection, processing, distribution, and marketing. The inputs segment accounts for over 80% of the capital invested in Latin American companies.

With agriculture pivoting toward relying more on technological advancements and their applications, venture capitalists and investors have increased cross-border operations with Latin American companies in agtech.

This report outlines the announced investments made in Latin American agtech companies between 2010 and 2020. The focus is placed on deal count, volume, and industry with spotlights on the most active investors, such as SP Ventures, NXTP Ventures, and The Yield Lab, as well as the deals closed by Produquimica Industria e Comercio.

Segments Overview

A Closer Look into the Agtech Value Chain

 

Inputs

Inputs is the sector’s largest and broadest segment. Companies that deal in agtech inputs work with seeds, agrochemicals, and equipment for farming and irrigation. Working with seeds includes genomics and biotechnology; agrochemicals deal with pesticides, fertilizers, and foliar feeding.

Production

Production and cultivation are arguably the most crowded agtech segments, yet they receive a small share of the total investments. Cultivation companies that include data analysis systems or incorporate machinery into their process have a better chance of securing investments, since traditional farming has not seen a notable growth rate over the last decade. Vertical farming, indoor farming, and hydroponics follow a rising trend in agricultural regions, such as Latin America, rural China, and Egypt.

Selection and Processing

If the raw material management allows for it, the selection and processing segment is usually integrated within the same firm in the value chain This segment includes the storage, manufacturing, or exportation of secondary or end products ready for the consumer. Exportation is the end goal for most producers and processing plants within Latin America, and capital invested into such companies is used for operational expenses. There are many advancements in raw food ingredients processing, yet minimal research and development expenditure occurs in Central and South American agriculture companies.

Distribution and Marketing

Logistics companies in the food and beverage business require cold storage units for most agricultural products. Latin American logistics companies deal with rot, odors, and pests. Distribution companies with an international presence partner with agrochemical companies for food preservation and transportation. Capital sources invested in 150 B2B firms, as opposed to less than 50% of B2C companies.

Marketing companies brand products for different sources. Most Latin American marketing firms promote local produce, while the international community advertises foreign, imported ingredients.

Latin American Market Overview

Agtech Deals from 2010 to 2020

  • Vale (metals and mining) acquired Vale Fertilizantes for $1.2 billion in 2011, making 2011 the year with the largest amount of capital raised for agtech companies in Latin America.
  • Drought issues prevented the closure of agriculture deals between 2010 and 2012, and besides Vale, few other firms were active in financing. The growing trend continued between 2013 and 2018 and is expected to resume in 2021.
  • 2018 was the most active year in the period with over $1.4 billion deployed across 57 deals.

Value Chain Spotlight

Agrochemicals in Inputs

Foreign capital sources actively invest in chemical production companies and research and development activities in Latin America. These investments made agrochemicals the largest segment for Latin American agtech companies in the last decade. Companies researching or implementing agrochemicals in the Latin American region do so with fertilizers, such as early-crop supplements, pesticides, and foliar feeding.

  • A total of 29 agrochemical companies in Latin America were actively involved in a private placement between 2010 and 2020. In 2015, several companies from Argentina, Brazil, and nearby countries were sanctioned for their use of chemicals in their crops. Several cancer cases in these countries were attributed to chemical exposure. This led to a notable drop in the companies actively looking for capital to acquire or produce similar chemicals.
  • Companies that could not withstand this period were forced to declare bankruptcy or sell their assets. This increased the M&A activity over the next four years, with similar companies acquiring businesses like Produquimica Industria e Comercio and Rizoflora Biotechnology due to their strategic value. During this period, eight Brazilian companies and two Argentinean agrochemical companies were purchased.
  • Venture capitalists and private equity firms invested $5 billion in agricultural chemical deals in Latin America, or over 85% of the total capital deployed for agtech deals in the region.
  • Deals with agrochemical companies in Latin America accounted for 64% of the total capital raised. In spite of the 2015 decrease in the number of deals, agrochemicals had more deals than all other verticals combined. Only 38 deals were completed for agrochemical firms, or 11% of the total deal count.

Value Chain Spotlight

Cultivation in Production

Agtech cultivation is a rather broad segment that encompasses early- to late-stage crop management, data analytics, chemical implementation, genomics, and care services. Cultivation is the foundational sector in Latin American agtech, yet it is second to agrochemicals. This is due to the number of companies in the region that do not have enough R&D expenditures to attract external private placements. Cultivation companies in the region tend to grow vertically toward logistics and distribution as opposed to technology and data. As a direct result, cultivation receives a consistent amount of capital and predictable trends in deal count for the Latin American region.

