ima asia ceo dialogues - issue 4 - spring 2015

ISSUE 4SPRING 2015

With the support of

The Productivity Issue

• Southco’s people-centric turnaround

• Is your company ready for the digital world?

• Big data and your property portfolio Ajit Melarkode

Rackspace where culture

eats strategy for breakfast

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Editor: Richard MartinContributing Editor: Mark MichelsonPublisher: Jerry McLeanContributor: Shannon [email protected] © 2015 IMA Asia

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IMA ASIA CEO DIALOGUES SPRING 2015

DEAR READER,Welcome to our fourth issue of CEO Dialogues. The last six months have seen some wild swings in oil prices, currencies as well as billionaire-minting stock markets. While on the political front we have been watching closely how Indonesia and India are faring with recently installed governments in place.

But the one constant our members face is the challenge of delivering the best corporate results in the face of complex conditions. We hope that you will find some insight and even some inspiration in this issue.

OUR UPCOMING OVERNIGHT EVENTSTwice a year we bring Asia Pacific leaders together for an overnight strategic discussion session. If you haven’t been to one yet or are returning, then mark Shanghai on October 21 and 22 in your diary. We’ll be emailing you with more in the coming months.

IN THIS ISSUEEach of the four articles in this issue tackle the thorny problem of how to boost productivity and get the most from your firm’s resources. You will find a spectrum of illuminating cases – from the traditional but often hard to master people-centric, cultural approaches, to the cutting edge and decidedly more hi tech data-centric, digitally disruptive method.

In our cover story, CEO Dialogues spoke with the inspirational Ajit Melarkode, vice president and managing director of Rackspace APAC. He reveals the steps he took to build a strong culture that delivers his company’s unique brand of ‘Fanatical Support’ and the laser focus he brought to bear on a regional strategy.

Mike Zhang, managing director of Southco Asia Pacific, also found results were not far behind his initiatives to take a people-centric approach. Looking to not only return to pre GFC levels of growth but to build a sustainable organisation to support it going forward, he took a three-step approach that led to meeting and exceeding his goals.

Identifying the prevailing trend affecting businesses today, EY asks businesses to consider: Are they ready for the digital world? The firm makes the important distinction that digital disruption is at its heart consumer driven, and sees digital technology as merely an enabler. The speed of change in the digital realm, to upload consumer preferences, will mean companies need to prepare for a continuous cycle of disruption.

And in a similar vein, JLL urges companies to consider the benefits a new world of data and analytics can bring to strategic real estate portfolio planning. With a wealth of data at their fingertips, the global real estate services firm shares how bringing business teams and real estate planning to the table together can deliver productivity boosting results.

Lastly, you will find some key numbers and charts to keep you abreast of ASEAN trade trends.

So, enjoy the read. CEO Dialogues will be with you again later this year as we prepare for our Shanghai Overnight in October. We hope to see all of you there.

Best,

Richard MartinManaging [email protected]

EDITOR’S HIGHLIGHTS /CONTENT

TABLE OF CONTENTS:

2 RACKSPACE: WHERE CULTURE EATS STRATEGY FOR BREAKFAST

5 SOUTHCO’S PEOPLE-CENTRIC TURNAROUND

7 IS YOUR COMPANY READY FOR THE DIGITAL WORLD?

9 THE NEXT FRONTIER FOR DATA ANALYTICS: YOUR PROPERTY PORTFOLIO

12 ASEAN IN STEP WITH THE WORLD

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IMA AsIA CEO DIAlOguEs Spring 2015

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where culture eats strategy for breakfast racksPace

Ajit Melarkode

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BEFORE COMING TO Hong Kong two years ago to head up Rackspace’s APAC division, Ajit Melarkode heard a lot of advice. He

was cautioned to be culturally extra sensitive with employees and customers alike, and to think about individual cultural strategies for each country in APAC.

But Melarkode wasn’t worried. “I’ve found that people are people everywhere,” he said.

