global ENTERPRISE SURVEY REPORT 2011 asia-pacific A UNIQUE AnnuAL insight into the competitiveness of ASIA-PAcific businesses And developments in GLOBALisAtion business with confidence icaew.com/smeresearch
02 Global Enterprise Survey 2010 Asia-Pacific Report Welcome
welcome TO THE ICAEW GLOBAL ENTERPRISE SURVEY REPORT 2011 ASIA-PACIFIC The ICAEW Global Enterprise Survey 2011 provides a timely, revealing and unique picture of the opportunities and challenges that face businesses across the world: Asia-Pacific, the EU, the US, the Gulf and Africa. It draws upon the expertise of ICAEW Chartered Accountants who work at the heart of business in positions such as chief financial officers, finance directors and senior management. It looks at businesses growth ambitions as well as their views on globalisation and the regulatory environment in which they operate, enabling us to compare views in different markets across the world. The outlook for business growth in the year ahead remains similar to growth witnessed last year. However there is significant variation between countries, with businesses in China the most optimistic. The report also identifies a clear focus amongst businesses on developing new markets in other countries, perhaps influenced by greater competition in the region. We hope the findings of this Asia-Pacific report will be of relevance to policy-makers, governments and all those involved in international trade. Mark Billington Regional Director, South East Asia Welcome icaew.com/smeresearch 03
KEY FINDINGS GROWTH Almost seven in ten Asia-Pacific businesses interviewed in the Global Enterprise Survey 2011 expect turnover growth in the next 12 months similar to last year, and only surpassed by Africa (81%). Businesses surveyed in China are most likely to report any turnover growth, and are most optimistic about future turnover growth, but there are some indications that this leadership position is softening. In Malaysia, growth expectations are less buoyant for the future than they have been over the past 12 months. The trend for the proportion of firms expecting gross profits growth among the Asia-Pacific businesses in this year s survey is generally flat or declining, but Australia/ New Zealand somewhat bucks the regional trend, with an increase in the proportion expecting gross profits growth. Improving profitability is an objective for most Asia-Pacific region businesses interviewed. It is also most likely to be their key aim for the next 12 months. Increasing turnover is the second most likely key business aim in all markets. Asia-Pacific businesses are most likely to see their greatest opportunity for the next 12 months to be developing new markets and customers mainly through overseas expansion. Businesses in the Asia-Pacific region are more positive than those in most other parts of the world about their local regulatory and tax environment. This is particularly true for Hong Kong and Singapore. Over the next 12 months, competition looks set to be the main challenge across the region. Most notably this is the view in China, no doubt influenced by those elsewhere looking to export to China. However, businesses in the region are more likely than those in other parts of the world to expect labour market issues particularly the availability of management skills to be a greater challenge to business performance over the next 12 months. In Malaysia, firms are more likely than those in other Asia-Pacific markets to foresee more issues with bank charges. globalisation Businesses in the Asia-Pacific region are extremely likely to be positive about the impact of globalisation on their business. Over 80% engage in some form of international business activity, and this peaks in Singapore (93%). 04 Global Enterprise Survey Report 2011 Asia-Pacific Key Findings
CONTENTS Growth 06 Business growth 06 Business objectives, opportunities and challenges 09 globalisation 16 Attitudes to Globalisation 16 Current Global Business activity 17 Technical Appendix 18 acknowledgements 19 Further details 19 Contents icaew.com/smeresearch 05
GROWTH The majority of businesses surveyed in the Asia-Pacific region expect turnover growth in the next 12 months. Improving profitability is an objective for most and their greatest opportunity is seen as overseas expansion. Business GRowth Almost seven in ten businesses in the Asia-Pacific region who were interviewed in the Global Enterprise Survey 2011 have experienced turnover growth over the past 12 months, and expect it to continue over the coming year. This is in line with other global regions, and is only surpassed by businesses in Africa, where 81% expect turnover growth over the next 12 months. However, variations can be seen between countries within the Asia-Pacific region. 06 Global Enterprise Survey Report 2011 Asia-Pacific Growth
