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KellyOCG Asia Pacific Global Market Brief and Labor Risk Index - Q2, 2011
 

KellyOCG Asia Pacific Global Market Brief and Labor Risk Index - Q2, 2011

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A groundbreaking resource for companies as they assess market investments and global labor strategies. This report is a proprietary blend of Kelly\'s labor market knowledge with Eurasia Group\'s ...

A groundbreaking resource for companies as they assess market investments and global labor strategies. This report is a proprietary blend of Kelly\'s labor market knowledge with Eurasia Group\'s expertise in political and socio-economic risk analysis

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    KellyOCG Asia Pacific Global Market Brief and Labor Risk Index - Q2, 2011 KellyOCG Asia Pacific Global Market Brief and Labor Risk Index - Q2, 2011 Presentation Transcript

    • Think ouTside.GlobalMarket Brief& Labor Risk Index asia Pacific 2011 2 Tokyo Bay, Tokyo, Japan © 2009 Robert Churchill
    • asia Pacific2 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh Overview: china consumers tighten their belts and costs across Asia. Today, many Asian hong kong shift toward lower-cost products. governments intervene in energy india Asia Pacific For governments in the region, the general goal will be to normalize prices to protect households and industry from price volatility. But as indonesia Japan Malaysia monetary policies that were primed resource prices rise, the costs of this new Zealand for growth during the financial crisis, intervention will grow. Philippines but this is happening only slowly. singapore In some countries, such as the south korea The risk is that inflation has already Philippines and Indonesia, where Thailand become too pervasive, and that ➔ Inflation is the preeminent budget constraints are real and Vietnam governments around the region aBouT sPonsors challenge for most Asian affect economic volatility, the could be facing more persistent governments this quarter, the result government’s capacity to continue price rises in coming months. of years of expansionary monetary these interventions is limited, policies, government initiatives to A major inflation driver Asian meaning higher input prices, limit currency appreciation, upward manufacturing costs for industry, governments are struggling to wage pressures, higher international and potentially less discretionary address is higher international energy and commodity prices, incomes for consumers there. energy and commodity prices—a and food shortages. Resulting Other countries, including China, result of recent unrest in the Middle Malaysia, Singapore, and Thailand, higher prices for a range of goods East, plus a rebounding global will likely allow some more gradual like fuel, basic commodities, and recovery. Policy differentiation over currency appreciation to offset housing will likely shift job growth how to manage inflation will mean higher energy import costs. away from higher-end and luxury more volatility in exchange rates, sectors in coming months, as growth rates, and manufacturing ■ ■ ■ 
    • asia Pacific3 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladeshasia Pacific – risk index suMMary TaBle – Q2 2011 china hong kong Macro risks laBor risks india foreign indonesia Political social security economic flexibility availability Quality contentment investment Japan Malaysia Australia 8 Y 9 9 8 9 8 6 8 8 new Zealand Bangladesh 4 Y 4 6 3 3 Y 5 5 1 2 Y Philippines singapore China 7 Y 5 Y 9 6 6 Y 4 5 7 4 south korea Thailand Hong Kong 9 8 10 7 Y 10 6 6 8 7 Y Vietnam India 7 Y 4 7 6 XX 5 5 5 1 3 aBouT sPonsors Indonesia 6 6 8 4 3 Y 4 5 3 4 Japan 4 Y 9 10 5 7 5 4 8 Y 7 Malaysia 7 4 9 5 X 7 7 4 7 X 7 New Zealand 8 8 10 6 Y 9 8 6 8 7 Philippines 6 X 3 7 5 X 4 5 5 4 6 Y Singapore 9 X 8 8 8 Y 10 7 5 Y 8 9 South Korea 7 8 6 7 8 4 5 Y 8 6 Y Thailand 5 X 4 Y 7 6 7 7 5 Y 5 7 Vietnam 7 6 8 4 6 6 5 Y 4 5for all variables, scores range from 1 to 10, where 1 is ‘high risk’ and 10 is ‘low risk’. very positive trend positive trend negative trend very negative trend 
