Category Archives: Asia Pacific

Business confidence in the Middle East and Africa trailing Europe

Can there be anywhere in the world less confident about its business prospects than Europe right now? Most people would answer that question with an emphatic ‘no’. But, during our recent annual conference in London, we polled the 280 delegates – from all corners of the globe – and got some contrary and interesting views.

36% of RSM members in Europe categorised business confidence in their respective countries as ‘good’ or ‘very good’. Surprisingly, both Africa and the Middle East scored lower than Europe on business confidence, despite many countries in those regions experiencing relatively high levels of economic growth. Just 25% and 22% of accounting professionals respectively in those regions rated business confidence as ‘good’ or ‘very good’.

Needless to say, business confidence is absolutely critical. If businesses do not feel optimistic, they will be reluctant to invest. As we all know, increased capital spending by private businesses will be needed to kick-start growth, but many organisations across Europe are still in cost-cutting mode.

Contrast this with Africa, where many economies are growing strongly. Confidence is relative of course, so it’s entirely possible to be less bullish despite a more favourable economic reality. The fortunes of African economies are closely tied to demand from the U.S., Europe and China, but with demand muted, and commodity prices falling, many African economies are facing growing headwinds.

Within Europe the picture is polarised. Whilst 62% of delegates from RSM Germany rated confidence as ‘good’ or ‘very good’, business confidence from UK delegates is significantly below the European average, with only the Spanish more pessimistic about their economic prospects among major European economies. Just 9% of RSM delegates from the UK ranked business confidence as either ‘good’ or ‘very good’, whereas RSM members from Spain are the most pessimistic among the five major European economies, with none rating business confidence as ‘good’ or ‘very good’.

70% of RSM members in the Americas and 66% in Asia/Asia Pacific rated business confidence as ‘good’ or ‘very good’. It’s a little surprising to see confidence in the Americas higher than Asia, but then Americans are known for their optimism, and with the prospect of energy self-sufficiency in the U.S. a growing possibility, there is good reason for feeling positive. Energy is one of the largest input costs for manufacturing businesses, so the shale gas boom could provide a much-needed competitive boost to U.S. industry.

Looking forward to 2013, 42% of RSM members in Europe think business confidence will decline over the next 12 months. Only African RSM members are less optimistic: just 25% thought confidence would improve, compared to 36% of Europeans.

RSM members have their fingers directly on the pulse of businesses in their respective countries, so this survey provides a fascinating overview of economic vitality. 2012 has been a tough year for the global economy, but there is reason to hope that the prognosis for 2013 will be a little better.

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Filed under Africa, Asia Pacific, Business confidence, Economy, Europe, General, Latin America, Middle East and North Africa, North America

Global business confidence – a local perspective from Hong Kong & China

The latest FT/Economist Global Business Barometer indicated a fall in confidence among businesses around the world. More than a third of respondents expect conditions to worsen. This survey data was captured before the US rating downgrade by S&P and the latest default worries in the Eurozone – and we can only guess what that confidence level would be like today. These surveys are at best an interesting insight into macro trend, rather than the more important matters of what is actually happening on the ground. Different countries have different challenges – and different insights.

I have just returned from a trip to China visiting RSM International’s offices in the region, and so I took the opportunity to ask the RSM team there and in Hong Kong about how they view the global economy and how they expect it to impact their markets. It is crucial in our business to understand these diverse pressures and ensure they are planned for.

Our teams in China and Hong Kong provided me with a range of opinions that on balance saw positivity for the future. However, they do have medium-term concerns about the impact of a US and European slowdown.  I wanted to share these insights and have summarised some of the key themes below:

On sustainability of China’s growth

China is an economic powerhouse fuelled on exports and companies involved in the export business to US and Europe will be affected by a slow down. An interesting insight from our RSM team in China is that this would be offset to a degree as China expands its internal consumption market, which will continue to fuel the economy.

On currency inflation & the property market

Currency inflation is another concern. Hong Kong dollars are pegged to US dollars thus the continuous devaluation of USD will lead to higher inflation in Hong Kong. This is likely to have an effect on the Hong Kong property market which is supported by the low interest rate regime. Last week, on a day when the stock market dipped 10% there was an unusually poor response to a public land auction. The property market in Hong Kong is a strong indicator for the optimism and confidence of Hong Kong consumers, businessmen and investors. Our team hope that the recent US announcement to maintain low interest rates over the next two years will help stabilise the property market, and provide that foundation of confidence on which the rest of the economy can base itself.

General business outlook

The slow recovery of major western economies will definitely slow down the export sector and transport sector in Hong Kong for the next twelve to eighteen months. The business outlook will slow down compared to the last eighteen months. Business will continue to grow but at a slower rate – and may be buffeted by economic changes impacting on political risk. There is always a concern of social unrest during times of economic uncertainty (UK being a recent case in point!) and changes in political leadership can also add to uncertainties to the global economy and business conditions.

These local perspectives may resonate with all of us in our own markets and I am glad that our common response is to get out there and create positives for our business. Throughout my travels I am consistently impressed by the measures taken by RSM member firms to get closer to their client’s business and understand more about the impact of economic and social change. There is no doubt that in this business to be truly effective we have to continue developing new products and services adapting quickly to our clients changing needs.

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Filed under Asia Pacific, Economy, Effective business

Emerging markets tunnel vision: Don’t forget about Latin America

China’s booming economy continues to grow at a considerable rate and has helped pull much of the global economy away from the worst of the financial crisis. India’s youthful population has also buoyed many Western economists’ forecasts of continued economic growth. This sustained focus on Asia’s economic performance has meant other emerging economies Brazil, in particular, and Russia, to a lesser extent, have found it hard to have a profile in the pantheon of emerging markets. It is as if BRIC has become IC.