China still leading but MAy be losing ground Businesses surveyed in China are most likely to report any turnover growth, including high level growth (10%+), in the past 12 months. While these businesses in China are most optimistic about future turnover growth, there are some indications that this leadership position is softening, with a decline in the proportion expecting high level growth. This decline is unlikely to be related to demand, which many expect to be less of a challenge than in the past. A more likely contributor is continued high levels of competition, including competition from overseas. In Malaysia and Hong Kong, approximately three-quarters report turnover growth over the past 12 months. In Hong Kong, a similar proportion expect growth in the next 12 months. Future growth expectations are less buoyant in Malaysia, with a significant decline in the proportion expecting any turnover growth, and a decline in the proportion expecting high (10%+) growth. This is reflected in an anticipated reduction in growth of domestic sales: over the next 12 months, 42% in Malaysia expect no growth in domestic sales, compared with 32% over the past 12 months. Singapore and Australia/New Zealand are least likely to report recent turnover growth, with no real change in the proportion expecting growth over the next 12 months. Figure 1 PROPORTION OF BUSINESSES REPORTING AND EXPECTING GROWTH IN TURNOVER % Last 12 months Growth 10%+ growth Expected next 12 months Growth 10%+ growth Asia-Pacific Australia/ New Zealand Malaysia Singapore Hong Kong Mainland China* *NB: Very low base Base: All businesses: 469 (Australia/New Zealand: 100, Malaysia: 100, Singapore: 101, Hong Kong: 100, Mainland China*: 38) Growth icaew.com/smeresearch 07
Profits GRowth more subdued, except in AustRALia/New ZeALAnd There is less disparity between the countries with regard to gross profits (as opposed to turnover) growth. Businesses surveyed in China and Malaysia are the most likely to report gross profits growth in the past 12 months. But their expectations for the next 12 months are weaker, with a significant decline in the percentage expecting high level (10%+) gross profits growth. Gross profits growth expectations are largely static in Hong Kong and Singapore. Australia/New Zealand somewhat bucks the regional trend, with an increase in the proportion expecting gross profits growth in the next 12 months, though notably not at the high growth (10%+) level. It appears that this optimism is driven by expectations for domestic sales, with the proportion expecting a decline in domestic sales reducing from 23% in the past 12 months to 10% in the next 12 months. Figure 2 PROPORTION OF BUSINESSES REPORTING AND EXPECTING GROWTH IN GROSS PROFITS % Last 12 months Growth 10%+ growth Expected next 12 months Growth 10%+ growth Asia-Pacific Australia/ New Zealand Malaysia Singapore Hong Kong Mainland China* *NB: Very low base Base: All businesses: 469 (Australia/New Zealand: 100, Malaysia: 100, Singapore: 101, Hong Kong: 100, Mainland China*: 38) 08 Global Enterprise Survey Report 2011 Asia-Pacific Growth
Business objectives, opportunities and challenges Increasing profitability key business aim Improving profitability and increasing turnover feature among the objectives of approximately 90% of Asia-Pacific region businesses surveyed. Improving profitability is most likely to be the key aim for the next 12 months. Figure 3 KEY BUSINESS OBJECTIVE OVER NEXT 12 MONTHS % Increase profitability Increase turnover of the business Increase reward to shareholders or owners Improve return on capital employed Reduce costs Increase cash balances/pay down debt Manage risk more effectively Asia-Pacific Australia/New Zealand Malaysia Singapore Hong Kong Mainland China* *NB: Very low base Base: All businesses: 469 (Australia/New Zealand: 100, Malaysia: 100, Singapore: 101, Hong Kong: 100, Mainland China*: 38) Increasing profitability and increasing turnover are most likely to be cited as businesses key objectives over the next 12 months. But against the backdrop of a declining proportion of businesses anticipating high (10%+) levels of gross profit growth, it is perhaps no surprise that businesses are most likely to say that their key business objective over the next 12 months is to increase profitability rather than to increase turnover. This pattern is most noticeable in Malaysia, which also has the most marked drop in the proportions expecting gross profits growth in the next year compared with the last year. In China, where there is a large disparity in the proportion reporting and expecting high level (10%+) gross profits growth, half will be focussed on increasing profitability in the next 12 months. Across the region, increasing cash balances/paying down debt is least likely to feature in their plans at all over the next 12 months, but is more likely to be a key businesses objective in Malaysia than elsewhere. Growth icaew.com/smeresearch 09
