Doing Business in Asia

Jari Hietala

Finpro’s Global Network – Asia and Russia

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Finpro’s Global Network – Australia, Malaysia, Philippines and Singapore

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Sep 2009 © Finpro ry

Finpro’s Network in China

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The Importance of Asia For Finnish Companies

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WORLD GDP 2050

• According to Goldman Sachs, this is the most likely scenario of World GDP in 2050

– Note the position of Asian countries

2050

Asia and Finland in 2010

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Australia

China

Hong Kong

India

Indonesia Japan

Korea Malaysia

Philippines Singapore Thailand Vietnam

Finland

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GDP based on PPP per capita (thousands)

Asia and Middle East in 2010

The bubble size indicates GDP based on PPP in 2010. The bubble size indicates also the country's share of the total GDP

of all countries included in the graph.

Source: IMF, World Economic Outlook, September 2011 Note: Amounts in current international dollar

Asia 2016

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Source: IMF, World Economic Outlook, Sept 2011 Note: Amounts in current international dollar

Australia

China

Hong Kong

India

IndonesiaJapan

South KoreaMalaysia

Philippines Saudi Arabia SingaporeThailand UAE

Vietnam

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GDP based on PPP per capita (thousands)

Asia and Middle East in 2016E

The bubble size indicates GDP based on PPP in 2010. The bubble size indicates

also the country's share of the total GDP of all countries included in the graph.

Special Charasterics of Asian Markets

• There is no one homogenous Asian market – analyze and select the right markets for your company and products

• There is one common feature in all Asian markets: the Chinese business culture – it’s not what you know but who you know – invest to establish and maintain your personal contact network, Guanxi

• There are a lot of so called “opportunistic” trading houses, which are eagerly looking for principals and suppliers from all over the world for example at trade fairs

– It is not a big challenge to find a sales channel representative for any company – the real challenge is to get business going

• Often the channel partners would like to represent your products in several markets in Asia. Watch out as this has very seldom proved to be successful

• Verify your partners’ Guanxi • There are also several Finnish (and European) channel partners available –

easy and safe option perhaps, but how does your end customer value them compared to truly local companies?

• Asia is full of trading houses whose main sales argument is the price – it is challenging to find partners capable for value selling

Marine Cluster – East Asia

• China – New vessels – Value added vessels

• Cruise ships – Marine equipment manufacturing – Offshore oil & gas facilities

• Bulk ships and container ships • Liquefied natural gas storage

tanks • Japan

– Port development and re-building – Bulk ships and container ships

• South Korea

– Ship ICT – Arctic know-how – Green ship solutions such as

eNavigation – Offshore equipment &

components

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China’s evolving shipbuilding industry “The shipbuilding industry has undergone vast development during the 11th Five-Year Plan (2006-10). Chinese shipyards surpassed South Korea to become the world's top manufacturer in terms of new deliveries, new orders and outstanding orders” “The Chinese shipbuilding sector is reportedly on the cusp of evolving - and seeking to increase the share of, for instance, container ships and liquefied natural gas storage tanks” http://europe.chinadaily.com.cn/epaper/2012-05/11/content_15269649.htm

Marine Cluster – South East Asia

• Australia – Commercial shipbuilding – Military naval vessels – Repair sector

• Container ships, cruise liners etc • Indonesia

– Auxiliary equipment production – Navy and Coast Guard – Port development and waterways

development in general – Ship IT, design, equipment for

shipyards, training software and some offshore applications

– Modernization of production/management of large state owned shipyards

• Malaysia

– Innovative design, power engineering and cutting edge technologies

– Defence related sector, particularly the EW sector

• Philippines – Auxiliary equipment – Software and simulation systems – Design, port facilities,

management tools

• Singapore – Electronics communication and

navigation, automation precision machining, and corrosion control

– Diesel engines and turbochargers – Ship design and consultancy,

marine inspection and surveying

• Vietnam – 5th biggest shipbuilding country in

the world

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Paper and Pulp Industry – East Asia

• China – R&D and education – Chemical agents – Electronics – Metal manufacturing – Transportation – Equipment manufacturing – Packaging industry

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Paper industry on track to grow “The country's paper industry is poised for further strategic growth this year under the ongoing framework of China's 12th Five-Year Plan (2011-2015), which encourages fundamental structural reforms to accelerate the industry's development.” “The government's plan explicitly labeled the paper industry a new source of economic growth that positively drives related businesses. The plan provides that China's paper industry should step up structural reforms in order to transform its paper enterprises into sustainable modern businesses.” http://usa.chinadaily.com.cn/epaper/2012-05/03/content_15198925.htm