    • asia Pacific4 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh Australia china trading partner—is expected while the natural disasters at the hong kong to shave about a quarter of a end of the year resulted in just india percentage point from GDP growth 2,300 job cuts. The surge in mining indonesia Japan in the 2010-2011 fiscal year. Despite sector activity is raising risks of a Malaysia ➔ Australia’s economy grew by a short-term negative impact from skills shortage and placing upward new Zealand 2.7% in 2010, but Treasurer Wayne these natural disasters, rebuilding pressure on wages. Mining wages Philippines Swan stated on 2 April that the in both Queensland and, more jumped 4.6% in 2010 (compared to singapore December and January cyclones importantly, Japan, will generate an economy-wide increase of 3.9%). south korea Thailand and flooding in Queensland and strong demand and employment Industry pressure for a loosening Vietnam elsewhere would cost the economy in the country’s already booming of restrictions on the skilled worker aBouT sPonsors AUD 9 billion ($9.4 billion). In resources sector. visa program is mounting. Although On 24 February, Prime addition, the main economic impact immediate changes may not be Minister Julia Gillard of the summer floods is likely to The mining and LNG boom in forthcoming, an expansion of visa announced the government’s be felt in the first quarter of 2011, Australia has had a dramatic impact allocations is likely later this year or intention to put in place a particularly with a major slowdown on job creation. According to the early next year. three- to five-year fixed carbon in coal exports. And the massive Australian Bureau of Statistics, the tax that would later transition March earthquake and tsunami in economy created 362,800 jobs ■ ■ ■ to an emissions trading Japan—Australia’s second-largest during the first 11 months of 2010, program. Details must still be worked out and the road to passage will not be smooth, but the plan will most likely pass parliament. Transitional low risk 10 MACRO RISKS LABOR RISKS assistance to industry is 9 probably inevitable, especially 8 to trade-exposed sectors such 7 as manufacturing and LNG, 6 5 which will mitigate the tax’s 4 negative effect on employment. 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific5 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh Bangladesh china growth of remittances has stalled, youth are seeking employment in hong kong inching up to $5.55 billion during the Middle East—particularly in india the first half compared to $5.53 Saudi Arabia and Kuwait—and in indonesia Japan billion during the same period a Malaysia. It is estimated that around Malaysia ➔ The Bangladeshi economy year earlier. A second problem is 6 million Bangladeshis are working new Zealand is likely to be pressured by two annualized inflation that has climbed abroad. The Bangladeshi authorities Philippines concerns. First, the country’s balance due to high food prices hitting are concerned that the recent singapore of payments swung to a $686 million 8.14% in November 2010 compared economic discontent and social south korea Thailand deficit during the first half of the to 8.12% in the previous month. unrest in several Middle Eastern host Vietnam countries could disrupt the export of 2010—2011 fiscal year from a $2.09 aBouT sPonsors The government is increasingly surplus labor and could potentially The textile sector continues to billion surplus during the same concerned about the impact of lead to the return of immigrant suffer from labor discontent period a year earlier. This deficit was social unrest in the Middle East workers to Bangladesh. This would and unrest. In July 2010, caused by a sharp 37% year-on-year on the domestic labor market. put additional pressure on the the government raised the increase in imports in the first half of Bangladesh’s annual employment monthly minimum wage government to create jobs. the fiscal year. Bangladesh routinely growth (1.6%) has been unable to from $23 to $43, but this runs a trade deficit but growth in keep up with the increase in the ■ ■ ■ fell short of union demands remittances has kept the overall size of the labor force (4.7%). As a ($70) and lags minimum balance of payments in surplus. But result, large numbers of Bangladeshi wages in other Asian textile manufacturers. High inflation has also undermined the wage increase. Tens of low risk 10 MACRO RISKS LABOR RISKS thousands of textile workers 9 are taking to the streets to 8 demand better enforcement 7 of the new minimum wage 6 and another increase. 5 4 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific6 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh China china Growing inflation could lead to is to develop a vibrant services hong kong more rate hikes or encourage sector. As China rebalances away india faster income growth to keep pace from relying on exports, it is trying to indonesia Japan with consumer prices. Numerous absorb workers and create new jobs Malaysia ➔ Policymakers continue provincial governments, especially in an expanded services sector. The new Zealand to wrestle with inflation. Yearly along the coast, have already new plan calls for creating 45 million Philippines consumer price inflation clocked rushed to raise minimum wages. new jobs by 2015—a tall order that singapore south korea in at 4.9% in February, unchanged This will increase the cost of labor requires the development of new Thailand from January, and economists are there, and rising costs could spread industries and job opportunities. The