  • Cultivation deals raised 19% of the total capital for Latin American companies between 2010 and 2020. Thirty-nine cultivation companies in this region participated in 55 deals. This showcases the importance of cultivation in Latin American countries, as more than half of them were active in more than one round of investments.
  • Most investment activities halted in 2015 due to the rising health concerns of chemicals and pesticides used on crops. Companies that dealt with cultivation followed the same trend.
  • Agro Amazônia Produtos Agropecuários, a Brazilian company, was forced to sell to Sumitomo Corporation in 2015 with a 0.35 revenue multiple. Another company was marketed in 2016. After 2015, venture capital investment trends normalized until the 2020 COVID-19 pandemic, which introduced a 50% decrease in investment activities.

Agtech Deal Investment Forecasts Moving Forward

Latin American agtech startups set a new record for the decade in the first quarter of 2020.

Since the entire sector benefited from the concerns around food security due to the COVID-19 pandemic, new records are expected for this new decade. Jahani and Associates expects financial activities to grow gradually through 2021 and reach record numbers by the first quarters of 2022. Chemicals and early crop care are developing industries in Latin America. Trends show that manufacturing and chemical research and development will have the highest deal counts in the next coming years.


ASEAN Overview & Highlights

ASEAN Overview & Highlights

ASEAN: Size, Growth, and Relevance (1 of 4)

This is the first part of J&A’s ASEAN series. In it, we will investigate the ASEAN market and economy, its importance, its capital markets, its position in global trade, and finally its integration with other major players like the USA and China.

ASEAN Background

The Southeast Asian region has grown to global prominence over the last 20 years. Economies in Southeast Asia have been growing rapidly due to trade openness and their position in the global economic trade balances. The region is strategically positioned close to the emerging superpowers of China and India. Businesses should be aware of the growth potential and opportunities present in the region. The Association of Southeast Asian Nations (ASEAN), an economic and political union, has empowered the region and facilitated the conditions necessary for rapid development. The ASEAN union includes Singapore, Malaysia, the Philippines, Indonesia, Thailand, and Vietnam, Cambodia, Brunei, Laos, and Myanmar.

The Importance of Southeast Asia

Southeast Asia has demonstrated a remarkable model for economic growth and development that sets the region apart from other developing markets. The region is strategically positioned as a gateway to both China and India and boosts openness to trade and business that is no longer guaranteed in Hong Kong. J&A forecasts a continued expansion of the region’s economic and strategic importance as a link between the rising superpowers of India and China and the companies and consumers of the United States of America.

ASEAN was formed in 1967 to prevent a power vacuum caused by rapid decolonization and foster cooperation in the region. The official ASEAN declaration states that the objectives of the organization are to accelerate economic growth and social progress, and preserve cultural traditions in the region through cooperation and partnership. Regional peace, the rule of law, increased education, and cooperation in agriculture and industry are additional goals.

  • ASEAN has been successful in promoting peace in the region throughout the transition from colonialism and communism towards free-market economies.
  • Trade within the region has grown remarkably from $790 billion in 2000 to $2.8 trillion in 2019.
  • GDP growth in ASEAN has regularly exceeded the global average, resulting in a regional economic growth of 10,116% between 1970 and 2020.

 

 GDP Growth in ASEAN

  • The combined economy of ASEAN economies has grown at an average rate of 9.3% annually between 1970 and 2020.
  • In 1970 combined ASEAN gross domestic product (GDP) stood at approximately $29 billion, making the region one of the poorest in the world. In comparison, the GDP of South Africa and Brazil in 1970 were $48 billion and $42 billion respectively.
  • The member states of Indonesia, Malaysia, Singapore, and Thailand’s economies are among a handful of emerging markets whose GDP per capita has grown at a rate of at least 3.5% annually over the last 50 years.
  • Additionally Cambodia, Laos, Myanmar, and Vietnam have experienced at least 5% GDP per capita growth over the last 20 years, making the region home to eight of the top-performing emerging economies globally.

ASEAN Forecast Economic Performance in 2021

  • ASEAN markets are expected to rebound strongly in the second half of 2021 as the region and the world emerges from the economic impact of the COVID-19 pandemic.
  • Malaysia, Vietnam, and the Philippines are forecasted to experience GDP growth in excess of 6% for 2021.
  • The economies of Singapore and Indonesia are expected to expand at a rate of between 4% and 5%, which remains significant given the size of these markets.
  • Countries that rely heavily on tourism, such as Brunei and Thailand, are expected to recover more slowly than their other regional counterparts.
  • Myanmar is the regional outlier, with political turmoil resulting in negative growth forecasts.

