Asean Benchmark


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A comprehensive study on the cost of doing business in ASEAN

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Asean Benchmark

  1. 1. ASIA PACIFIC - Benchmarking Country CompetitivenessA snapshot summary from GBP InternationalPhilipp Dera, Volker Friedrich© 2012 GBP Internatioal S n dn. Bhd.All rights reserved.Project Director: Volker FriedrichLead Analyst: Philipp Dera 1
  2. 2. ASEAN Country CompetitivenessContentsP3 IntroductionP4 Executive Summary P5 City Overview P6 Methodology P7 Case StudiesP11 Skilled Labour, Jobs, Income LevelP15 Education System, University GraduatesP18 Business English Skills, Visa RegulationsP21 City Size, Density, InfrastructureP24 Taxes, Incentives, Cost Of Doing BusinessP29 Rent, Electricity, Secretary, Currency RiskP34 Competitive PerformanceP36 ConclusionP38 Appendix 2
  3. 3. IntroductionASEAN’s economic rise is also reflected in the economic competitiveness of its cities.Given the rapid growth and development of many ASEAN cities, competition betweenthem for business, investment and talent has already begun.But what is the best location in Asia-Pacific for European Small and Medium sizedenterprises (SME)?While Hong Kong and Singapore have established themselves as globally competitivecentres in recent years, size and growth potential alone do not determine thecompetitiveness of a country. Meanwhile, newly emerging markets such as Myanmar havethe potential of comparative advantages. Besides economic size and growth, several otherfactors determine a country’s overall competitiveness, including its quality of humancapital, level of education, English skills, cost of doing business, income level, businessand regulatory environment etc.The ASEAN Country Competitiveness Study was designed for European SME’s inorder to choose the best possible location for their business operations in Asia-Pacific. TheStudy ranks the competitiveness of major and upcoming players within ASEAN andbeyond: Thailand, Malaysia, Singapore, Indonesia, Philippines, Hong Kong and Myanmar.Our research drew on two main initiatives:• We conducted in-depth interviews with local industry experts, long standing expatriates, corporate executives and government officials in each country to get their insights on location competiveness.• A Index that compares the seven locations across eight distinct categories of competitiveness and a variety of individual indicators.GBP International is an independent consulting company based in Asia and Europe. Withlocal and international experts in offices across China, India, Southeast Asia and Europewe have successful operations in all major Asian and European markets. 3
  4. 4. ASEAN Country CompetitivenessExecutive SummaryAsian cities are among the world’s most competitive today, in terms of economic strength.15 out of the top 20 cities worldwide are Asian. Most of them are forecast to grow by atleast 10%. This is in sharp contrast to the single-digit growth rates of most developedmarket cities in Europe.Among the key findings of the study are as follows:In contrast to most European cities, the countries highlighted in this study don’t performequally well across all segments of their competitiveness. In fact very few cities are goodall-round performers and no city can hold an absolute advantage in every dimension thatmatter to a potential investor. A manufacturer seeking cheap land, competitive labour andgood shipping will inevitably be attracted to a different city than a technology firm seekinghighly skilled graduates to invest in R&D. Even companies in the same sector will finddifferent locations appealing. Luxury brands will consider the purchasing power of highincome local residents in Singapore and Hong Kong, while low-cost consumer goodsproducer might focus untapped markets with higher growth potential such as Vietnam oreven Myanmar.The top rankings of Singapore and Hong Kong is largely due to their appeal to a widerange of businesses, low corruption rates, high government efficiency and excellentfinancial services hubs. As such, due to high cost of doing business, even these mostcompetitive cities will be unappealing prospects to certain companies with particular needs.For companies seeking high quality education, cheap rent and good business skills, KualaLumpur is by far the best albeit mostly underrated location.Overall, this Study provides a balanced view across the locations and reviews a broadrange of different dimensions and criteria that shape their overall competitiveness. 4
  5. 5. ASEAN Country CompetitivenessLocation OverviewYangon, Bangkok, Kuala Lumpur, Singapore, Jakarta, Hong Kong, Manila Hong Kong Yangon Manila Bangkok Kuala Lumpur Singapore Jakarta 5
  6. 6. ASEAN Country CompetitivenessMethodology OverviewData Acquisition- Research of Secondary Sources: Data Acquisition Internet Search, Internal GBP Database, Media Search, Government Organizations, Industry & Commerce SearchPrimary Research- In-Depth Interviews & Personal Meetings: To learn about advantages and drawbacks from key Primary Research players in the markets first-handAnalysis- Analysing Qualitative and Quantitative Data: Sourced from background research and primary research Analysis- Comparing Location Competitiveness: Based on indicators, prices, scorings & rankings 6