Vietnam expecting it to climb. In response, to other provinces. service sector is an obvious choice aBouT sPonsors Beijing will likely respond Beijing has raised banks’ reserve for job growth, as the industrial Not only is Chinese labor becoming to higher inflation by sector is approaching saturation. requirement ratios to 20.5% with more expensive, but it is also accelerating the nominal A more services-based economy appreciation of its currency, a string of successive hikes. On 4 shifting into new sectors, driven by also uses less energy and develops which will allow the April the government also raised government policy. Beijing formally human capital. government to mitigate interest rates for the fourth time ratified its 12th Five-Year Plan in mid- imported inflation driven since October 2010. March, an important goal of which ■ ■ ■ by rising international commodity and energy prices. While Beijing is unwilling to implement a fast-enough rate of appreciation to fully low risk 10 MACRO RISKS LABOR RISKS offset these dynamics, any 9 appreciation could reduce 8 the level of China’s trade 7 surplus with the US, which 6 5 will help reduce tension with 4 the US over currency issues. 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific7 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh Hong Kong china A large property bubble is an year before. Retail sales also hong kong added concern on this front. rose 18.3% in 2010. india indonesia House prices are up nearly 50% in For employers, recent changes Japan the past two years. Malaysia ➔ The Hong Kong economy in Hong Kong labor laws bear new Zealand continues to grow rapidly, driven by On the labor front, Hong Kong monitoring. On 1 May, Hong Philippines a rebounding financial sector and remains a bright spot. Seasonally Kong’s first-ever mandatory singapore strong economic performance in adjusted unemployment dropped minimum wage law will go into south korea effect, with the wage rate set at Thailand mainland China. The government to 3.6% in the three months ending Vietnam still expects growth of 4%–5% $3.60/hour. The move—which has in February 2011, a two-year low aBouT sPonsors in 2011. Policymakers, however, been politically contentious in Hong Under public pressure to and a significant improvement face an immediate challenge in Kong for months—also carries near- alleviate income inequality, from the already-low 4.3% average cooling inflation. City officials term economic risk. Specifically, the Hong Kong government unemployment rate for 2010. Job in mid-March passed expect 4.5% inflation in 2011, with higher mandatory wages will raise growth continues in finance and an interim budget that private estimates of above 5% for labor and manufacturing costs, the year. Near-term concerns are financial services, consumer retail, authorized $5.2 billion in tax further amplifying inflation concerns driven by a mixture of rising energy tourism, and hospitality. Meanwhile, and cash rebates, including over coming months. and commodity import prices and there were 36 million tourists in $770 payments for all citizens. The populist measure, which higher labor and food costs. 2010, a 22% increase from the ■ ■ ■ received final approval on 15 April, is expected to increase consumption by 1.4 low risk 10 MACRO RISKS LABOR RISKS percentage points but will also 9 stoke inflation and increase 8 public demands for more 7 such moves in the future. 6 5 4 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific8 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh India china likely increase and a delay in the on R&D projects, will likely trickle hong kong implementation of subsidy reforms down in the form of increased india is also likely. Meanwhile, the budget skilled and non-skilled job creation. indonesia fails to provide specifics on major Moreover, the government plans Japan to allocate more funding to Malaysia ➔ The United Progressive fiscal and economic reforms— new Zealand notably, it does not establish a the National Skill Development Alliance (UPA) government’s Philippines timeline for the delayed goods and Fund, which promotes vocational 2011–2012 budget—announced singapore skills building, a step that should on 28 February—is marked by services tax (GST) or a roadmap south korea improve workers’ access to skilled the continuation of the political for disinvestment in state owned Thailand jobs. Finance Minister Shri Pranab Vietnam companies. Finally, the budget and economic priorities seen in Mukherjee has pledged 5 billion aBouT sPonsors does not propose any effective Progress on labor reforms the previous two budgets. The rupees ($112 million) to the Fund measures to tackle high food prices. will remain slow because of budget, which presumes a 9% GDP during 2011–2012. The government growth rate, emphasizes spending aims to create a skilled work force competing pressures