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Managing Moves into Emerging Markets: the Challenge, the Preparation, the Requirements Slide 2 PRESENTERS: Sharon Leong Regional Director, Global Client Services, Asia Pac, MSI Paul Neve Regional Director, Global Client Services, Americas, MSI Elaine Phipps Regional Director, Global Client Services, EMEA, MSI Michael Ray Vice President, Emigra Worldwide, LLP. Diane Fitz-Gibbon Director, Global Client Services, MSI (Moderator) Slide 3 Emerging Market Designation What is considered an emerging market? >Nations with social or business activity in the process of rapid growth and industrialization >Currently, there are considered to be 28 emerging markets in the world, with the economies of Brazil, Russia, India, China (BRIC) considered to be the four largest Slide 4 Emerging Markets 2011 - 2012 BRAZILUAEMALAYSIAPHILIPPINES RUSSIAVIETNAMCOLOMBIAUGANDA INDIAPOLANDMOROCCOKAZAHKSTAN CHINAPERUCZECH REPUBLICNIGERIA MEXICOS. AFRICAETHIOPIACHILE SAUDI ARABIATHAILANDEGYPTIRAN TURKEYS. KOREATAIWANBANGLADESH Data source: MSCI Barra Slide 5 Key Business Drivers for Moves into Emerging Markets Emerging Market Potential: >Lower operating costs o Free trade zones o Less costly local labor o Tax incentive for foreign investors >Corporate Expansion o New market place o Growth potential >Resources human, mineral, etc. >Government Joint Ventures infrastructure, investment According to the Economist, Western multinationals expect to find 70% of their future growth in Emerging Markets - 40% of it in China and India alone! Slide 6 Challenges! > On its 2010 Ease of Doing Business Index in a possible 188 countries (1 being the easiest), the World Bank ranked o China 89 th o Brazil 129 th o India 133 rd > Local Market Competition yes, even in emerging markets! > Immediate access to crucial resources > Potential requirements for new business models to accommodate the needs of the market Slide 7 CONSIDERATIONS Slide 8 Key Destination Considerations >Political Stability & Risk >National Security >Freedom Rankings >Status of Women >Unemployment >Inflation Rate >Safety & Security >Compliant Entry >Housing & Lifestyle >Taxation >Health Advisories >Risk Management >Retaining Talent Slide 9 Key People Considerations >Assessment & Selection for assignment o Ability to overcome barriers to effective operation o Adaptability o Family accompanied/unaccompanied >Assignment Considerations o Personal safety and security o Risk management o Hardship premium o Home visits, R&R leave o Cultural Training o Language Training o Spousal/family transition counselling o Health o Networks; general support systems Hardship Premium Home Visits/R&R Leave Family Transition Counseling Slide 10 Key Immigration Considerations >Lack of Formal Process o Example: Gabon and Peru- Different each time, timeframe varies >Work is often non-standard o Example: Panama Canal Work o Example: Sierra Leone - Special Permits >Lack of Transparency in Government Process o Example: Democratic Republic of Congo -Missing passports o Example: Laos >Qualified Council not available o Example: Dominican Republic, Indonesia >Unstable Governments or Special Restrictions o Example: Eritrea -Weekly variances o Example: Columbia, China, Italy (strikes) Slide 11 REGIONAL OVERVIEW Slide 12 The Americas BrazilMexicoColombiaPeru Human Development Index (measures quality of life) 73567963 Political Risk Index8677 Gender-related Development Index (measures status of women) 52465567 Environmental Issues Deforestation; Loss of bio- diversity; Air & water pollution; Soil nutrient degradation Scarce fresh, unpolluted water; Deforestation; Air pollution; Widespread soil erosion Deforestation; Loss of bio- diversity; Air pollution; Soil nutrient degradation Deforestation; Desertification; Soil erosion; Urban air pollution; River and coastal water pollution; Overfishing Taxation Corporate: 15% Personal: progressive, up to 27.5% VAT is 18% Corporate: 28% Personal: progressive, up to 28% VAT is 15% Corporate: 34% Personal: progressive, up to 34% VAT is 16% Corporate: 30 % Personal: progressive at rates of 15%, 21% and 30% VAT is 19% Economic ConditionsStrong macro-economic framework; GNP growth: 5.5% Improvement in macro- economic policies in recent years; GNP growth 4.07%; Very strong economic fundamentals; GNP growth 2.25% Strong economic fundamentals; GNP growth 6.33%; Safety & SecurityStreet crime in major urban areas; Terrorist enclaves; arms trafficking; money laundering Narcotics trafficking and related violence; money laundering Rampant criminal activity related to narcotics trafficking, kidnapping and extortion. High murder rates; weak judicial system High crime: Trafficking and related crimes, theft, armed robbery, and express kidnappings Data provided by The World Trade Resource Slide 13 Destination Services The Americas BrazilMexicoColombiaPeru Availability of short term accommodations Limited; prices increasingModerate Moderate; limited outside of metropolitan