  7. 7. ASEAN Country CompetitivenessCase Study: Singapore – Talent as a competitive edgeSingapore is by far the highest-placed city In addition, English is one of the fourin Asia. The location ranks particularly well official languages (English, Chinese, Malayin terms of Ease of Doing Business and Tamil) and the majority of the(highest rank), financial maturity (highest population in Singapore speaks English asrank), institutional effectiveness and low their main language. The majority of thecorruption rates (highest rank), Stable multi-cultural population of 70% ethnicPolitical & Social Framework (highest Chinese and 25% of Malays and Indiansrank), Taxes and Tax Incentives (among use English as their first language.the highest ranks). Due to the fact that a significant For insiders and locals, none of this number of graduates in Singapore havewill be surprising, given the city’s lean studied abroad, the English skills ofbureaucracy, safe environment and employees in Singapore are extremely wellefficient transport. But the high “western developed.standards” have their price in terms of Labor Costlabor cost (lowest rank) and office rent 3(lowest rank). Ease of Doing Business 2 Skilled Labour On the talent front, the city has 1focused on competitive economy, quality 0life and environmental Visa Regulations Political & Socialsustainability, offering a pool of around Framework700.000 professionals. But the salary levelfor highly skilled labor is that of many Cost of Doing Business TaxesEuropean city’s. Key Economic indicators City Rankings Score Population 5.3 Overall 1 GDP (US$ billions) 222.7 Labour market efficiency 2 GDP per capita (US$) 43,117 Ease of Doing Business 1 GDP growth rate 4.9% Political & Social Framework 1 Inflation (2011) 5.3% Credit rating of sovereign bonds Aaa Unemployment (2010) 2% Corruption (out of 182) 5 7
  8. 8. ASEAN Country CompetitivenessCase Study: Kuala Lumpur – Asia’s most undervalued cityKuala Lumpur is one of the most Due to the fact that the majority ofcompetitive and, at the same Malaysians speaks English as their maintime, undervalued city’s in Asia-Pacific. language, the English skills of employees This is perhaps surprising given its in Kuala Lumpur are well developed.low scorings across a diverse array of English is widely understood incategories. But if companies are service industries and is a compulsoryparticularly focussed on cost of doing subject in primary and secondary schoolbusiness, excellent quality of life, goodhuman resources, goodinfrastructure, affordable office rent and astable political system, then Kuala Lumpur Labor Cost 3is the choice of city. Even though Singapore is still the Ease of Doing Business 2 Skilled Labourchoice for finance, the Kuala Lumpur has 1become one of the global Islamic financing 0hubs in recent years. Besides finance, the Visa Regulations Political & Social Frameworkpetrochemical industry and the IT sectorcombine most of the workforce in thecountry, accounting for the large numbers Cost of Doing Business Taxesof expats working in Kuala Lumpur. Key Economic indicators City Rankings Score Population (Greater KL) 7.2 Overall 3 GDP (US$ billions) 247.6 Labour market efficiency 4 GDP per capita (US$) 8,423 Ease of Doing Business 4 GDP growth rate 6% Political & Social Framework 2 Inflation (2011) 3% Credit rating of sovereign bonds A3 Unemployment (2010) 3% Corruption (out of 182) 60 8
  9. 9. ASEAN Country CompetitivenessCase Study: Hong Kong – China as a competitive edgeHong Kong is the number 1 choice of city In addition, English is one of the officialif you are looking for a “safe way” to enter languages in Hong Kong and is usedthe Chinese market. Talent availability and widely in the Government, academicgeographic proximity to major player China circles, business and the courts and theis the overall competitive edge of Hong level of English in the businessKong. environment is quite high. The location ranks particularly well Even though Hong Kong’sin terms of Ease of Doing Business (high population is made up 95% ethnic Chineserank), Stable Political & Social Framework and therefore the city is a predominantly(high rank) and low tax rates, but it offers Cantonese-speaking society.almost no tax incentives whatsoever. The geographical advantage of thecity combined with its efficient public Labor Cost 3transport (airport access within 23 minutesfrom the CBD), offers the possibility of Ease of Doing Business 2 Skilled Labourreturn daytrips to Shanghai. 1 But similar to its biggest competitor 0Singapore, there is a certain prize to be Visa Regulations Political & Social Frameworkpaid. Salary levels and especially officerent are among the highest on a globalscale. This might change as current trends Cost of Doing Business Taxespredict the office market to head towards acyclical downturn. Key Economic indicators City Rankings Score Population 7.1 Overall 2 GDP (US$ billions) 225.0 Labour market efficiency 3 GDP per capita (US$) 31,591 Ease of Doing Business 2 GDP growth rate 5% Political & Social Framework 2 Inflation (2011) 5.3% Credit rating of sovereign bonds Aa1 Unemployment (2010) 3.4% Corruption (out of 182) 12 9
  10. 10. GBP International Competence In AsiaGBP International is an independent consulting company based in Asia and Europe. Withlocal and international experts in offices across China, India, Southeast Asia and Europewe have successful operations in all major Asian and European markets.The ASEAN market is a corner stone of GBP International’s expertise in Asia-Pacific. Withlocal offices in Malaysia, Thailand, Indonesia, Myanmar, Vietnam and thePhilippines, GBP International is dedicated to foster the economic relations between theASEAN countries and Europe, working extensively with both, Asian and internationalcompanies.GBP INTERNATIONAL Sdn. Bhd.UOA CENTRE 19-9-619 Jalan Pinang50450 Kuala Lumpur – 10