on the The 2011–2012 budget will likely on infrastructure and social numbering 500 million by 2022. government. Industry requires boost employment in priority According to government statistics, a larger and more flexible programs. These sectors account sectors: education, healthcare, during 2010–2011, the program skilled work force, and is for nearly 90% of all spending. The real estate and housing, provided training to 20,000 people, calling for changes, particularly government expects a fiscal deficit infrastructure development, 75% of whom were able to find on more flexible working of 4.6% of GDP but this is probably logistics, telecommunications, and skilled jobs. hours. Labor unions, however, unrealistically small. Subsidy manufacturing. High spending on fear that reforms will allocations, particularly for fuel, will projects in these sectors, including ■ ■ ■ lead to exploitation and weaken their position. Large low risk 10 MACRO RISKS LABOR RISKS union-led protests were 9 held in early-February in 8 New Delhi. Further isolated 7 unrest is likely, particularly 6 5 if the government pursues 4 labor reforms without first 3 building political consensus. 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific9 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh Indonesia china 6.7% year-on-year has raised the coalition remains fragile. hong kong hopes that price increases are One change that parliament may india moderating. For this reason, approve this year is a new land indonesia Japan policymakers will likely concentrate acquisition law, which would Malaysia ➔ Domestic consumption, on keeping the economy stable improve the cumbersome process new Zealand infrastructure and natural resources in the light of uncertainty over oil for acquiring rights-of-way for Philippines investment, and high commodity prices and the possibility of weaker infrastructure projects, primarily singapore prices will sustain economic growth growth in Japan. toll roads, and highway upgrades. south korea Thailand through the next few quarters with However, changes to the labor President Susilo Bambang Vietnam law—the primary roadblock holding GDP growth expected to be 6.4% aBouT sPonsors Yudhoyono has to manage what The Indonesian government is up the development of an export- in 2011. The main threat remains is becoming a more contentious planning tax incentives for large oriented manufacturing sector—will the possibility that sustained coalition. Over the past few be difficult. Labor availability capital projects, in an effort inflation in food and fuel could months, there have been strong and productivity remain major to encourage infrastructure spill over into the wider economy rumors of changes to the cabinet constraints to increased investment and “big steel” manufacturing and force the central bank to raise and a possible falling out between investments. For several years, and are likely to persist given the interest rates more aggressively the president and his main coalition Jakarta has been grappling lack of incentives for workers. in the next few months. But the partner, the Golkar party. While with the country’s inability to slower inflation rate in March of neither event has materialized, ■ ■ ■ attract large projects and the government’s hope is that clear- cut tax incentive program would offset the other disadvantages low risk 10 MACRO RISKS LABOR RISKS of investing in the country 9 (such as the weak bureaucracy 8 and unpredictable regulatory 7 and judicial environment). 6 5 4 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific10 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh Japan china no major policy fights are expected Japan experienced a slight decline hong kong until the crisis subsides. in prices during the early part of india 2011, but increased demand and indonesia Economic growth hit 4.0% in Japan supply shortfalls caused by supply Malaysia ➔ The Tohoku earthquake and 2010 but the pace is expected to chain disruptions are expected new Zealand tsunami have altered the country’s slow substantially in the wake of to push inflation toward 1% later Philippines political course. Prime Minister the disaster to 0.8% in 2011. this year. If recent trends continue, singapore Naoto Kan is temporarily in a more An expected strong rebound in the yen has reached the end of its south korea Thailand secure position now and will likely substantial appreciation, suggesting the first quarter has now been Vietnam survive the ongoing legislative that global commodity inflation downgraded to an annualized aBouT sPonsors session, despite criticism from both will now start to affect domestic One likely casualty of the 0.5% jump in output compared opposition parties and the ruling prices. These trends, combined disaster is the current proposal to the disappointing 1.1% to amend the Worker Dispatch Democratic Party of Japan (DPJ). with increased domestic economic contraction in the fourth quarter Law. This law governs However, neither group will push activity focused on disaster recovery Japan into a paralyzing general of 2010. Unemployment temporary employment efforts, may finally help Japan election or a leadership challenge remained steady in January at intermediation, and the escape persistent deflation. during a national emergency. 