Global companies once again eye higher growth in Asian markets. What's their mood?
That the Asian economy is the new engine of growth is now well reinforced. India, Japan, Taiwan, China are definitely reshaping the world's economy. The recent inflow of foreign investments into this part of the world is further fuelling the growth of Asia's economy. The ability of the Asian economies to bounce back after a deep financial crisis displays the confidence the countries have in the
future of the region.
As Western multinationals rediscover Asia, what's the overall mood? What are the concerns and the promise? "The future powers are here where we are standing, " says an enthusiastic Abdulnabi Alsho Ala, chairman of Bahrain-based Al Fanar Investment Co, a personal asset management company. Standing on the Asian soil, Ala could not have better displayed the excitement he has for his continent. "The
growth economy is shifting from USA and Europe to this part of the world. After 15 years of sleepiness, there is resurgence. Asia is the central of the new engine growth," says Michael J Roux, echoing Ala's views. Roux is the chairman of the Australian-based Australian-based Roux International Pty. Ltd., a private investment bank and corporate advisory firm. The company has an investment focus on
the information technology and education sectors.
While Roux agrees that there is resurgence in the Asian economy, he strongly believes that countries like China and India have to immediately to surmount their problems to sustain growth. Among key issues: infrastructure and corruption.
According to him, a combination of things has worked out for Asia. For example, China has done a remarkable work given its vast labour force, Indian economy is looking up - thanks in large part to the services sector, Japanese has seen an overall resurgence and Korean companies have invaded the electronics market in the recent past.
"I cannot see any reason for a company not to be bullish about Asia,' says Hugh Brown, director of sales, Securency PTY. "Asian economy has come back. It is a much stronger economy than it was some years ago showing all signs of sustainable growth."
The better adaption of Intellectual Property Rights (IPR) by Asian countries has propelled the growth. There has been a significant change in the investment patterns in this part of the country, Brown adds. The growth of IT industry especially in India is a tribute in part to better IPR regime in some of these countries. The greater ability to protect and exploit innovation has given the
confidence to a lot of investors in the Western countries.
GREATER CONFIDENCE
True." We have in the last five-six years been penetrating in the Asian markets. From our Hong Kong office, we provides services to the entire pan-Asian segment", says Richard A Smith, strategy consultant, intercontinental region, Eli Lilly & Company illustrating the company's interest in this part of the world. Eli Lilly and Company is one of the leading, innovation-driven corporations that
develop a portfolio of class pharmaceutical products that treat depression, schizophrenia, attention-deficit hyperactivity disorder, diabetes, osteoporosis and many other conditions. The company currently has operations in India, Japan, Malaysia, Singapore and China. "Given that most MNCs are focusing their resources in Asia, whether you talk about services or manufacturing, there is no dearth of
specialists here," Smith remarks.
"Well, if you have not seen the potential of Asia, then you are not far-sighted. The majority of human race is here. The Asian region has the largest number of middle class population. Though, in some parts the development may appear fast-and harsh, there are other parts of Asia that are steadily but growing calmly, says Adulnabi of Bahrain. The South east and Middle east Asia are all growing
economies. The pyramid might slightly tilt towards China, thanks to the onechild law, however, other economies are under development," he further adds.
| Facts speak for themselves.
Over the last few years, more than a dozen Asian companies have listed on the Nasdaq.
"There is a deep capital market in India and China. At Nasdaq, we definitely see both
the countries coming in a big way. While India is steadily doing its job, China is coming
in a big way and Taiwan is no behind," feels Charolette Crosswell, head of Nasdaq
International. Croswell agrees that there has been a Asian rediscovery and she further
asserts that if Asian countries continue to grow like this for next two years, there is
definitely much to more be discovered. |
Charollete Crosswell,
Head of Nasdaq International |
It is interesting to note that manufacturing industry has been shifted to China, while the Indian market has a significant chunk of the global services pie. Meanwhile, Singapore has emerged as one of Asia's major hub for business and investment. According to Singapore Economic Development Board (EDB), over 7,000 multinationals operate in the city-state, of which 60 per cent have set up their
regional or global headquarters there. The total number of international companies operating in Singapore is around 25,000 - with about 10,000 from the US, EU and Japan; 1,500 both from China and India; 7,500 from rest of Asia, and 1,200 from Australia and New Zealand. Besides, there are about 100, 000 small and medium enterprises operating from the small location.
EDB chairman Teo Ming Kian sums up the key (what he calls CORE) advantages as: 'Connectivity, not just through physical linkages provided by Singapore's ports, airport and IT infrastructure, but also through a number of free trade agreements. Openness, that is, polices and environment that welcome companies, talent and ideas from around the world. Reliability, as in transparency and consistency in
policies, and protection of properties -- intellectual or otherwise. And the vibrant Enterprise ecosystem which provides a fertile ground for companies of diverse types, sizes and geographic origins to interact and grow."
PENDING CONCERNS
Despite all these positive vibes, concerns remain. While the Asian economy is surging upwards, issues like corruption, bureaucracy, education and infrastructure still lurks in countries like India and China.
As Roux of Roux International rightly puts, "Even the negatives are being sold. The countries need to overcome these negatives, else you get stuck and deviate from the focus on new things that will put a country's growth in perspective." Nonetheless, Roux does not dispute that both economies will continue to grow at an average of 6-8 percent in the next few years. It is clear that even while some
of these Asian economies are doing well, there are issues that need immediate consideration.
But while some of the Asian countries may be still grappling with issues like infrastructure, centralisation, privatisation, the good news is that all these are being acknowledged by most of the governments and are being addressed as well. But there is still a lot more to be done.
For example, Crosswell of Nasdaq feels that financial disclosure transparency is a must for the growth of these countries. "This could give more confidence to investors. As capital markets grow strong, regulators' role will increasingly become critical", she adds.
Besides, it is equally important for companies to do their homework before they decide to invest in this part of the world. Like Jane S Hemstritch, managing director, Asia Pacific, Accenture, puts, "Work ethics, business conducts, everything is radically different from how the Western countries function. For example, a contract is the start of the negotiation in China, and it is the end in West."
This cultural diversity is one reason why many leaders point out that every CEO that is looking for a footing in Asia needs to personally visit the country, understand the demographics of the society well before actually putting in the moolah.
"Crisis optimism is a must. More importantly, companies depending on which area they are entering, must start relatively small with a modest investment and grow these investments over time based on their experience, commitments, and confidence, by watching the policy changes and the increased friendly environment closely," feels Brown of Securency.
"For a prosperous
survival, companies need to get the foothold inside the country that they want to
invest," asserts Percy Barnevik, former ABB chairman and currently, advisor, Sandvik
AB.
Every country has its own pros and cons. There is definitely a marked difference in how
countries operate primarily due to cultures, value systems etc. "It may be a better
idea for good MNC to invest in a country with a local partner. The fact that you have
proved your mettle in one country does not necessarily hold true in another," adds
Roux. |
Percy Barnevik,
Former Chairman, ABB |
*This article has been extracted with permission from the ASIAN MANAGEMENT REVIEW, Vol 1 Issue 1, Jan - March 2006. ASIAN MANAGEMENT REVIEW is the Journal of the Asian Association of Management Organisations which is published on quarterly basis.
