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Towards a New Direction:Emerging Asia-Pacific

Public Affairs Asia Conference | March 31, 2011

Brad Staples, president, international APCO Worldwide

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Contents

Emerging Asia

Beyond Economic Dominance

Strategies for Success

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Emerging Asia

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Emerging Asia:: Sharing in World GDP ::

Source: Citi

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Emerging Asia

• In three years, Asia will account for more GDP than the G7 combined.

• The E7 countries (India, China, Brazil, Russia, Indonesia, Mexico and Turkey) will overtake the current G7 in terms of economic dominance by 2020.

• Asia already receives the most foreign direct investments (FDI) of any region, according to UNCTAD.

• China, India, Indonesia, Thailand, and Vietnam are all ranked amongst the 15 most attractive places for FDIs.

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Emerging Asia

Asia Pacific Economic

Cooperation (APEC)

ASEAN Plus Three (APT)

Asia Pacific community, with a

small “c” (APc)

East Asian Community (EAC)

East Asian Summit (EAS)

Association of Southeast Asian Nation (ASEAN)

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Countries with Highest FDI’s

Ch

ina

U.S

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Ind

ia

Bra

zil

UK

Ge

rma

ny

Au

stra

lia

Ind

on

esi

a

Ca

na

da

Vie

tna

m

Me

xico

Po

lan

d

Fra

nce

0

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The 15 most attractive economies for FDI, 2009-2011

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Emerging Asia

Asymmetrical recover is already a reality, with the

low single digit GDP growth of Europe’s economies lagging far behind the BRICs and many other

Asian countries.

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IndiaIndia’s growth will also start to outpace that of China within three to five years…. India will see the most significant increase in its share of global GDP, predicted to rise from 2% to 13% by 2050

There is a steady rise of global Indians – professionals who are educated in the best universities around the world and making their mark in the global professional arena across a wide range of industries and vocations

India today is the fastest growing luxury car markets in the world and one of the most vibrant telecom markets in the world. Ironically, it is also home to a significant number of the poorest people in the world

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Emerging Asia

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Emerging Intra-Asian Trade

• (comprising Indonesia, Malaysia, the Philippines, Singapore, Brunei and Thailand) over the 2011-2015 period

GDP growth will average 6 percent annually across the ASEAN-6 countries

• embracing developing countries covers a population of 1.9 billion and involves about $4.5 trillion in trade volume

China-ASEAN Free Trade Area, the world’s largest free-trade area

• a market of almost 1.8 billion people with a combined GDP of $2.8 trillion

ASEAN-India Trade in Goods Agreement, signed in August 2009, creates the second largest FTA

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The Emerging Impact of Demographics

• By 2035, China’s population will peak at 1.47 billion, by which time India will have passed China to become the world’s most populous nation.

• India is the largest democracy in the world with close to 55 percent of its 1.2bn people under the age of 35

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Beyond Economic Dominance

How Asia emerging markets are influencing global decision-making

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Asia’s Global Influence

With the rise of economic power, emerging markets in Asia are growing in confidence and influence in political power.

Three of the top five G20 countries are in Asia; with China at number one, followed by India at number three and Japan at number four.

At this year’ s World Economic Forum in Davos, China had a record number of 66 CEO’s present. COSCO, a major China shipping company was one of the five key players

Emerging market countries have been granted more voting power at the IMF. China is now the 3rd most powerful.

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Asian Thought Leadership

• CEO of IFC, Lars Thunell pledged continued support to promoting sustainable economic growth and creating jobs in Indonesia by helping build infrastructure projects, expand access to finance for smaller enterprises, reduce greenhouse gases, and improving the investment climate.

• The Indian government will move forward with a controversial bill requiring some firms to spend 2% of their profits on CSR programmes.

• India will start phasing in International Financial Reporting Standards (IFRS) this April, starting with big companies.

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Asian Thought Leadership

The 2011 APEC meeting has established the following areas as priorities:

• strengthening regional economic integration and expanding trade1

• promoting green growth2• expanding regulatory

cooperation and advancing regulatory convergence3

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Reverse Innovation

• some global businesses are struggling to ‘glocalise’ their western brands and products, adapting them to very different local preferences in emerging Asian markets

• “scarcity may become the mother of innovation”• local entrepreneurs in emerging Asian markets have the intimate

appreciation of local needs and consumer requirements

• They understand how to develop better suited products, establish leaner business models, that boost low-cost demand and, critically, achieve impressive EBITDA results

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Growth vs Sustainability

The emerging economies that will thrive in the future will be those that acknowledge this dynamic tension and take meaningful steps to ensure energy supply challenges, food prices and waters shortages do not undermine inward investment, but potentially drive innovative thinking locally and new solutions to global challenges.

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Strategies for Success

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Strategies for success

Alignment with business strategy

• Asia’s key markets are is no longer just a center for global manufacturing. They are the major market s for multinationals in the coming years.

• Sales continues to build across Asia given high growth rates and sluggish economic activity in other markets.• For many multinationals, their China sales alone generate revenue in excess of USD 1 billion.• India was virtually untouched by the global financial crisis and is headed for double digit GDP growth this year.• 55 percent of India’s 1.2bn people are under the age of 35.• The past decade has seen a steady emergence of an educated, opinionated ‘middle class’ with rising

disposable incomes and strong consumption patterns. • Companies need a public affairs strategy appropriate to the new importance of Asian growth markets to global

business plans.

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Strategies for Success

Anticipating clouds on the horizon

• Inconsistent implementation of laws and regulations, a general lack of transparency, weak IPR enforcement, human resources issues, corruption and bureaucracy.

Adapting to an uneven playing field

• New anxieties about government policies favoring local players, particularly in those sectors heavily dependent on technology and innovation: renewable energy, advanced manufacturing, IT and biotechnology.

• The Chinese government wants local companies to go global, but its policies are focused on encouraging indigenous innovation and nurturing domestic champions.

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Strategies for success

Taking a more proactive approach

• goes beyond tracking regulatory changes. There are increasing opportunities to shape government regulations.

• this requires sustained outreach - effective advocacy can produce results.

Paying sufficient attention to all key stakeholders

• Not just government –and at the local level• Build local relationships • China and India are continents, not just countries – Delhi and Beijing do not call all the shots• Liberalisation can be multi-speed. Parts of the economy in India (media, telecom and healthcare) are opening up, others, which are just opening or yet to liberalise (financial

services, multi-brand retail, real estate, defense).

Articulating business goals in ways that resonate with the policy goals of the country's leadership

• Tax revenues and job creation are welcome but not enough.

Foreign firms that wish to succeed in China must have a public affairs strategy that responds to this evolving business environment and supports business success. The key elements of this strategy include:

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Strategies for success

Embracing the issue agenda – to demonstate alignment and engagement with national priorities

• food shortages, corruption energy security, the lack of social security, adequate education facilities, low cost housing, employment and access to credit, particularly in the farm sector

Expanding CSR programs – constructive partnerships amplify a corporate coms strategy

• to show that you understand the importance of national and not just corporate objectives• to demonstrate that you are giving back to the community• to recruit and retain staff

Recognising the growing influence of social media

• China has more Internet users than any country in the world and the online world is quickly becoming an empowering force for Chinese citizens.

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Brad Staples, president, internationalbstaples@apcoworldwide.com

Follow us: @APCOWorldwidewww.apcoworldwide.com