4.9%, though the total number proposal would reverse years Political skirmishes will persist, but of jobs fell slightly. ■ ■ ■ of deregulation by imposing a range of powerful restrictions on staffing agencies, including a near-ban on intermediating short-term manufacturing jobs. low risk 10 MACRO RISKS LABOR RISKS The bill will likely die in the 9 upper house as it would be 8 impossible for the government 7 to enact while coordinating 6 5 with opposition parties on 4 disaster recovery efforts. 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific11 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh Malaysia china infrastructure initiatives that are Any meaningful implementation hong kong part of the government’s ambitious of economic reforms under the india economic transformation program ETP will have to wait until after indonesia Japan (ETP)—particularly transportation the general elections, however. Malaysia ➔ High commodity prices projects for the greater Kuala Although elections are scheduled new Zealand and strong domestic demand Lumpur area. The government is for 2013, there is a strong likelihood Philippines are driving economic growth in also expected to shave subsidy that the date will be moved up to singapore Malaysia, with output likely to cuts as part of efforts to help late 2011 or early 2012. south korea Thailand expand by 5%–6% in 2011, up lower-income groups cope with One persistent risk is the fiscal Vietnam from the 3%–4% estimated in the rising prices. situation. The government’s goal is aBouT sPonsors previous report. Looming elections Ever since the ruling National The key to Malaysia’s long-term to cut the budget deficit from 7.4% Front (BN) coalition lost are encouraging the government outlook is its goal of becoming of GDP in 2009 to 2.8% of GDP by its two-thirds parliamentary to focus on policies that will sustain a high-income country by 2020. 2015, but it has not released any supermajority in 2008, politics or accelerate this growth, and This would involve an ambitious details about its plans, apart from has been in flux. Speculation maintain overall macroeconomic infrastructure build-up, boosting its intention to adjust prices for was that this marked the end stability in the face of geopolitical utilities and other subsidized items of BN dominance, but the uncertainties. Some of the the skill level of Malaysian workers, every six months. opposition’s lack of focus and programs being implemented and rolling back some of the in the near term are focused on country’s affirmative action policies. ■ ■ ■ internal disagreements make it likely that the government will retain control, if not win back the supermajority. This low risk 10 MACRO RISKS LABOR RISKS would give Prime Minister 9 Najib Razak the political capital 8 to implement his economic 7 transformation program. 6 5 4 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific12 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh New Zealand china spending in the budget it is set economic activity in the second half hong kong to release on 19 May. Cuts to of 2011 and into 2012. india government services could erode indonesia consumer and business sentiment Unemployment in the fourth quarter Japan of 2010 rose to 6.8%, up 0.4 Malaysia ➔ The New Zealand economy in the short term, challenging new Zealand job creation. percentage points from the previous will continue to suffer from Philippines quarter. Prior to the December the devastating late-February singapore The short-term impacts of the quake, employment numbers south korea earthquake in Christchurch Japanese earthquake and Middle appeared to be trending upward, Thailand (following a September 2010 East unrest on global economic according to the Department of Vietnam earthquake in the same region). aBouT sPonsors conditions are expected to further Labor, but first quarter job figures Changes to New Zealand’s The government has thus far spent dampen the economic recovery will likely reflect the quake’s effect. employment laws took effect NZD 1.1 billion ($844 million) on in New Zealand, and slow growth Employment will be particularly on 1 April. They include recovery efforts. This is a primary may persist into 2011. Despite this affected in the construction, retail, extending the 90-day trial reason for the larger-than-expected short-term setback, low interest hospitality, manufacturing, and employment provision, giving NZD 9.2 billion ($7.1 billion) rates, high commodity prices, employees the option to cash business services sectors in the budget deficit for the eight months reconstruction efforts, and the 2011 in their fourth week of annual Christchurch region. ending in February. In response, Rugby World Cup are expected leave, doubling penalties for the government will not increase to lead to a modest uptick in ■ ■ ■ breaching the Holidays or Employment Relations acts, and adjusting holidays and sick leave payments. The low risk 10 MACRO RISKS LABOR RISKS adjustments are designed 9 to encourage hiring, reduce 8 compliance costs, and 7 increase worker flexibility. 