The easiest way to compare the size of economies is to look at their gross national product (GNP).
This is arrived at by adding up the income of all participants: wages and salaries, rents, interest, profits and so on.
This income is either spent on private or public consumption, or on investments, or is saved.
Consumption and investments is the demand for products and services in the economy.
Income saved is channelled back as demand, as long as the savings are given to financial institutions which in turn lend to domestic creditors.
This simplified economic model allows us to use GNP data as overall indicators of demand.
According to the World Bank, Asia Pacific's total GNP in 1995 was about US$7.
1 billion - about the same as that of the USA, and about 90% of that of the 15 economies of the European Union (see Figure 1.
1 which shows GNP levels for the Asia Pacific countries and India).
The problem with these comparisons is that the USA, and even the European Union, are fairly homogeneous markets while in Asia Pacific, the multinational firm faces 11 distinct markets with substantial geographic distances and differences in industrial sophistication, purchasing power and consumer behaviour.
Most Asian countries either have a large population, but with relatively little spending power, or a small, fairly affluent population.
Apart from Japan (which accounts for over 70% of Asia Pacific's GNP), individual economies are relatively small
The GNP of Singapore or Malaysia is probably not much larger than that of Boston or Munich, and Indonesia's economy smaller than that of New York.
These two traits do not make Asia Pacific attractive for the Western firm (except Japan, of course, but it is often seen as a closed market).
A series of small markets, each with its own structure and regulations, requires a lot of management attention, and that usually implies high overheads.
There are several reasons, however, why Western firms should not ignore the region:
GNP data must be interpreted with great care, even if they come from institutions such as the World Bank, the International Monetary Fund (IMF) or the Asian Development Bank.
The role of Asia Pacific in the world economy : The Strategic Importance of Asia Pacific article from Strategy Management Catagory The role of Asia Pacific in the world economy
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