John F. Welch College of Business

1. John F. Welch College of Business Doing Business in Asia:Opportunities & Pitfalls Presented to theBritish Chamber of CommerceLuxembourgTuesday, 22 May 2007 Dr. Balbir Bhasin Associate Professor of International Business Sacred Heart University

2. Global Trends False   True Asian Century?

3. The New Map of the World Asia’s the planet’s new culture of hope. Europe and America are divided by a common culture of fear. The Muslim world in a culture of humiliation. “The Clash of Emotions” by Dominic Moisi, Senior Advisor, IFRI Paris In Foreign Affairs, Jan/Feb 2007 Vol.86-1

4. The Asian Century? “The 19th Century belonged to Europe, the 20th to America and the 21st will be the Asian century” Goldman Sach’s BRICS study predicts that by the year 2050, three of the four largest economies in the world will be Asian: China, USA, India and Japan (in that order) and no European economy will be among the top four. Source: Kishore Mahbubani to the Singapore Chinese Chamber of Commerce and Industry 21 March 2007

5. Share of the World GDP(% of total) Source: Reaching for a Renaissance The Economist, March 29, 2007 from IMF

6. World economy will slow from 5.1% in 2006 to 4.8% in 2007 (IMF) US economy is slowing down (consumer confidence, housing prices, rising interest rates) Current exchange rate of $1.30 per Euro may adjust to 1.40 or even fall further German growth helped the Euro area grow faster than the US for the first time in 10 years China’s economy again grew extraordinarily in 2006 – by 10.7% Central banks of Japan, China, Singapore and Taiwan hold $2.8 trillion of US treasury bonds World Economic Outlook 2007 PricewaterhourseCoopers for World Economic Forum, Davos, Switzerland. - 24-28 January 2007

7. World Economic ProjectionsGrowth rate of GDP (% per year) IMF: World Economic Outlook Projections Revised for 2007 and 2008

8. Global Trends: Outlook for AsiaGrowth rate of GDP (% per year) Source: Asian Development Outlook 2007 http://www.adb.org/Documents/Books/ADO/2007/ADO-growth-rate.pdf

9. Emerging Markets Where the Opportunities are

11. Booming Emerging Markets

12. Why Asia Holds a Special Interest • Asian market growth = emergence of world’s largest new middle class (half billion?) • Asia as a source of highly educated, skilled labor (at low cost up to now) • Result: Asia has special place in business globalization (supply chains) • Result: Asia is becoming a world incubator for new high-tech businesses

13. Advantages for Europe in Asia Recent Developments

14. Opportunities for Europe • Unsaturated export markets with over 4 billion consumers and growing income • Cheap labor allows sourcing from and investing in the region • Manufacturing (in China) and Services (in India) – now represent over 50% GDP • The demand for technology and know-how from Europe is tremendous: science and technology, infrastructure, energy, water, transport, environment, and financial services Source: ADB, European Representative Office, 18 Jan 2006

15. European Commission Identifies Major Opportunities in China by 2010 • EU study in Feb 2007 sees huge opportunities for exports to China • China’s middle class expected to number 150 million • Green technology – worth 98 billion Euro • High value consumer goods – 1 trillion Euro • Business to business services – 500 billion Euro Source: Xinhua – 21 February 2007

16. European Bull and the Asian Tiger:What Must Europe and Asia Do? • Europe must help develop Asia • Long industrial tradition and efficient system for keeping a free market economy. Europe has a strong banking sector, a strong corporate governance system, legal stability and a welfare system allowing the population to benefit from economic success • Asia can and wants to learn from Europe • Learn to combine rapid economic growth with environmental protection, energy efficiency, balanced urban growth and sustainable rural development • Learn to better use its huge foreign exchange reserves and regional savings for creating global balances Source: ADB, European Representative Office, 18 Jan 2006

17. Key Challenges for Asia • Implementing reforms to boost productivity growth in increasingly important service sectors. • Providing policy support for conducting the shift of resources from agriculture to industry and services. • Strengthening policy frameworks in late-developing countries. Source: Asia Rising: Patterns of Economic Development and Growth, World Economic Outlook, September 2006

18. Getting Asia Right Bridging the Culture Gap

19. A Most Recent Example of Cross-Cultural Frustration How does an ang-moh deal with 'late' culture?Apr 24, 2007 The Straits Times ONE of the most interesting things about being an expatriate living in Singapore is experiencing the fascinating differences between Western and Asian cultures. One of the more striking differences is our polar-opposite views regarding confronting people. Whereas in Western culture we have no qualms about confronting people if we feel they have done the wrong thing, in Asian culture it is considered rude and embarrassing to confront someone or to show frustration and annoyance. I want to assimilate and desperately need advice on how to deal with unacceptable service levels. How do I deal with the tradesman who turns up hours late, or not at all? How do I deal with delivery people who don't turn up or even call? How do I deal with restaurant delivery that promises my meal within one hour but delivers it 31/2 hours later? When I call to complain, I am usually told 'never mind, soon, soon'. The problem is that I do mind. After waiting around for hours I am frustrated and annoyed. How does one deal with these situations? Please help this rather-baffled ang-moh. Gary Anthony

20. Iceberg of Culture

21. WEST External control Individual Equality Achievement Winning Pride Noise oriented Time is money Respect for results Respect competence Fact oriented Value Privacy Open Selfish Control Short term oriented Direct Independent Doing EAST Internal self control Communal Hierarchy Modesty Harmony Saving face Silence oriented Timeis life Respect for status Respect elders Truth oriented Nosy and curious Hypocritical Sharing Accept Long term oriented Indirect Interdependent Being The East West Divide:Up Close and Personal

22. Don’t look at markets solely through the lens of off-shoring and cost reduction Don’t build marketing strategies centered around just the rich cities and the top 5-10% of the population Getting Asia Right • Don’t choose your local partners naively • Don’t treat India and China (or Asia for that matter) as peripheral rather than core to the company’s global operations Source: Anil Gupta and Haiyan Wang WSJ, April 28, 2007

23. A Euro-Anniversary • March 25 marks the 50th anniversary of the Treaty of Rome. We have much to celebrate, but the future is hardly secure. • Yet economic growth remains fairly sluggish, labor productivity problematic, and competition generally feeble. • Rigid laws and regulations make it hard to create, change, and eliminate jobs. McKinsey & Company, 21 South Clark Street, Chicago, Special Report, March 21, 2007

24. Global Competitiveness

25. The Big Gap in Education: UK and China Source: Royal Society of Chemistry

26. World’s Most Competitive Countries Source: Business Week, May 14 2007 IMD World Competitiveness Yearbook May 10, 2007

27. Europe’s Response ASEM, AEBF and ASIA INVEST

28. Europe Asia Cooperation • ASEM – Asia Europe Meeting, every two years since 1996 – last in 2006 Helsinki, discuss political, economic, cultural • AEBF – Asia Europe Business Forum, every year – discuss trade, investment, financial services, infrastructure • ASIA INVEST I & II – Support European business activity in Asia – funding now 35m Euros

29. Asia-Invest II 2003-2007 EU-Asia business co-operation

30. Thanks Arigato – Gracias Xie Xie – Danke - Terimah KasehShukran - Dhanyawad - Khamsa Hamnida - Khawp Koon Moshakir - Spasibo - Grazie Evkaristo - Mahalo - Obrigado Merci