6 5 4 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific13 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh Philippines china was optimistically targeting 7%–8% expanding their interests into hong kong growth for 2011, may be forced infrastructure including power india to eventually scale back to a more generation, toll roads, airport indonesia Japan realistic 5%. Such a number would operations, mass transit systems, Malaysia ➔ The earthquake in Japan, be more in line with independent and mining. Foreign investors new Zealand higher inflation, and conflict in the estimates from multilateral agencies are starting to invest in gold, Philippines Middle East have raised the risk and private economic forecasters. copper, and nickel mining. Central singapore that growth in the Philippines will south korea In fact, the appreciation of the peso government policies toward Thailand be slower than earlier expected. In has anecdotally already affected mining have started to stabilize, Vietnam particular, geopolitical problems families dependent on remittances, limiting political risk principally aBouT sPonsors could manifest themselves in which could have a negative effect Over the next few months, the to the local government level. weaker export growth to Japan main economically important on domestic consumption. If local government policies (the Philippines’ second-largest political events are the also start to become more impeachment of the country’s trading partner), lower consumer Increased investment by accommodating to mining ventures, top anti-corruption officer, and spending due to higher prices, domestic companies outside of their traditional sectors could investment could surge due to the the prosecution of corruption in and a decline in remittances from Philippines’ potential. the military. The impeachment overseas workers in the Persian Gulf compensate for negative external of the ombudsman, if successful, region. The government, which developments. Many firms are ■ ■ ■ could increase the popularity of President Benigno Aquino III, allowing him to pursue tax reforms and take on corruption low risk 10 MACRO RISKS LABOR RISKS in the tax collection service. 9 It would also allow him to 8 overcome bureaucratic and 7 political resistance to major 6 5 infrastructure projects. 4 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific14 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh Singapore china competitiveness, Singapore’s latest of external demand due to the hong kong budget focuses on income support strengthening of the Singaporean india and programs to upgrade worker dollar. Housing grants and rebates indonesia are also part of the plan. Japan productivity. Fiscal incentives for Malaysia ➔ After Singapore’s firms, which were a vital part of new Zealand Singapore has tightened monetary economy rebounded strongly earlier attempts to limit job losses, Philippines policy more aggressively than many late in 2010, the forecast calls for are now less urgent due to the singapore other countries have. But cost a more modest 4%–6% annual south korea recent high growth levels. Under increases are also being driven by Thailand growth rate for 2011. Sustainable the new budget, funds have instead external factors, which help drive Vietnam growth, rising inflation, and been shifted from wage support income support polices, rather than aBouT sPonsors the appreciating currency are The government is raising the schemes to vouchers that can be the more drastic, but ultimately less turning the government’s focus levy on imported labor over used for public transportation, effective, monetary policy options. from supporting employment to the next two years as part of a household maintenance, and In an attempt to cool off the cushioning price increases and broader agenda to encourage utility bills. The government likely property sector, the Singaporean improving productivity. firms to invest in more capital government in January mandated sees low income groups as more equipment and training, and vulnerable in the coming year from lower loan to value ratios for real to keep foreign workers at no In an effort to help lower income the threat of high inflation and estate loans. more than about one-third of workers cope with rising inflation and to improve the country’s possible shifts in the composition ■ ■ ■ the work force. Singapore’s industrial policy is now firmly directed at raising the domestic value-added of its sectors and low risk 10 MACRO RISKS LABOR RISKS in making the economy more 9 competitive with high-income 8 producers such as Taiwan. 