ASEAN Countries are High Performers

  • ASEAN economies led the emerging markets in regional GDP growth between 2011 and 2019. The region was able to maintain consistent growth rates of between 4.6% and 6% over the period.
  • Economic diversification in Southeast Asia resulted in more consistent GDP growth in comparison to other regions that may be dependent on specific industries such as oil and gas, or heavily linked to the performance of neighboring developed markets.
  • In 2020, ASEAN economies contracted by 6% due to the ramifications of the COVID-19 pandemic and the region’s openness to trade. Southeast Asia is expected to recover at a significantly faster rate than regions such as sub-Saharan Africa, Latin America, and the Caribbean due to effective vaccine rollouts and growth from trade partners like the USA and China.

ASEAN Governments’ Debt-to-GDP Ratio Matches Similar Markets

  • Lower debt-to-GDP ratios give governments more margin for investment into infrastructure and public spending, lower interest payments on public debt, and better sovereign debt ratings.
  • Thailand, the Philippines, and Indonesia have maintained low debt-to-GDP ratios of under 50% despite the size of their economies and populations.
  • Singapore has the highest debt-to-GDP ratio in Southeast Asia. Singapore, however, has the most developed infrastructure in the region, and so would not require large public spending.

We hope that you enjoyed this introduction to ASEAN. We reviewed the organization’s history and economic performance, which provide the basis for the region’s rise to global prominence. The region’s economic growth has been spurred by strong capital markets and high openness to trade. Southeast Asia is a critical market to link the rising superpowers of the East with the spending power of the West. The economic and geopolitical integration of the region will enhance Southeast Asia’s global prominence and economic growth.

ASEAN: Capital Markets and Investment Banking (2 of 4)

This part of J&A’s ASEAN series focuses on the capital markets of the region, their maturity, and their activity. Capital market activity has increased steadily in the ASEAN region over the last 20 years. The number of capital market transactions has more than doubled between 2018 and 2020. Of the capital deployed by ASEAN investors, 56% occurred within mergers and acquisitions. This highlights the appetite for inorganic expansion and the intention for companies in Southeast Asia to grow geographically and into new market segments. Singapore remains the key regional market and houses the largest and most active institutional investors.

  • Capital markets are maturing in Southeast Asia. Capital deployed and deal count have been increasing steadily over time. Capital deployed by ASEAN investors in the first half of 2021 ($19.3 billion) has already exceeded total deployment in 2020 ($18.8 billion).
  • A deal count conducted between 2018 and 2020 increased by 147%, from 144 to 356 announced deals. In the first half of 2021, 244 capital market transactions were announced, with a strong capital market growth forecast as the region emerges from the COVID-19 pandemic.
  • The six largest institutional investment firms, in terms of assets under management, are based in Singapore. The sovereign wealth funds Temasek Holdings and the Government of Singapore Investment Corporation (GIC) are the two largest investors in the ASEAN region. The GIC has a total of 840 active investments and $500 billion in assets under management. Temasek Holdings has a total of $300 billion in assets under management and a total of 336 active portfolio investments.
  • Temasek Holdings has been the most active Southeast Asian investor in 2020 and 2021. The firm conducted a total of 30 investments between Q3 of 2020 and Q3 of 2021.
  • The top seven most active 2020 and 2021 investors in Southeast Asia are based in Singapore and include early-stage venture capital firms that made 25 investments in the period.

Mergers and Acquisitions Dominate Capital Markets in ASEAN

  • In 2020, 56% of total capital deployed by ASEAN investors occurred within mergers and acquisitions. Significant mergers and acquisitions activity highlights the expansion intentions of Southeast Asia firms.
  • As companies outgrow their markets and become comfortable with international expansion, investment banks will see increased opportunities in M&A advisory and acquisition financing.
  • Four sectors that illustrate this trend well are financial services, telecommunications, energy, and natural resources.

Competition is Normalizing ASEAN Equity Returns

Return on average equity of Asia-Pacific Banking has been drifting down toward the global average

  • APAC emerging markets include the 10 ASEAN countries as well as rising superpowers such as China and India.
  • APAC emerging markets have experienced outsized returns on equity investments over the period from 2010 to 2018. As these markets, and particularly China, have become more accessible to international investments, returns have trended towards global averages.
  • Returns among APAC developing nations are still higher than in APAC developed nations such as Australia, Canada, and Russia.
  • However, ASEAN returns are normalizing with parts of the world as growth slows and the region slows from capitalizing on its many competitive advantages.