Business opportunities Businesses in the Asia-Pacific region told us what they see as their single greatest opportunity for the coming year. Responses focussed firmly on developing new markets and customers mainly through expansion into other countries. Firms in the region tend to feel their greatest opportunities lie in other markets within the Asia-Pacific region, particularly in China. There will be expansion regionally. The Malaysian market is fairly saturated and so we are looking at overseas. Asia and Thailand; neighbouring countries. MALAYSIA financial services The focus is on the Asian markets. As in client focus. We will do more business in Asia rather than Europe, because it s a growth market here and we never really had a strong presence in Europe anyway. SINGAPORE financial services We will be looking for increasing new shops mainly in China and Hong Kong. Our focus is in Asia not usa or Europe. HONK KONG RETAIL To capitalise on the growth in China, developments in roads, water plants, etc. If the economy is doing well our revenue will be going up. HONG KONG TRANSPORT I would say economic growth in China. The majority of our sales are to China. AUSTRALIA energy In addition, in all the Asia-Pacific markets covered in the survey, about one in ten firms felt product development was their greatest opportunity. 10 Global Enterprise Survey Report 2011 Asia-Pacific Growth
Regulation and tax environment in Asia-Pacific RAted favourably Many Asia-Pacific-based businesses who participated in the Global Enterprise Survey 2011 are likely to rate their local regulatory and tax environment as business friendly. Three-quarters see the regulatory and tax environment as business friendly and therefore presumably supportive of growth; higher than most other regions and only exceeded by The Gulf (89%). Across the markets of the Asia-Pacific region attitudes to the local regulatory and tax environment vary in much the same way that they did in 2010: Businesses in Hong Kong and Singapore are the most positive. In Singapore, nearly three quarters see the environment as very business friendly. Most firms in Malaysia consider the regulatory and tax regime there fairly business friendly. In Australia/New Zealand opinion is least favourable. This was the also case in 2010, and it has deteriorated since last year when 67% of businesses were positive. Opinion among those interviewed in China is equally divided over whether the regulatory and tax regime is business friendly or not. Figure 4 ATTITUDE TO LOCAL REGULATORY AND TAX ENVIRONMENT Asia-Pacific Australia/New Zealand Malaysia Singapore Hong Kong Mainland China* 100 80 60 40 20 0 20 40 60 80 100 Very business friendly Fairly business friendly Not very business friendly Not at all business friendly *NB: Very low base Base: All businesses: 469 (Australia/New Zealand: 100, Malaysia: 100, Singapore: 101, Hong Kong: 100, Mainland China*: 38) Growth icaew.com/smeresearch 11
Manage risk more effectively Competition Increase reward to overshadows customer demand as A MAin challenge to business performance shareholders or owners Reduce costs Businesses in the markets of the Asia-Pacific region are Increase more likely cash balances/ than those in most other regions to expect pay down debt increasing pressure from competition in the marketplace over the next 12 months. The exception is Africa, where 60% see competition as an increasing challenge. In terms of challenges to business performance, in Hong Kong and Malaysia, competition has been the main challenge; elsewhere, customer demand was as likely to be seen as a challenge. Over the next 12 months, competition looks set to be the main challenge across the region. Most notably this is the view in China, no doubt influenced by those elsewhere looking to export to China. In Australia/New Zealand, where for the last 12 months demand has been more of a challenge, indications are that many expect this to subside as a challenge over the coming year. Figure 5 GREATER CHALLENGE EXPECTED NEXT 12 MONTHS COMPETITION AND CUSTOMER DEMAND Asia-Pacific Australia/New Zealand Competition in the marketplace 2011 Customer demand 2011 Malaysia Singapore Hong Kong Mainland China* *NB: Very low base Base: All businesses: 469 (Australia/New Zealand: 100, Malaysia: 100, Singapore: 101, Hong Kong: 100, Mainland China*: 38) 12 Global Enterprise Survey Report 2011 Asia-Pacific Growth