Paper and Pulp Industry – South East Asia

• Indonesia – Large existing P&P and forestry industry with well known

players for Finnish suppliers. Upgrading and process improvements ongoing on several sites

• Malaysia – Sarawak area cheap energy – Large scale pulp mills in the east – Technology suppliers

• Vietnam

– P&P industry lacking raw material – New small scale plantations profiligating – Equipment for mechanical wood working industry and

some upgrading of the existing P&P facilities

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Oil and Gas Industry – South East Asia

• Australia – Skills and training – Infrastructure suppliers – Technology supplier – LNG projects – Transports and logistics

infrastructure

• Indonesia – Offshore oil and gas production – Support equipment related

• Malaysia – Engineering services – Geotechnical resource centre – Energy efficiency – Oil storage – Exploration

• Philippines, Vietnam, Burma, Cambodia and Thailand have some Oil and Gas industry – mostly for domestic consumption

• Singapore is a hub for many multinationals and for design and also a location for supply companies to the industry

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Oil and gas might be the next big thing “Kuala Lumpur: In a report last week, CIMB Research said oil and gas companies are expected to post their record high earnings this year. Much of the research house optimism is tied to Petroliam Nasional Bhd’s (Petronas) plan to boost output by developing new and marginal fields. As early as last mont, Petronas had announced that it plans to incest up to RM300 billion over the next five years, or up to RM60 billion a year, to develop new fields, and initiatives to develop marginal fields“ http://www.btimes.com.my/Current_News/BTIMES/articles/ong29/Article/

Renewable Energy – East Asia

• China – Energy efficiency technologies – ESCO / EMC business in

process industry – Recycling and waste

management – Advanced nuclear energy – Biomass – Re-forestation and sustainable

use of forests – Wind energy – Solar power – Hybrid and pure electric vehicles – Heat pump technologies

• Heat sources: waste heat, water, ground, air

– Water source heat pump technologies

– Smart grids • System integration • Telecommunication solutions

– Energy efficient urbanization and building

• South Korea – Solar cells – Windmills – Smart grid – Lithium batteries

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Winds of change blow through China “World's biggest polluter spends £4bn a year on wind and solar power generation in single region as it aims to cut fossil fuel use.” “Jiuquan alone now has the capacity to generate 6GW of wind energy – roughly equivalent to that of the whole UK. The plan is to more than triple that by 2015, when this area could become the biggest windfarm in the world.” “- plan to supply 15% of the country's energy from alternative and renewable sources by 2020.” http://www.guardian.co.uk/world/2012/mar/19/china-windfarms-renewable-energy

Renewable Energy – South East Asia

• Indonesia – Biomass related opportunities

• Malaysia

– Up to € 400 million soft loans available for RE projects

– Solar – Biomass – Biogas – Mini-Hydro – Solid Waste

• Philippines

– Geothermal – Hydropower – Biomass – Wind, solar and ocean energy

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Palm oil industry in Malaysia “The palm oil industry has considerable potential to support the nation's economy through the provision of renewable energy as well as through traditional export of agriculture commodities.” “The challenge for this industry, is to organise economical logistics to make sure that the biomass are collected and brought to a central factory or processing plant, while at the same time, providing opportunities to generate new jobs and create new business opportunities.” “Malaysia and Indonesia currently account for 87 percent of the world’s palm oil production” http://www.btimes.com.my/Current_News/BTIMES/articles/palmo/Article/ http://www.btimes.com.my/Current_News/BTIMES/articles/8MUMBAI/Article/

Municipal Solid Waste – East Asia

• China – WWTP sludge and urban water

body (river and lake) sediment dewatering

– Economical & ecological energy recovery

• Further processing of the solids with economical and ecological benefits

– Smart and intelligent MSW collection and transportation

• Carrier capacity, higher processing and storage capacity

• Smart waste transportation i.e. pneumatic in specialized areas or industrial sectors.