areas Availability of acceptable permanent housing Limited; prices increasingModerate Moderate; limited outside of metropolitan areas Quality of life; lifestyle assimilation Good variety of restaurants and entertainment Moderate better in cities than rural areas Education facilities Public schools low quality; international & private schools available, but have waiting lists Good public, private, religious and international schools available Good public, private and international schools in major metropolitan areas Public schools - good. IB program available in private international schools Medical facilities Good private healthcare recommended; free healthcare via SUS Good private healthcare recommended; free healthcare via IMSS Good public healthcare facilities; private coverage recommended for expats Moderate private healthcare recommended Transportation Car and driver recommended; pubic transport moderate in cities Good public transport infrastructure; car & driver not a necessity Car & driver recommended; Poor rural road infrastructure Public transport good in cities; poor in rural areas Slide 14 The Americas BrazilColombiaMexicoPeru Slide 15 Immigration Solutions The Americas BrazilMexicoColombiaPeru Documentation Document heavy; can take 2-3 months to gather documents All documentation must be submitted in Spanish and most foreign documents must be legalized Time Frames Long government processing times Long overall processing times Long government processing times Process Many highly specific visa/ permit types; process can vary greatly from case to case Payroll location can affect process Personal appearance is required Red Flags Several restrictions on payroll and salary requirements Some job categories may require additional documentation and steps, meaning longer processing times The DIGEMIN (Immigration Department) will closely examine the Employer's ratio of foreign to local workers The INM (Immigration Department) will closely examine the Employer's ratio of foreign to local workers Slide 16 Europe, Middle East, Africa (EMEA) RussiaThe StansEgyptUganda Human Development Index (measures quality of life) 65 Afghanistan: 155 Kazakhstan: 66 Kyrgyzstan:109 Tajikistan: 112 Uzbekistan: 102 101143 Political Risk Index7 Afghanistan: 2 Kazakhstan: 6 Kyrgyzstan:5 Tajikistan: 4.5 Uzbekistan: 4 4.5 - 56 Gender-related Development Index (measures Status of Women) Not ranked Afghanistan: n/a Kazakhstan: 61 Kyrgyzstan:85 Tajikistan: 93 Uzbekistan: 86 Not ranked109 Environmental Issues Deforestation; soil erosion; air pollution; water pollution; high greenhouse gas emissions Air & water pollution; waterborne disease; overgrazing; soil degradation, erosion; contaminated food sources Loss of agricultural land; soil erosion; desertification; water pollution; waterborne disease Deforestation; overgrazing; soil erosion; draining of wetlands; extensive poaching Data provided by The World Trade Resource Slide 17 Europe, Middle East, Africa (EMEA) RussiaThe StansEgyptUganda Taxation Corporate: 24% Personal: 13% (residents), 30% (non-residents) VAT: 18% Afghanistan: little tax information Kazakhstan : corporate: 30% Personal: progressive up to 20% VAT: 15% Kyrgyzstan: corporate: 30% Labor taxes up to 27% Tajikistan: corporate : 25 % Personal : variable, approx 13 % VAT : 20% Uzbekistan: corporate: 12% Personal: progressive, from 13 to 29% VAT: 20% Corporate: 20% VAT: 10% Corporate: 30 to 35% Personal: PAYE system of 4 to 20% VAT: 17% Data provided by The World Trade Resource Slide 18 Europe, Middle East, Africa (EMEA) RussiaThe StansEgyptUganda Economic Conditions Economy hit hard by global crisis; stabilized in 2010; positive growth outlook for 2011+ Afghanistan : signs of recovery; GNP growth 8.64% Kazakhstan : recovery from sharp declines in 2008 & 2009; GNP growth: 2.4% Kyrgyzstan : unsettled; high inflation; GNP growth: 4.61% Tajikistan : stable; structural reforms; GNP growth 4% Uzbekistan : strong economic growth; GNP growth: 8% Impressive economic performance; resilient economy; high inflation Economic growth; price stability; good fiscal policy; improvement in living standards; reduction in poverty Safety & Security Crime rate high extortion, kidnapping, narcotics trafficking; money laundering; high growth rate of HIV/AIDS virus Taliban & al-Qaida terrorism threat; Islamic militant organizations; narcotics trafficking; money laundering; street crimes; theft Low rate of crime; money laundering concerns; terrorism threat high; insurgent groups Islamic Group and Islamic Jihad High rate of crime theft, armed robbery, assault; Insurgent groups; HIV/AIDS Data provided by The World Trade Resource Slide 19 Destination Services - EMEA RussiaThe StansEgyptUganda Availability of short term accommodations Yes major cities; Limited rural Yes major cities; Limited rural Good Yes major cities; Moderate rural Availability of acceptable permanent housing Yes major cities; Limited rural Moderate compounds Good Yes major cities Limited