LabouR MARKet challenges expected to increase in Asia-Pacific Asia-Pacific stands out among most other regions with regard to the challenge posed by labour market factors, and, with regard to availability of management skills, there are some similarities to the challenges faced in Africa. Australia/New Zealand firms are markedly less affected by the labour market challenges under consideration than other parts of the region. Challenges faced in China are no doubt influenced by the large proportion of surveyed businesses which increased their staff levels over the last year (71%). To a degree, this looks set to continue over the coming year, with 79% planning to increase staff levels. In China, availability of non-management skills remains relatively high at 24%, but is nonetheless a slight improvement on the last 12 months. In part, this reduction may be due to an uplift in the proportion expecting to increase their staff development budget (74% up from 55% in the last 12 months). Non-management skills availability is also a pressure for one quarter of surveyed businesses in Hong Kong and Malaysia. In Singapore, however, the availability of non-management skills is expected to challenge a lower proportion of businesses in the coming year than it has done over the past 12 months. Figure 6 GREATER CHALLENGE EXPECTED NEXT 12 MONTHS LABOUR MARKET FACTORS Asia-Pacific Availability of management skills Staff turnover Australia/New Zealand Availability of non-management skills Malaysia Singapore Hong Kong Mainland China* *NB: Very low base Base: All businesses: 469 (Australia/New Zealand: 100, Malaysia: 100, Singapore: 101, Hong Kong: 100, Mainland China*: 38) Growth icaew.com/smeresearch 13
Late PAyments and bank charges of GReatest concern in China and MALAysia Financial factors are less prevalent as challenges for the coming 12 months in Asia-Pacific than in some other regions, and this is particularly the case in Australia/ New Zealand. Variations are discernible within the region: In China, all the financial factors, and especially access to capital, are expected to become more of a challenge. In Malaysia, over a quarter of businesses surveyed expect bank charges to become more of a challenge. Singapore has the lowest proportion of firms in Asia-Pacific anticipating late payments from customers to be a challenge in the coming 12 months. Figure 7 GREATER CHALLENGE EXPECTED NEXT 12 MONTHS FINANCIAL FACTORS Asia-Pacific Australia/New Zealand Your access to capital Late payment from customers Bank charges Malaysia Singapore Hong Kong Mainland China* *NB: Very low base Base: All businesses: 469 (Australia/New Zealand: 100, Malaysia: 100, Singapore: 101, Hong Kong: 100, Mainland China*: 38) 14 Global Enterprise Survey Report 2011 Asia-Pacific Growth
Exporters would VALue sector and country MARKet intelligence In each market in the Asia-Pacific region, approximately half of businesses in the Global Enterprise Survey 2011 currently export, rising to 70% in Hong Kong and Singapore. The types of information which current exporters in the Asia-Pacific region, and those planning to start exporting in next two years, are particularly likely to point to as most helpful if they were considering expanding business internationally are: Market intelligence for sectors they are interested in Market intelligence for countries they are interested in Details of commercial laws such as product regulations Cultural and social conditions Taxes in the target market Growth icaew.com/smeresearch 15
Globalisation Businesses in the Asia-Pacific region are extremely likely to be positive about the impact of globalisation on business. The majority (82%) engage in some form of international business activity. Attitudes to globalisation Asia-Pacific businesses positive about GLobALisation In all global regions, the businesses interviewed for the Global Enterprise Survey 2011 are more likely to be positive than negative about the impact on their business of the continued globalisation of markets. Firms in the Asia-Pacific region are particularly likely to be positive, other than those in Australia/New Zealand. Compared with 2010, attitudes to globalisation within the region are largely unchanged. The exceptions are Malaysia, where a higher proportion now believe it has a positive impact on them (up from 62% in 2010), and Singapore, where fewer now view globalisation favourably (down from 89% in 2010). FIGURE 8 ANTICIPATED IMPACT OF GLOBALISATION ON BUSINESS Positive impact % No overall impact % Negative impact % Asia-Pacific Australia/New Zealand Malaysia Singapore Hong Kong Mainland China* *NB: Very low base Base: All businesses: 469 (Australia/New Zealand: 100, Malaysia: 100, Singapore: 101, Hong Kong: 100, Mainland China*: 38) 16 Global Enterprise Survey Report 2011 Asia-Pacific Globalisation