7 6 5 4 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific15 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh South Korea china to 3.0% in mid-March, in line with demands are met. They include a hong kong expected gradual tightening. uniform increase in monthly base india pay; a guarantee of labor talks; and indonesia Alongside inflation, another the conversion of some temporary Japan principal concern remains currency Malaysia ➔ South Korea’s economy, worker positions to permanent new Zealand volatility. The central bank has often status with existing benefits. which contracted in the second half Philippines intervened to bolster the won, but Another moderate umbrella of 2008, grew by 6.2% in 2010, its singapore its tolerance for volatility is rising organization, the Federation of south korea fastest rate since 2002. But inflation given strong export data and robust the Korean Trade Unions (FKTU), Thailand remains a significant concern. In corporate earnings. Vietnam has declared that it is ending its March, consumer prices rose 4.7% aBouT sPonsors year on year, the fastest pace in 29 cooperation with the ruling Grand President Lee will be Public support for South Korea’s months. And while President Lee National Party (GNP) that dates something of a lame duck for labor movement has waned from 2007. The FKTU is seeking the rest of his term. In March, Myung-bak hopes to keep inflation considerably over the past year, but to repeal the “time-off” limits Lee broke a campaign pledge below 3% for the year, the central labor relations should be tougher on company-paid union officials to build a new international bank has projected that inflation will in 2011. In February, the national and single-channel negotiation in airport near Busan when a accelerate to 3.9% in 2011, up from metal workers union, which includes multiple-union companies. commission raised questions 2.9% in 2010. The bank hiked the auto company unions, announced about its feasibility. This key interest rate by 25 basis points a plan to strike in July unless its ■ ■ ■ compounds Lee’s difficulties, after he opposed an effort to move nine ministries and four government agencies low risk 10 MACRO RISKS LABOR RISKS from Seoul to Sejong City. 9 Lee’s proposed alternative—a 8 business complex—was killed 7 when his rivals joined forces. 6 5 4 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific16 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh Thailand china of inflation and to build support claims that the government is hong kong ahead of the election campaign. illegitimate and would signal that india Parliament is also deliberating a former prime minister Thaksin indonesia Shinawatra’s popularity and his Japan supplementary budget worth 100 Malaysia ➔ Perceptions of political billion baht ($3.3 billion). Opposition ability to influence domestic politics new Zealand instability will rise in the near term, parties are calling it an election slush are waning. Improving stability Philippines fund, and asserted that many of the would, in turn, reduce investor as general elections are due in singapore budget’s allocations were aimed at apprehension about violent and south korea late June or early July. But the possibly even destabilizing unrest. Thailand political uncertainty is unlikely to repaying junior coalition partners for The main risk is that one of the Vietnam significantly dent the outlook for their support. aBouT sPonsors smaller parties in the government In late March, the government the economy, which is growing due coalition defects to the opposition, But while the elections may create promised to raise wages by 25% to a strong recovery in exports and but this is unlikely to happen some near-term uncertainty, the over the next two years. This perceptions that political stability ruling Democrats and their coalition given that many of these parties announcement is likely designed may be returning to the country. partners are expected to hold would likely insist that Thaksin to motivate workers to vote for In addition, the government is remove himself from an opposition the ruling Democrat Party in on to their current majority and focused on supplementing incomes leadership role. the elections. Any such increase win a new mandate. This would for the poor to counter the effects eliminate popular opposition ■ ■ ■ will be resisted by the Bangkok business community, which is one of the key constituencies of the ruling Democrat Party. Even without government low risk 10 MACRO RISKS LABOR RISKS action, wages for skilled 9 workers are still likely to rise 8 due to the tight labor market. 