To capture more growth, Asian firms expand abroad – study

MANILA, Philippines – Recent reports make the Philippines sound like the ideal place for a business to be, but several top companies realize expansion outside the country’s boarders is both inevitable and necessary for growth, explained a global consultant.

Four top businesses in the Philippines – conglomerate JG Summit Holdings Inc, drug maker United Laboratories (UNILAB), Philippine National Bank (PNB) and electronics firm Integrated Microelectronics Inc. (IMI) – were part of a recent study, Asian Trailblazers: The Accelerating Globalization of Asian Companies, by global consulting firm Towers Watson, which spoke with 104 Asian companies.

“Based on our conversations with participants, despite the buoyant economy happening right now, the local market is already a bit tight,” said the Managing Director of Towers Watson Philippines James G. Matti.

“Companies realize that the Philippines is a great market. Revenues are still here but they know that the only way to grow is to invest in the future,” he added, opting to speak on the study results than on individual company respondents.

For businesses in the Philippines and neighboring countries, the future lies largely in Asia.

All eyes towards Asia

Of the 11 South East Asian companies Towers Watson talked to, 90% counted China as an important source of future growth.

“For SEA trailblazers the main destination is China and it probably will be for the next decade,” said Scott Burnett, Towers Watson’s Managing Director for South East Asia.

Another 70% of companies identified emerging markets in Asia as importance areas for growth, while only 40% are looking to North America.

The results show that most Asian multinational companies want to expand outside their borders but inside the eastern sphere.

“Asia has emerged as a high-potential source of growth for multinational companies globally. The size of these markets, presence of human and natural resources, and incentives provided by governments for foreign investment have resulted in Asia becoming an attractive region for different types of investments,” said the report, which was culled from interviews between November of 2011 and January of 2012.

South East Asia’s approach to growth

Burnett explained that most South East Asian companies are more comfortable building their business in their home country before expanding abroad, compared to some Latin American companies which will develop directly in overseas markets.

“South East Asia is quite adept at leapfrogging to other countries we are quite more cautious than our neighbors, we like to begin in our home ground,” he said.

Matti believes going forward many Philippine companies will see more of their profit base coming from abroad. He cited port operator International Container Terminal Services Inc (ICTSI), led by businessman Enrique Razon, as an example.

“ICTS is a true Filipino multinational. In the past, roughly 3/4ths of their revenue is Manila based, now I think it’s down to 50%, I think going forward it’s going to be down to 35%. They realize that’s the way forward,” he said.

“Whether you like it or not we’re limited by our own geographical spread,” said Matti. – Rappler.com