Investment Banking in ASEAN

  • There are currently 91 registered investment banks operating in ASEAN. Over 80% of these institutions are headquartered outside of Southeast Asia with regional headquarters in Singapore. Morgan Stanley, Royal Bank of Canada, and Bank of America are the three most active investment banks in the region and are all headquartered in North America.
  • The expansion of international investment banks into Southeast Asia is driven by strong regional macroeconomic growth and positive investor environments.
  • The level of investment sophistication in Southeast Asia differentiates the region from other developing markets.

ASEAN Technology Companies are Globally Competitive and Their Strategic Geographic Access to the USA, China, and India Makes High-Growth Companies in the Region Prime Targets for Investors

With uncertainty surrounding the role of Hong Kong and Taiwan, Singapore has become the gateway to the East. Capital market activity in the region is dominated by institutional investors from the city-state. The strength of mergers and acquisition activity by Southeast Asia companies is a sign of the expansion ambitions of the region. International investors and companies seeking growth partners should be mindful of the continued expansion and strategic position of the ASEAN markets. J&A forecasts an increase in capital market activity as nations such as Indonesia, Malaysia, Thailand, and Vietnam develop.

We hope that you enjoyed this overview of ASEAN capital markets. In the next section of this analysis, we will review the region’s position on global trade. The region’s economic growth has been spurred by strong capital markets and high openness to trade. Southeast Asia is a critical market to link the rising superpowers of the East with the spending power of the West. The economic and geopolitical integration of the region will enhance Southeast Asia’s global prominence and economic growth.

ASEAN: Global Trade (3 of 4)

Part three of J&A’s ASEAN series focuses on the region’s trade openness and trade advantages. The Association of Southeast Asian Nations (ASEAN) has facilitated the rapid economic growth and development of the region. The increase in trade between member states and other regions internationally is a critical factor for this growth and success. Singapore acts as a regional trade hub and is ranked first in global exports per capita and third in openness to trade. J&A forecasts continued growth in trade in Southeast Asia and the continual rise of the region in global prominence.

Openness to Trade

The trade openness index is calculated through the sum of a nation’s exports and imports as a share of the total GDP as a percentage. Trade openness indicates the strong influence of trade on domestic industries.

Trade openness spurs economic growth and encourages foreign direct investment. It also promotes competitive markets and allows consumers access to a wider range of products at competitive prices.

Trade openness can negatively impact domestic businesses and industries that are not competitive with large, multinational companies. This is particularly common in sectors such as agriculture and manufacturing. Countries with high trade openness indexes rely heavily on international business cycles and may experience highly volatile economic conditions.

  • Trade within Southeast Asia has grown remarkably from $790 billion in 2000 to $2.8 trillion in 2019.
  • Five of the 10 ASEAN nations—Cambodia, Malaysia, Singapore, Thailand, and Vietnam—have a trade openness index of over 100%.
  • Intra-ASEAN trade accounted for 22.5% of total merchandising imports and exports.
  • ASEAN’s largest trading partners in 2019 were China, with 22% of imports and 14% of exports, the European Union, with 21.5% of imports and 13% of exports, and the United States, with 8% of imports and 13% of exports.

 Key Market: Singapore

  • Singapore ranks first globally on per capita exports, $52,700 annually, and fifth globally for imports per capita, $56,300 annually. The nation has a trade openness index of 317%, the third-highest globally.
  • Singapore is the regional trade hub of Southeast Asia and accounts for 27.5% of the region’s total exports.
  • The nation had a 79% manufacturing products to total exports ratio, and a 74% manufacturing products to imports ratio, showing the reliance of domestic industry on trade.
  • Top imports into Singapore include electrical equipment (21%), minerals (22%), machinery and appliances (13%), and precious metals (6%).
  • Leading exports from Singapore include electrical equipment (28%), minerals (15%), machinery and appliances (13%), and instruments and apparatus (7%).

Deregulation Has Boosted the ASEAN Economy

  • ASEAN nations have reduced internal and international tariffs and non-tariff barriers (NTB) in an effort to stimulate trade in the region.
  • Average regional tariffs have decreased from 25% in 1990 to 7% in 2010, a period in which ASEAN nations also experienced large real GDP growth.

Openness to trade and ease of business have been vital contributing elements to the growth of Southeast Asian economies such as Singapore, Malaysia, and Thailand.

