webinar practical approaches to entering new markets in ... · start your discussions with the...

WEBINAR

Practical Approaches to Entering New Markets in Southeast Asia

Presenter – Hong Le Webb, Partner

2019 © Murphy & McGonigle, P.C. 2

* Corruption Perception Index (CPI) by Transparency International (first launched in 1995). 180 countries ranked by their perceived levels of public sector corruption. Scale of zero (highly corrupt) to

100 (very clean). Correlation between high scores and democracies and low scores and autocracies. (2018)

** Ranked 190 countries. A benchmark study of regulation. Looked at the regulatory environment for the starting and operation of local firms in 10 categories: (1) starting a business; (2) dealing with

construction permits; (3) getting electricity; (4) registering property; (5) getting credit; (6) protecting minority investors; (7) paying taxes; (8) trading across borders; (9) enforcing contracts; and (10)

resolving insolvency. (2019)

*** Ranked 157 countries by their economic potential in human capital, based on five health and education indicators: child survival, school enrollment, quality of learning, healthy growth and adult survival.

(October 2018)

CPI*/EASE OF DOING BUSINESS/HUMAN CAPITAL

2019 © Murphy & McGonigle, P.C.3

Country Population (World Bank) CPI Scale* CPI Ranking*Ease of Doing Business Score

(World Bank)**Human Capital Index

(World Bank)***

Vietnam 95.5 million 33/100 117 69 48

Malaysia 31.5 million 47/100 61 15 55

Philippines 106.6 million 36/100 99 124 84

Thailand 69.5 million 36/100 99 27 65

Indonesia 268 million 38/100 89 73 87

Cambodia 16.2 million 20/100 161 138 100

Laos 7 million 29/100 132 154 111

Myanmar 53.7 million 29/100 132 171 107

Singapore 5.6 million 85/100 3 2 1

China 1.4 billion 39/100 87 46 46

USA 327 million 71/100 22 8 24

GDP

CountryGDP Nominal

millions of USDGDP Nominal

per capita USDGDP (PPP)

millions of USDGDP (PPP)

per capita USD GCR*

Indonesia 1,100,911 4,123 3,743,159 14,019 #45

Thailand 516,662 7,607 1,390,484 20,474 #38

Malaysia 373,447 11,385 1,064,567 32,454 #25

Singapore 372,807 65,627 589,187 103,717 #2

Philippines 356,682 3,280 1,032,289 9,493 #56

Vietnam 260,301 2,725 769,928 8,062 #77

Myanmar 65,665 1,238 372,699 7,029 N/A

Cambodia 26,979 1,635 76,605 4,643 #112

Laos 20,153 2,931 58,329 8,485 #110


GDP and GDP per capita data (nominal vs. purchasing power parity) are according to International Monetary Fund’s April 2019 estimates.

The Global Competitiveness Report, published by the World Economic Forum assesses the three stages of economic prosperity of a nation (factor-driven, efficiency driven and innovation-driven), based on 12 pillars of competitiveness: (1) institutions; (2) appropriate infrastructure; (3) stable macroeconomic framework; (4) good health & primary education; (5) higher education & training; (6 & 7) efficient goods and labor markets; (8) developed financial markets; (9) ability to harness existing technology; (10) domestic & international market size; (11) production of new and different goods using the most sophisticated production processes; and (12) innovation. (2018-2019)

CONTEXT

➢What worked in China and other markets may not translate in any of these countries in SEAsia.

➢ China is at least a quarter century ahead of many of these countries in development of an industrialized market economy.

➢ Diversity of Region: Each of these countries has different social, cultural, religious, governmental, political and economic systems.

➢ Each country has a different history and current relationship with the U.S. and with each other.

➢ China is in expansion mode globally and asserts itself prominently in the region, and China’s presence in each country varies.


CENTRALIZED SUPPLY CHAIN – All aspects of production confined to one location

vs.

DISTRIBUTED SUPPLY CHAIN – Multiple production centers closer to end markets

vs.

HYBRID MODEL

vs.

TOTAL OUTSOURCING


VIETNAM

➢ Favors English as a second language.

➢Young workforce (more than 60% of population is under the age of 35 (PWC Report, 2017)) => young consumer population.

➢High technology human resources (computer learning starts very early and nurtured through secondary school).

➢Nascent supply chain with fragmented or limited suppliers.

➢Vietnam imports to the US are expected to reach $64.8 billion this year, up 36% from 2018. Influx from Chinese companies as well. (WSJ)

➢The main beneficiary of the trade war. As a result, facing supply chain constraints and tightening labor market due to the increase in demand.


MALAYSIA

➢Third largest economy after Indonesia and Thailand; third wealthiest country after Singapore and Brunei.