From the outset Melarkode knew the only way to succeed would be to bring the beating heart of Rackspace to the fore — to deliver “Fanatical Support,” the company’s trademarked brand of services. He also knew that, to deliver exceptional support, he would have to cultivate an engaged workplace, so that employees or “Rackers,” would want to go the extra mile for their customers, and for one another.

“As our Chairman, Graham Weston says, ’What we all want is to be valued members of a winning team on an inspiring mission’”, added Melarkode.

Fanatical suPPortRackspace is ranked as the leading managed cloud service provider globally. Its approach differs from the big cloud providers, which essentially rent out access to raw IT infrastructure and expect the customers to fi gure out how to make it work.

The San Antonio-based company has a client roster that includes Domino’s Pizza, Under Armour and Tinder. In APAC, the fi rm lists clients such as the online retailer LightInTheBox.com, the world’s largest online matrimonial service, Shaadi.com, and Australian sportswear designer, Rip Curl.

Fanatical Support is not only about solving customers’ IT problems and providing mission critical hosting, according to Melarkode, “it is an attitude and culture that permeates the company.” In traditional companies, Customer Service is a department while Rackspace creates an environment where it permeates the whole company.

altituDe = attituDe + aPtituDeWhen you walk into the Rackspace offi ce in Hong Kong, the company’s vibrant culture is immediately visible - open plan format, fl ags for Rackers to hang above their desks and Nerf guns, which can be fi red at anyone including Melarkode. The overall soundscape can be best described as noisy and engaged.

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Rackspace hires for attitude and aptitude, as well as for technical skills.

The company is known for its exacting standards and selectivity, making on average one job offer for every 25 applicants in APAC.

“It means we may spend months interviewing candidates when it could theoretically be days,” he says. “We will always go for picking the number one candidate rather than settling for anything less.”

hoW to Make a racker Getting employees to deliver Fanatical Support requires more than just picking the right candidates. It also involves an inordinate amount of training: at least three months for every new hire and a standard on-boarding programme called “Rookie-O” which everyone attends, whether it be a director or an intern.

“We spend a lot on training,” Melarkode says. “The soft stuff — about serving customers, treating each other right, how we lead teams — is hard. You can’t cut and paste it. We obviously have a company strategy and that’s important, but we believe that culture eats strategy for breakfast.” For example, Rackers never work off a preset script and are trained as well as empowered to fi nd the right solutions for given situations.

To gain this level of commitment from employees involves something in return. Citing the infl uence of The Five Dysfunctions of a Team by Patrick Lencioni, Rackspace culture actively encourages ‘constructive dissent’ and ‘peer-to-peer’ accountability.

Given that the education system in most Asian countries discourages anything resembling constructive dissent, it would seem that this non-hierarchical approach would be near impossible to achieve.

living By an oPen Book Melarkode admits it was a challenge at fi rst to create a safe environment for being open. “It took 6 months. But once the open exchange of ideas started, there was no going back.” The key, he says, is to lead by example, as when he lets his staff see him openly pose pointed questions to the executive leadership from the US.

Transparency is another central element. The company practices an ‘open book’ policy, whereby each month the company’s strategy and fi nancials


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are shared with the entire office. Rackers are given the chance to openly challenge and question Melarkode’s decisions — an experience he says “I inordinately enjoy.”

After the meeting, every person in the office, led by Melarkode, chips in to return the 50-plus chairs back to where they belong. It’s a small example of the ‘servant leadership’ Melarkode works hard to deliver. “We all roll up our sleeves,” he says.

We like to say ‘thank you’ When it comes to rewarding employees for exceptional service, the company excels. It offers monthly paid vacations for top performers, whether

which countries would most help Rackspace drive long-term growth and profitability.

His second decision was to whittle down the company’s focus from many countries in APAC, to five. After a year of listening to clients and looking at the numbers, he whittled down the list again, going after three major regions: Greater China, India and ANZ.