The region is ideally positioned to act as a hub for trade among the emerging superpowers of India and China and developed markets such as Australia and the USA. J&A forecasts continued growth of regional and international trade in ASEAN, which will further spur the region’s economic and geopolitical rise.

We hope that you enjoyed this introduction to ASEAN. We reviewed the organization’s history and economic performance, which provides the basis for the region’s rise to global prominence. The region’s economic growth has been spurred by strong capital markets and high openness to trade. Southeast Asia is a critical market to link the rising superpowers of the East with the spending power of the West. The economic and geopolitical integration of the region will enhance Southeast Asia’s global prominence and economic growth.

ASEAN: Economic Integration with the USA, MENA, and China (4 of 4)

This is the final part of J&A’s ASEAN series, wherein we will investigate the integration of ASEAN economies into the rest of the world. ASEAN will prove a key geopolitical and economic battleground for the United States and China.

The region’s geographic positioning, openness to trade, and expeditious economic emergence have made the ASEAN a prominent economic and political force. Southeast Asia is closely integrated with the developed nations of the European Union, the USA, and Australia through trade, foreign direct investment (FDI), and business. China, however, is now the region’s closest trade partner and has increased its share in FDI to exceed that of the USA. Economic integration between ASEAN and the Middle East and North Africa (MENA) has strengthened through trade and capital market activity. J&A forecasts the continued rise to global prominence of the ASEAN as a hub for trade positioned to connect the manufacturing of the East with the spending power of the West.

  • Southeast Asia is strategically positioned to act as a link between the rising superpowers of India and China and established markets such as the USA, Canada, and Australia.
  • Intra-ASEAN trade has increased at a rate of 9.5% annually from $608 billion in 2013 to $1.15 trillion in 2020.
  • ASEAN’s biggest trading partner is China, which conducted a total trade, consisting of both imports and exports, of $777 billion with the region in 2020. The share of ASEAN exports to China has increased from 3.7% in total exports in 2005 to 13.9% in 2018. The share of Chinese imports in the region has increased from 5.4% to 20.5% of imports in the same period.
  • ASEAN conducted a total of $358 billion in trade with the US. The share of imports and exports with the US and the EU as a percentage of total trade has declined significantly between 2005 and 2018 and signals the global rise of Asian markets.
  • Trade between Southeast Asia and MENA has increased at a compound annual growth rate of 8.9% between 2013 and 2020 and now accounts for $296 billion in ASEAN total trade.

Southeast Asia is strategically positioned to act as a link between the rising superpowers of India and China and established markets such as the USA, Canada, and Australia.

  • Trade surpluses in ASEAN have been driven by nations’ rapid increase of production in agriculture and manufacturing. In addition, the region now has a globally competitive services sector.
  • The $1,432 billion of regional exports in 2018 exceeded the $1,384 billion spent on imports in the same year. Thus, a total regional trade surplus of $48 billion was achieved in 2018.
  • Large trade surpluses ensure a continual injection of capital into an economy and grant authorities the ability to increase foreign reserves or strengthen local currencies depending on policy preferences.

ASEAN Receives FDI from Diverse Nations and Growingly in China

  • Countries in Southeast Asia have historically received large amounts of FDI from developed nations such as the USA, Japan, and members of the European Union.
  • China and Hong Kong have recently displaced the USA in the region’s top five FDI contributors and jointly contributed over 13% of the region’s FDI in 2018. The geopolitical significance of China’s influence through FDI and trade, which now eclipse the influence of the USA, should not be understated.
  • Intra-ASEAN FDI has grown substantially and contributed approximately 16% of FDI in 2018. Developed nations in the region are contributing large quantities to stimulate growth in neighboring markets.

Southeast Asia is strategically positioned as a global trade and investment hub. The economies of Singapore, Indonesia, and Thailand could serve as a springboard for western companies to access the rising superpowers of India and China.

The level of Chinese influence in the region through trade and FDI will leave many in the USA weary. However, companies from North America should spot opportunities now available to them to access Chinese customers through the ASEAN markets. The increase in economic integration between the ASEAN through trade and FDI is undoubtedly a contributing factor to the region’s economic growth and one that many other developing regions have struggled to emulate. J&A forecasts the continued rise of ASEAN prominence through economic integration.

We hope that you enjoyed this introduction to ASEAN. We reviewed the organization’s history and economic performance, which provide the basis for the region’s rise to global prominence.
The region’s economic growth has been spurred by strong capital markets and high openness to trade. Southeast Asia is a critical market to link the rising superpowers of the East with the spending power of the West. The economic and geopolitical integration of the region will enhance Southeast Asia’s global prominence and economic growth.

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