➢ Centrally located (shares land/maritime borders with Thailand, Indonesia, Singapore, Brunei, Vietnam and the Philippines); strategically located next to the Strait of Malacca.

➢Developed infrastructure, with 200 industrial parks.

➢High labor productivity.

➢ Second largest beneficiary of the trade war, with one of the largest gains in in the furniture sector, expected to grow 6.1% in 2019. (AMResearch)


PHILIPPINES

➢~7,641 islands make up the Philippines.

➢English is an official language. Over 20% of the labor force has tertiary education, comparable to Singapore.

➢Manufacturing (almost a quarter of GDP, with electronics making up about 50%) and business processing operations are the two sectors spurring the country’s economic growth.

➢Geographic disadvantage – location in “Ring of Fire” (24,900 mi long semi-circular ring inside which 90% of earthquakes on Earth occur). Volcanoes and typhoons.


THAILAND

➢Only country SEAsia that was not colonized.

➢Second largest economy after Indonesia; fourth wealthiest country after Singapore, Brunei and Malaysia.

➢Thai government released a 20-year plan to achieve developed nation status by 2037, including to turn Thailand into a regional investment, production trade and transportation hub.

➢Electronics and machinery account for a large portion of their exports, as well as food and beverage.

➢Skilled workforce. Population growth stagnation. Shifting away from labor-intensive manufacturing as a result.


INDONESIA

➢ Over 17,000 islands make up Indonesia.

➢ World’s 4th most populous nation; large workforce; median age of population is 30.2 years.

➢ Indonesia is pursuing it’s Fourth Industrial Revolution to become a manufacturing hub of ASEAN as it moves to become less dependent on export of raw commodities (60%). Focus on five sectors: food & beverage; textiles; electronics; chemicals; automotive (battery powered). Looks to inject robotics and AI into manufacturing processes.

➢ Low labor costs – average wages lower than its three competitor countries -Malaysia, Thailand and Vietnam.

➢ Geographic disadvantage – “Ring of Fire.” The Indonesian archipelago is situated in the middle of the ring. 127 active volcanoes in the country (7 in eruption phase).


CAMBODIA

➢ 34-year dictatorship under Hun Sen, who has been consolidating power with his family.

➢ Largest trading partner is China (building military base on the Gulf of Thailand and reports of airstrip being built); exerts influence in ASEAN through Cambodia’s veto power.

➢ Young workforce. Close to 50% of Cambodia’s population is younger than 24 years old. 41% of population is between 25-54 years old. (CIA World FactBook)

➢ High reliance on China. 22 special economic zones; many are Chinese owned.

➢ Enrollment in school dramatically tapers off after primary and lower secondary education.

➢ Textiles make up 80% of Cambodia’s total exports.


LAOS

➢The only landlocked country in SEAsia. Desire to be the “battery of SEAsia” through hydropower (hydroelectric dams) and land-linked with China, Thailand and Vietnam, their biggest trading partners.

➢One of the region’s fastest growing economies with annual GDP growth averaging 7.8% for the past decade. (World Bank). Still one of the poorest countries in the region.

➢Agricultural (subsistence) economy.

➢Rich in mineral resources (bauxite, coal, copper, gold, tin).

➢Lacks and educated workforce and adequate infrastructure.


MYANMAR

➢Largest mainland of the SEAsian nations, with 3600 miles of uninterrupted coastline.

➢Poorest country in SEAsia.

➢Lacks an educated workforce and adequate infrastructure.

➢Agricultural (subsistence) economy.

➢Rich in mineral resources (jade, rubies, sapphires) and potential for geothermal power production.

➢Military is large stakeholder in all major industries despite the junta’s dissolution in 2011.


SINGAPORE

➢English is an official language.

➢Business-friendly principles familiar to Westerners.

➢Financial, commercial and shipping center of SEAsia (~Hong Kong). Port of Singapore is one of world’s top port terminals.

➢Main beneficiary of the unrest in Hong Kong.


CASE STUDY


A FEW TAKE-AWAYS

➢Start your discussions with the diplomatic communities.

➢Cultivate/maintain relationships.

➢Sensitivity to the country cultural norms in business.

➢Do some of your homework. There is a wealth of public information on a country’s demographics (CIA FactBook; World Bank, Census and Economic Information Center, etc.).

➢Have your people on the ground to work with any local consultant (verifiable identity, vetted and proven results).

➢Assume in many of these countries that your activities are being monitored.


HONG LE [email protected]

Main: 202.661.7000Direct: 202.661.7014

2019 © Murphy & McGonigle, P.C.18

QUESTIONS? CONTACT ME

mailto:[email protected]

webinar practical approaches to entering new markets in ... · start your discussions with the...

Documents