Russia has its own economic idiosyncrasies, which have made it less attractive to investors than its Asian counterparts.

Yet markets in Latin America, like Brazil and Mexico, have similar positive growth prospects yet far less profile than Asian economies. Mexico grew at almost 6% in 2010 and its close proximity to the US provides a powerful stimulant to its economy.

Brazil’s economy soared last year with 7.5% growth and it’s expected to grow 4.5% this year. Its population is forecast to hit 217 million by 2030. Resource rich Brazil today is a major world supplier of commodities and natural resources. The country will also now play host to two of the world’s largest international sporting events – the World Cup in 2014 and the Olympics in 2016 –   global events which will perhaps give this emerging economy the global recognition it deserves.

While China and India will remain vitally important markets, the likes of Mexico and Brazil should not be overlooked. Recovering economies and strong links with the US mean these two countries will continue to provide significant investment opportunities as their financial markets mature. We need to banish the emerging markets tunnel vision and remember the opportunity in Latin America.

Click here to listen to the BBC’s report on the prospects for Brazil’s economic boom continuing.

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Filed under Asia Pacific, Economy, General, Latin America, RSM Regions

Chinese economic growth bears expensive fruit

Sometimes you have to look at the small stuff to understand the complexity of economic growth. My latest trip to China was eye opening. The cost of everyday items, such as the price of fruit has risen significantly this year – by all accounts some 31% in the past 12 months (consumer prices were up 5% in the year to March). With economic growth of 9.7% the Chinese government is in an epic battle to rein in inflationary pressures, pressures that are having an effect on the wallets of the Chinese.

China has raised interest rates four times and banks’ reserve requirements seven times since October 2010, when it declared it would make fighting inflation a priority.

A further implication for unchecked Chinese inflation is in trade.

US-China trade has risen exponentially over the past thirty years – from $2 billion in 1980 to around £460 billion in 2010. This has culminated in a record US trade deficit estimated at $273 billion in 2010.

The basics are simple – China’s large population and booming economy have made it a large and growing market for US exporters. In turn, the US imports low cost goods from China.

High inflation in China poses a significant threat to China’s status as the low-cost production centre of the world, with many US firms depending on China operations for growth.

Wages are surging particularly among foreign invested firms in coastal regions, which is leading to some firms questioning whether they can continue to operate profitably in China or seek a move to a lower-wage country. This is exacerbated by a decline in surplus labour which has led to firms paying staff more money to remain competitive.

Inflation will always be of concern to any government, but it seems China has some major battles to win, and fast if it is to remain a powerhouse of world manufacturing.


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Filed under Asia Pacific, Economy

The client-consultant relationship

On a daily basis I am reminded how fortunate I am to work with such a diverse range of personalities that comes with working in an international network – and particularly those that make up the extended RSM International network.

I recognise that many people think of accountancy as a ‘number’ industry, and while it certainly does involve having a head for figures, it takes more than a mathematician to crack the consultancy field. The very nature of ‘consultancy’ is built on the concept of relationships and trust, and to me accountancy is very much a ‘people’ business.

The economic crisis has certainly caused the public to distrust institutions – whether they are banks, businesses, regulators or government – and I wonder, has the client-consultant relationship changed at all because of it?

The Edelman Trust Barometer, which looks at credibility in business, shows that for most people values based on trust and transparency are as important as a company’s quality of products and services.

During my recent visit to China, the importance of these relationships for success in businesses became very clear. Business often occurs outside of normal working hours and isn’t complete without at least one trip to a restaurant or bar.  The business and social relationship is inevitably intertwined – the more you share your personal life (including family, hobbies, political views, aspirations), the closer you are in your business relationship.  Both parties want to be sure they understand and trust one another.

All clients have needs, concerns and aspirations that reach beyond the basic accounting needs of businesses. And, at the same time, they are sharing some of their most confidential information to be analysed and assessed with outsiders. It certainly makes sense then for the client – consultant relationship to build through harmonious personalities and mutual trust.  I know that our professionals within the RSM network endeavour to offer not only high quality consulting and professional services, but they take a journey with their client on their road to success and are privileged to do so.

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Filed under Asia Pacific, Management, People

Inspired by India

I just returned from a trip to Mumbai where I spent two days exploring the growth opportunities in India with the leaders of our member firm, RSM Astute Consulting*. Mumbai is very well known for its high energy and excitement and this trip certainly proved it no different. The positive energy generated from the people, in the offices and on the streets, is unbridled. One cannot help but leave feeling reinvigorated. The depth of the topics discussed, the forward thinking apparent in our discussions, and the patient and persistent manner in which plans are executed are all inspiring.   
  
Throughout my 15 years with RSM, I have probably travelled to India at least once per year and through these years, met with many of the accounting professionals and business leaders in all of the major Indian cities. There certainly exists a depth of culture that pervades all aspects of life and an entrepreneurial spirit that is clearly prevalent. There are many Indian business success stories which we have all read about.   
  
The country, as with many others globally, is facing some challenges – inflation has been on the rise with food prices most affected, the newspapers are full of reports on uncertainty with regard to corporate governance investigations, and an overhaul of the tax system at a state and national level is being discussed. The GDP growth rate continues to be high, projected at 8.4%, and there are no doubt challenges and pressures in order for the rate to be sustained at a level which provides for the vast population. These are being addressed at the national level and it was clear to me during my visit that there is a seriousness about ensuring India is a leader on the world stage.   
  
The opportunities in India are there – the business success stories will, no doubt, continue to develop and even more world business leaders will rise. It really doesn’t get more exciting than this.   
  
  
*RSM Astute Group, with over 800 personnel, is collectively the fifth largest firm in India.

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Filed under Asia Pacific, Economy, People