– Optimization or upgrade of MSW-to-energy incineration plants

• Burning efficiency with higher energy output

• Dioxin online measurement in the furnace stack is a hot issue

– Kitchen waste processing and treatment

• Onsite kitchen waste disposal in urban areas

• South Korea – Vacuum waste collection market – Composting facilities – Energy plants – World’s largest Foster Wheeler

4x550MW

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Municipal Solid Waste – South East Asia

• Malaysia – Solid Waste Management – Integrated Municipal Solid Waste Facility – Waste To Energy – Incinerators – Industrial Furnaces – Turnkey Projects

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Health ministry cleans up wet markets in Jakarta "In close cooperation with the Trade Ministry, the Health Ministry is making efforts to improve sanitation in traditional wet markets under the “Pasar Sehat” (healthy wet market) initiative. Under the program, eight new wet markets have been opened, which cost the Health Ministry Rp 994 million (US$ 105,364).Under the program, each traditional market receives Rp 45 million.Some of the wet markets targeted in the program include one in Samosir, North Sumatra, and another in Sikka, East Nusa Tenggara. “It’s not a lot of money, but enough to fix the plumbing, sewer and waste treatment facilities” The Health Ministry has increased the budget for the program to Rp 1.5 billion for 2013.” http://www.thejakartapost.com/news/2012/07/30/health-ministry-cleans-wet-markets-considered-breeding-ground-disease.html

Software and Digital Media – East Asia

• China – Mobility & TMT market – Wireless devices and

cloud based applications – Digitainment &

Entertainment – Intelligent automation – IoT – OEM & ODM

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China Mobility and TMT Markets Developing Rapidly "TMT, mobility, and technology companies continue to seek effective methods to enter and expand in the China market. This includes effective alliances & partnering and increasingly strategic investments and M&A…” “Now with over 800 million mobile subscribers and 400 + million internet users the China TMT, Mobility, and Digital Media opportunities for foreign and Chinese players are significant and growing. “ http://www2.prnewswire.co.uk/cgi/news/release?id=236440

Software and Digital Media – South East Asia

• Malaysia – Multimedia Super

Corridor – Talented developers and

engineers – Tele-health – E-Government – Smart Schools

• Philippines – Software development – Applications development

and maintenance – IT operations and

infrastructure – business analysis, project

management, education – Animation & game

development • 2D, 3D, Maya, 3D

Max, Medical/Educational Graphics & Animation

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Service Industries – East Asia

• China – Education (reform ongoing)

• Teacher training • Adult education • Educational solutions

– Outbound tourism – Architecture – Engineering services, industrial

design – Consumer design products – BPO

• South Korea

– The market is opening due to the FTA’s

• Marine services and education. – Increased awareness and

interest in the Finnish education system from Korean side. The market is extremely large in Korea

• Care services

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Departures (million)

Expenditure (billionUSD)

International Tourism Expenditure of Residents and International Departures

BMI China tourism report Q3/2011

Service Industries – South East Asia

• Malaysia – Tourism – Higher Education – Vocational training – Engineering services – Outsourcing – Complete Logistics value

chain

• Philippines – Globally number 1 in

voice, number 2 in non-voice and complex IT/BPO services

– Contact centers – Back-office operations – Knowledge-process

outsourcing – Software development,

animation & game development

– Engineering design

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Life Sciences – East Asia

• China – Food safety (tainted food & food

diagnostics) – Food chain, traceability & RFID

application – Contract Research & Manufacturing – Cancer early diagnosis and therapy – Modernization of Traditional

Chinese Medicine (TCM) – Sports Industry: health concept,

fitness in fashion – Dental / mouth care in China – Rural Healthcare, telemedicine,

sensor application – Biomaterials & implants – Medical waste disposal solution – Reforming of medicine distribution

channels & hospital management – Textile and garment sourcing in

China – Occupational health/health

promotion – Digital health care/home care

• South Korea – Food (functional) – Interior materials & Design

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Life sciences enter top sectors ranking for foreign investment "With its growing and youngest population in the world, the Asian continent offers great business opportunities to global pharma, medical and healthcare companies. To effectively respond to the growing demand for healthcare, Eli Lilly, Lonza Group, Novartis, Merck KGaA, Novo Nordisk, Pfizer, they all further consolidated their presence in the Chinese market. Shanghai figures as the most attractive destination in the country, followed by Beijing and Hong Kong, where also the presence of top research institutions guarantees good availability of skilled labour.” www.life-science.se/se/74

Life Sciences – South East Asia

• Indonesia – Health care coverage for all

citizens to be implemented by January 2014 and other social security benefits for workers by July 2015 at the latest

– Middle class thriving for better medical care

– Diagnostics, rural healthcare • Malaysia

– Medical Devices – Biomaterials and implants – High-tech Diagnostic Systems – Early detection methods – Rural Healthcare, telemedicine,

sensor application – Medical waste disposal solution

• Philippines – Construction and upgrade of

hospital buildings and facilities – Purchase and supply of modern

hospital equipment, furniture and fixtures

– Installation of a comprehensive hospital IT system

– Medical tourism – world class hospitals

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Thank You!

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