Kuala Lumpur, Malaysia. Photos: Shutterstock
Which Asian city will come out on top? Top business leaders at the APCAC Summit share their consideration factors
Left to right: Steven Chan, Ralph Jensen, Gary Liu, Lennard Yong and Barrett Bingley (moderator) speaking at the APCAC summit in March
If only choosing where in Asia to do business was as easy as going on holiday…
Lennard Yong, group chief executive officer at the Tricor Group, looks at five attributes when assessing the suitability of any place for business: Transportation and infrastructure, environmental regulations, rule of law, talent supply and government support.
He says, if businesses are interested in North Asia, they will generally choose either Hong Kong or Shanghai as their hub. If they are more Southeast Asia-focused, Singapore usually comes up trumps.
This varies by sector. “For manufacturing firms, places like Vietnam and Jakarta make great offshore bases. Whereas firms in the services industry are still very much anchored in HK or Singapore. It depends where the economic focus is,” says Yong.
Yong thinks the economic transition from manufacturing to services pushes the topic of talent supply to the conversation’s forefront.
“There are many factors out of a CEO’s control, but human talent is one you can control. Whoever wins the battle for talent in the services sector will determine the eventual winners and losers of hubs,” he says.
Kuala Lumpur in particular is emerging as a hub for highly educated, multilingual and cost-effective talent in Asia, says Yong.
Findings from a Deloitte study show that nearly 30 percent of Malaysia’s total labor force of 14 million people work in the Greater Kuala Lumpur area, while more than a third of the country’s fresh graduates move to the area.
Malaysia also offers a cost-effective workforce compared to its more developed Asian competitors, with the cost of talent being on average one-third of that in Singapore or Hong Kong. According to the same study, a finance manager in KL can expect an annual salary of US$45,000, whereas the same worker could command US$95,000 in Singapore, and US$90,000 in Hong Kong.
Malaysia is ranked 22nd out of the 88 economies surveyed in Education First’s English Proficiency Test 2018, coming third in the Asia region behind Singapore and the Philippines. Most Chinese Malaysians can speak at least one Chinese dialect or language in addition to English – most commonly Mandarin or Cantonese.
One to watch: Vietnam
South China Morning Post CEO Gary Liu is seeing incremental investment in Vietnam, which he says “is becoming an interesting country from a tech standpoint.”
“It doesn’t have all the pieces in place yet but look at its growth trajectory between 2017 and 2019. There is more FDI flowing into the country, not just into its traditional manufacturing sector, but also into innovation and biotech,” he says, adding that talent in Hanoi and Ho Chi Minh are of high quality and low cost in “high-tech circles.”
“For tech players in most places, there really isn’t a high barrier to entry. You just need somewhere with an electric grid, stable internet and connectivity,” he says.
Ho Chi Minh, Vietnam
Old rivals: Japan and Korea
Paypal’s APAC head of government relations Steven Chan thinks Japan has lost its former edge over its Asian competitors from “not having moved into the 21st century.”
He says despite the country’s high-tech reputation, many businesses in Japan still use paper-based processes for procedures like KYC. Before you can open a Paypal account in Japan, for example, the company will send you a “postcard” which you need to return in person before it can verify your identity, he says.
“As a user, would you spend one week trying to open a Paypal account? It’s a missed opportunity,” he says.
Liu blames Japan’s slowness to digitize certain processes on its internalized economy and unique domestic consumer behavior. He warns against making general analyses about unfamiliar markets, as oftentimes you don’t get the full picture until you’re physically there.
“Until you are in-market, you don't know how difficult it is to disrupt ingrained consumer behavior. It’s hard to spot from a 10,000-foot view,” he says.
“What about Korea?” asks someone from the audience.
Yong says many of Korea’s challenges surround its business ecosystem and infrastructure, language and culture. When American and British companies look at potential hubs in Asia, the places they tend to consider first are Hong Kong, Singapore, Japan and South Korea. Between Japan and South Korea, he says companies will usually go with Japan.
“The Koreans are good at exporting themselves, but letting the world in, not so much,” he says.
The Wild East: China
Ralph Jansen, chief operations officer at Clover Group International, compares the Asian economies with their more developed European counterparts, in which there is “a growing middle class that has become very complacent. Everything is convenient and comfortable – a situation people don’t want to disrupt. Whereas in a growing economy people are hungry. They want to grow and evolve. They have nothing to lose.”
He thinks the biggest indicator of success is when a company or city “reaches that point of disregarding the past 10 to 15 years of what they learned from other cities and starts making their own way.”
China, for example, is working hard to end its over-reliance on US technology. Jansen sees the potential of China’s Greater Bay Area for businesses like his in the apparel manufacturing industry in which the biggest challenge is how to “bring fabrics closer to needlepoint.”
He praises manufacturing hubs like Shenzhen, where you can have full control over and access to all necessary components at each stage of the supply chain. “Labor is not the answer anymore, but how you streamline your processes,” he says.
Liu says of Shenzhen’s supply chain capabilities: “There is something fascinating about there being nowhere else in the world where you can decide on the design of a new chip-set in the morning, and next day have a prototype ready, then be ready to manufacture and distribute to other parts of the world in a matter of days. Not even Silicon Valley can do that,” he says.
Yong adds that investing in China can at times require a leap of faith, especially when, as a foreigner, you aren’t given complete visibility of the situation on the ground before you commit to a decision.
He admits this makes things more complicated, especially from a Western lens, as “you need to be able to articulate to your boss why the company should invest in somewhere like China’s Greater Bay Area.”
To companies in this scenario, Yong’s advice is to “Take a lesson from the historical rulebook. “If it comes from the State Council you can believe it,” he says.
With or without the full picture, the opportunity to get involved in China’s Greater Bay Area initiative is not one Tricor wants to miss out on.
“As the Chinese say, ‘Build a bridge one stone at a time. It will emerge over the years, and you can wait, but by then you might have missed the boat.’ For our company, we’re going in, lock stock and barrel,” he says.