rural Quality of life; lifestyle assimilation Generally goodVariedGoodModerate Education facilities Major cities -International Schools; Rural - local schools only Limited compounds GoodKampala only Medical facilities Varying scale - cities to rural Varied Compounds Good Good Kampala; Limited rural Transportation Urban - good Rural - limited Car and Driver required Good Car and Driver required Slide 20 Europe, Middle East, Africa (EMEA) Russia and the Stans - Two ends of the scale Sub Saharan Africa Uganda Captial vs. Rural Capital Middle East/North Africa Slide 21 Immigration Solutions - EMEA EgyptRussiaKazakhstanUganda Documentation All documentation must be submitted in Arabic and must be legalized All documentation must be submitted in Russian Documents may greatly vary on a case by case basis Time Frames Should allow for long processing times Process Quota program in place (process depends on ratio of foreign to local workers) The employee must be on local payroll with a local contract and is paid in Rubles Local position must be advertised in country for a period of time Payroll location can affect the process. Red Flags Work permits are granted with the understanding that the foreign national is training a specific Egyptian national assistant to fill the same position. If renewal is necessary, it must also be justified why the training is ongoing Companies must submit a forecast of how many foreigners they wish to hire for the coming year, as well as nationalities and job descriptions Can be difficult to find compliant, qualified in- country counsel Considered a remote location; processes must be reconfirmed before moving forward on any cases; can have significant variances Slide 22 Asia Pacific ChinaIndiaVietnamMalaysia Human Development Index (measures quality of life) 8911911357 Political Risk Index784.58 Gender-related Development Index (measures Status of Women) 64988350 Environmental Issues Air pollution Forest damage Water shortage Deforestation Soil Erosion Overgrazing Deforestation Soil degradation Water pollution Air Pollution Water Pollution Deforestation Taxation Corporate: 33% Personal: up to 40% VAT: 17% Corporate:40% Personal: progressive up to 30%; VAT 12.5% Corporate: 28% Personal: up to 40%; VAT 10% Corporate: 28% Personal: up to 28% Service Tax: 10% Economic Conditions Fastest growing economy in the world; one of the worlds largest trading countries; GNP growth 11.03% One of the fastest growing economies; sound macro- economic policies; steady structural reform; GNP growth 8.78% High inflation rate; Industrial sector shown rapid growth; GNP growth 6.04% Transformed from mainly minerals and agricultural exports to manufacturing and services; GNP growth 7.2% Safety & Security Extremely safe, but robbery, mugging, and pick pocketing are becoming increasing common in the urban areas Safe, however there is narcotics trafficking activity; Terrorist violence continues to pose a direct threat Low crime rate; theft is the only major crime, with violent crime rare. Extremely safe, but petty theft is evident and caution should still be exercised at all times. Data provided by The World Trade Resource Slide 23 Destination Services Asia Pacific ChinaIndiaVietnamMalaysia Availability of short term accommodations Sufficient LimitedSufficient Availability of acceptable permanent housing Sufficient Slight ShortageSufficient Quality of life; lifestyle assimilation Good ModerateGood Education facilitiesAvailable SomeAvailable Medical facilitiesMany FewMany TransportationCar & Driver available Car & Driver Available Car & Driver Preferred Car & Driver available Slide 24 Asia Pacific ChinaIndiaVietnamMalaysia Slide 25 Immigration Solutions Asia Pacific ChinaIndiaVietnamMalaysia Documentation An employment contract between the employee and the local entity will be required Several company documents required; contract needed with local entity Police clearance process can often cause delays Documents not in English must be certified by the Malaysian government Time Frames In-country approval times are subject to inconsistent government processing Process Lack of consistent process; variance s city to city Application process is complex Much of the process may take place post arrival Red Flags Relevant experience is highly scrutinized Compliance concerns within government Extensive list of restricted nationals; additional authorizations required for these Slide 26 In Summary >Financial considerations allowances, hardship premiums, tax >Social Issues - Adaptation and expanding comfort zones can the employee/family engage and adapt? >Immigration plan early; know the constraints of the host countrys process >Business Practices unique to emerging markets >Safety and Security what are the risks? Are you prepared? >Healthcare: What medical care facilities are readily available? >Adequate housing and schooling >Appropriate time out of country >HR/business leaders due diligence and understanding Slide 27 THANK YOU! QUESTIONS?