Things can only get better

Asia
has a lot of business potential for multinationals. And the culture in the
region is starting to change for the better, says Ed Peters

Multinationals
seeking to take a dive into Asian waters need to look before they leap,
although most of the major multinationals are in the region already – in one
form or another. The most popular country in the region appears to be China.
Indeed, China’s admission to the World Trade Organisation is provoking a
stampede of smaller and medium-sized companies (from suppliers and contractors
to the law firms and multinationals). US real estate companies are also
suddenly waking up to the potential Asia has to offer.

Those
multinationals wanting to enter into this region for the first time should be
aware that they will encounter many HR challenges. The region is a crossroads
of cultures; its many different countries are at vastly different levels of
development; and financial upheavals may well be on the horizon.

On
top of this, local politics can add spice to an already precarious situation.
For example, at one stage the Indonesian government was considering legislation
which decreed that no corporation could employ more than three foreigners. The
scheme was little more than a pre-election vote catcher, but it did cause various
multinationals – who would have been unable to continue operations without
their full complement of expatriate executives – more than a little heartache.

This
example serves to illustrate one of the major problems multinationals can
expect to encounter: the pool of labour – apart from the inexpensive manual
kind – is limited. While Asians place a high value on education, local
resources are often insufficient, whether because of poor funding or inadequate
teaching methods. Foreign study is highly prized, but those lucky and clever
enough to attend school overseas very often stay put once they have graduated,
or come home to start their own businesses. Multinationals are thus often faced
with the choice of a painstaking local headhunt and possibly having to train up
new recruits into the bargain, or bringing in staff from abroad, with all the
extra expense that entails.

John
Ambler of the New York-based Social Science Research Council has made an
extensive study of the problem of Asian educational practices. "Asia is
not alone in placing great respect on the teacher. However, while rote learning
facilitates the transmission of state values and doctrine and facts, it does
not encourage creative thinking and problem solving," he says.

"Criticism
and scepticism are threatening to societies which see educational systems as
mechanisms for social control, but it is the critics and the sceptics who will
become the problem solvers that Asia needs to stay competitive in a world
market and to handle the new social and technical issues arising from rapid
change within its societies," he adds.

Ambler
also points out that skill levels need to be increased if Asian countries are
to move from labour-intensive to skill-intensive industries, and not simply
rely on attracting multinationals through cheap rents and staff costs.
Thailand, for example, has the infrastructure for continued growth but suffers
from a lack of skilled personnel, which in turn hampers its ability to bring in
new investment. "Management talent, which requires integrative thinking
and initiative, will be in short supply as many Asian countries that have based
their economies on cheap labour try to make the jump to more value-added
industry," he notes.

Labour
laws can also provoke problems. A certain xenophobia prevails in most Asian
countries, with multinationals welcomed for the business they bring in yet
resented solely on the grounds that they are foreign. This is even the case in
countries like Thailand, which has never been colonised. In South Korea, the
port manager for an international airline was once flabbergasted by a demand
from the union leader that all the local staff should receive an immediate pay
rise to compensate for the "indignity" of working for a foreign
corporation. And even when disputes get taken to court, the judiciary often
sides with the local underdog, as multinationals are seen as having a lot of
money, so it won’t hurt them to pay some more to their relatively impoverished
employees.

While
Korea and Thailand are more developed than some of their neighbours, countries
like Vietnam can provide examples of business practice that apply to
multinationals right across the region. Irwin Jay Robinson, an international
trade lawyer based in the US who has had long experience of business dealings
in Vietnam, offers a number of pointers for multinationals thinking of basing
themselves in the country, but who want to "lose a little less
money".

"It’s
vital to select tough, experienced, ‘Asia-smart’ management staff for any major
project," he says. "Doing business in Vietnam is so complicated that
the educational experience can be costly – it’s by no means a place for
weaklings or beginners."

He
adds that once in place, managers should be savvy enough to wring every
possible tax concession and tax benefit available under Vietnamese law, with
the proper documentation from the appropriate national and local government
agencies, before they even think about going ahead with any investment.

"If
the managers are not tough enough to get everything they want – and they should
insist too that the foreign-language version of any agreement should prevail in
the case of a dispute – then the project will founder. Getting the right
manager is the key," he says.

Robinson’s
warnings are echoed by independent consultant Alun Lee Wing, who has worked for
a number of multinationals setting up in the People’s Republic of China (PRC).
Lee stresses that many corporations had moved into China because economic
restrictions had been lifted and a business culture was encouraged, but they
had then run up against unforeseen hurdles.

"Quite
a lot of companies think that it will be the same as doing business at home but
with fewer overheads – they couldn’t be more wrong," he says.
"Managers can get burnt out by the culture in China, as business operates
very much on who you know. Plus, it is only in the past couple of decades that
the PRC has started to look at things in a commercial light.

"A
lot of people who are working for state corporations are political appointees with
no idea of how to do business. Their reaction to a foreigner coming in to do a
deal with them is to back off and see what he or she has to offer. It can be
very frustrating to somebody from abroad with their eye on the bottom line!"

But
Lee does offer some hope for the future: "The culture is changing
gradually, and in fact, in China and all over Asia, there is a school of
thought that says the way of doing business doesn’t have to be just the local
way. "As long as Asia can avoid any more financial crises, and
multinationals continue to move into the region prepared to tackle HR and other
problems head on, business here can only get better."

Who’s
going where?

As
well as the multinationals – many of which are already in the region – law
firms and US real estate companies are making their way into Asia Pacific. The
most popular destinations are:


China


Thailand


Taiwan


Korea

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