Current GLobal business activity Majority of businesses ARe GLobALLy engaged Nearly three-quarters of businesses based in Asia-Pacific are likely to be globally engaged; that is, they export, outsource or offshore. This proportion is similar to The Gulf and only exceeded by Europe. However, if importing activity is included, the proportion with any international activity rises to three-quarters in Asia-Pacific, and 93% in Singapore. The pattern of international activity varies across the region. Exporting is the most prevalent activity overall, and especially in Singapore and Hong Kong. However, in Hong Kong, there is a decline in the percentage expecting their volume of exports to grow down from 70% in the past 12 months to 58% over the next 12 months. Singapore businesses are particularly likely to be offshoring business activities. Importing is more common in Australia/New Zealand and Hong Kong than elsewhere in the region, and it is Australia/New Zealand s most prevalent international activity. Companies in Malaysia and China are the least likely to have international business activities, and those in Malaysia are noticeably less likely than those elsewhere to outsource. FIGURE 9 GLOBAL ENGAGEMENT % Globally engaged Any international activity Outsource Offshore Export Import No overseas activity Asia-Pacific Australia/New Zealand Malaysia Singapore Hong Kong Mainland China* *NB: Very low base Base: All businesses: 469 (Australia/New Zealand: 100, Malaysia: 100, Singapore: 101, Hong Kong: 100, Mainland China*: 38) About a third of non-exporters across the Asia-Pacific region plan to start exporting over the next two years, and this is much higher in Singapore. Globalisation icaew.com/smeresearch 17
TECHNICAL APPENDIX The Global Enterprise Survey 2011 was conducted by Kudos Research during the period 27 July to 2 September 2011 with icaew members working in industry and commerce in key global regions. The purpose of the study was to look at the following issues that impact global business today: business growth, objectives and influences, including the impact of regulatory issues the impact of globalisation Interviewing was conducted by telephone and the number of interviews in each global region and Asia-Pacific market are detailed below. Africa 100 The Gulf 148 Americas 101 Europe 252 Asia-Pacific 469 Singapore 101 Malaysia 100 Hong Kong 100 Australia 80 China 38 New Zealand 20 Others 30 As the survey is conducted among businesses which employ icaew members, the mix of business sizes and sectors does not necessarily represent their distribution in the regions, and large companies or those in the Financial Services sector may be over-represented in places. The responses of these members are compared in this report to those of 579 members working in globally engaged businesses in the UK, that is firms which export, import, outsource or offshore. The UK interviews formed part of the UK Enterprise Survey 2011 (for which a full report is published separately). 18 Global Enterprise Survey Report 2011 Asia-Pacific Technical Appendix
Acknowledgements Ruth Betts This report was prepared with the assistance of Ruth Betts BSc MMRS, of RBMR Consulting. Ruth is a freelance market research consultant, living and working in London EC1. She works with ICAEW as well as a range of other clients particularly in the business and professional services, and technology sectors. Kudos Research Interviewing and data analysis was undertaken by Kudos Research. Kudos Research specialises in premium quality, custom-tailored UK and international data collection, as well as data analysis and research advisory services. Kudos Research interviews customers, stakeholders, business leaders and opinion formers across the globe, online and by telephone, as well as recruiting them for focus groups and depth interviews. Further Details For more information about this research or to download a copy of the Global Enterprise Survey Report 2011 Asia-Pacific Report visit icaew.com/smeresearch T +44 (0)20 7920 8667 E enterprise@icaew.com To download a copy of the Global Enterprise Survey Report 2011 visit icaew.com/smeresearch In association with Other survey reports available include: UK and The Gulf. GLOBAL ENTERPRISE SURVEY REPORT 2011 A UNIQUE ANNUAL INSIGHT INTO BUSINESS COMPETITIVENESS AND GLOBALISATION IN MAJOR ECONOMIC REGIONS BUSINESS WITH CONFIDENCE icaew.com/smeresearch A Further Details icaew.com/smeresearch OUR OFFICES ICAEW Chartered Accountants Hall Moorgate Place London EC2R 6EA UK T +44 (0)20 7920 8100 E information.centre@icaew.com icaew.com ICAEW China Beijing T +86 10 8518 8622 E china@icaew.com icaew.com/china ICAEW Europe Brussels T +32 (0)2 230 3272 E europe@icaew.com icaew.com/europe ICAEW Hong Kong T +852 2287 7277 E hongkong@icaew.com icaew.com/hongkong ICAEW Malaysia Kuala Lumpur T +60 (0)3 2171 6022 E malaysia@icaew.com icaew.com/malaysia ICAEW Middle East Dubai T +971 (0)4 408 0000 (ext 710000) E middleeast@icaew.com icaew.com/middleeast ICAEW South East Asia Singapore T +65 (0)6 407 1554 E southeastasia@icaew.com icaew.com/southeastasia 19
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