7 6 5 4 3 2 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • asia Pacific17 | GloBal MarkeT Brief & laBor risk index Q2 2011 overview risk index australia Bangladesh Vietnam china curtailing lending to the overheated to improve as the transition to the hong kong property sector, which will likely next government is expected to be india lead to slower economic growth. completed by May. The National indonesia Assembly will meet to reelect Prime Japan But this policy will have to be Minister Nguyen Tan Dung, who Malaysia ➔ After several months maintained through at least the new Zealand has been the most visible advocate of apparent indecision in late third quarter, which will dampen Philippines of reform in the senior rungs of the 2010, the government is now growth expectations well into next singapore party. But Dung has to contend with south korea firmly focused on dealing with year. Economic growth already the presence of two conservatives, Thailand inflation. Senior officials have even slowed to 5.4% year-on-year in the Communist Party General Secretary Vietnam emphasized the need to move on first quarter, almost two percentage Nguyen Phu Truong and soon- aBouT sPonsors from the growth-focused polices Government firms dominate points lower than the 7.3% year- to-be President Truong Tan Sang. that have caused policymakers to key sectors of the Vietnamese on-year growth in the fourth Both represent the conservative economy, such as power, ignore or disregard clear signals quarter of 2010. factions of the party that emphasize telecommunications, heavy about overheating in several stability and security, which would industry, and natural resources. sectors of the economy. To achieve Policymaking coherence, which manifest itself in slower reforms These firms not only secure this, the government will likely had been absent during the fourth and liberalization. significant budget support, focus on raising interest rates and quarter of last year, is also likely ■ ■ ■ they also prevent liberalization of these sectors. Their strong political connections make reform and privatization difficult. The bankruptcy in mid-2010 low risk 10 MACRO RISKS LABOR RISKS of the national shipbuilder 9 Vinashin exposed this problem. 8 Continued high levels of 7 state-owned enterprise (SOE) 6 5 involvement in the economy 4 lead to longer-term problems 3 related to the sustainability 2 of public sector debt. 1 hiGh risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
    • 18 | GloBal MarkeT Brief & laBor risk index Q2 2011 About this Report The Global Market Brief & Labor Risk Index is jointly developed by KellyOCG, the Outsourcing and Consulting Group of human resources provider, Kelly Services and Eurasia Group, the global political risk consultancy. The report, a proprietary blend leveraging Kelly’s labor market knowledge with Eurasia Group’s expertise in political and socio-economic risk analysis, delivers a groundbreaking resource for companies as they assess market investments and global labor strategies. Published on a quarterly basis, the Global Market Brief & Labor Risk Index is segmented by four geographies: the Americas, Asia-Pacific, Europe and Eurasia, and the Middle East and Africa, with detailed insights for 55 of the world’s most important economies. About Eurasia Group Eurasia Group is the world’s leading global political risk research and consulting firm. Since 1998, it has helped clients make informed business decisions in countries where understanding the political landscape is critical. The firm’s research analysts are trained social scientists with post-graduate degrees, extensive professional experience, and a diverse range of language capabilities. Headquartered in New York, it also has offices in Washington and London, as well as a network of experts around the world. For more information, please visit www.eurasiagroup.net. About KellyOCG KellyOCG is the Outsourcing and Consulting Group of Fortune 500 human resources solutions provider, Kelly Services, Inc. KellyOCG is a global leader in innovative talent management solutions in the areas of Recruitment Process Outsourcing (RPO), Business Process Outsourcing (BPO), Contingent Workforce Outsourcing (CWO), including Independent Contractor Solutions, Human Resources Consulting, Career Transition and Organizational Effectiveness, and Executive Search. Visit www.kellyocg.com. To Receive this Report This report is available on an annual subscription basis. To access a complimentary report abstract, and for full subscription details, visit www.kellyocg.com/marketbrief More Information To find out more about how the KellyOCG / Eurasia Group partnership can add insight to your global planning, please contact marketbrief@kellyservices.com  exiT 