“I’m often asked,” says Melarkode, “ “are you in so-and-so country?’’ We have customers we value in 20+ countries in the region, but we choose to focus our sales and marketing efforts,” he says. “I think focus is a big advantage in a region spanning nine time zones.”

they work in sales or operations. This level of investment pays off in a remarkable level of organisational commitment from employees, Melarkode says, “using frameworks like StrengthsFinder ensure that the right Rackers are in the right roles and teams are balanced in the right way for strengths.”

When employees felt more Mandarin-speakers were needed on the team, two Rackers stepped up to the challenge and set up a weekly, after-hours, Mandarin language course for the rest of the office, completely unpaid.

In these lean times, where productivity is the top priority for companies, Rackspace shows that investing in culture, often viewed as a luxury, can pay handsome returns. However, as much as Melarkode emphasises culture over strategy, he has nonetheless developed a very disciplined and focused approach to Asia and made three vital strategic decisions.

Focus is everythingOne of Melarkode’s first decisions was to determine

His third big decision was to concentrate on businesses that are exporting to and investing in the West, a high proportion of which are engaged in e-commerce.

This decision meant not focusing on just MNC players, even though Rackspace services almost 70%of the Fortune 500 and 40% of the FTSE 100. Rackspace decided not to focus on the purely local players, either, including the big guys.

“Again we took a contrarian call to focus on westbound businesses, ‘zou chuqu’ ( ) as the Chinese call it,” Melarkode says, “those coming out of China or India,” Melarkode explains. “When we first announced this, the audience was skeptical, but Ali Baba going west helped”!

It has not been an easy ride for Merlarkode, or for Rackspace, which in many ways is a David in a field of Goliaths. But underdogs can have the formula for success in both APAC and beyond. “The mission in APAC and the future is about making cloud computing accessible, real, valuable and fun. I’m going to be nothing less than Fanatical about it,” summed up Melarkode. n


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Southco’S people-centric turnaround

Mike Zhang

Facing a high hill to climb in the aftermath of the global financial crisis, Southco, a privately held US company,

found that it needed to develop a new approach toward its business and especially its people in the region. The company had had a bumpy ride during the crisis, like many other firms with a global reach, but when the economic recovery came, Southco aP was still struggling to get back on track.

Southco executives knew that asia would be an important growth engine and had invested heavily in operational excellence. They were in aP for the long haul. Southco aP had everything going for it, but the desired business results remained elusive.

That was the situation the soft-spoken Mike Zhang encountered when he joined 18 months ago. he was brought on board to mastermind a turnaround, and generate the kind numbers the company had been looking for.

Makers of sophisticated mechanical parts and systems known as ‘engineered touch-point solutions,’ Southco’s products can be found behind the fluid movement of a luxury car headrest and the quiet, satisfying feel of a glove compartment box latch that pops open with a touch.

One-third of its revenues come from new products. innovation, customer service and global footprint are key to its ability to stay ahead of the copycat competition.

it did not take long to determine that reorganisation or cuts were not a way back to growth. With the support of hQ and the board, Zhang decided that the best way forward was

to nurture the company’s best resources: its people.

“i had strong support from the board,” says Zhang, “asking me to drive the growth and saying, “tell us what sort of investment is needed to get there.””

a company with over 100 years’ history in the US, the Southco aP story started only 15 years ago. in the beginning, it followed its clients to the region to better meet their service requirements. The company later expanded operations with the establishment of engineering and manufacturing sites.

although Southco’s most sophisticated factory is in Shenzhen, the corporate culture within aPac had some catching up to do to match with the rest of the company.

“We are so new, we have had to do many things in a short period of time while also building a solid foundation in culture, organisation, teams and people,” said Zhang.

“We had to grow; we are in a growth region and operate at a certain scale here. But instead of handing down a top-down directive, saying asia had to grow by a certain percentage, we initiated a collaborative process,” he explained.

Tackling the asian diversity challenge was one piece of the puzzle. Southco has 1100 employees and numerous offices, distribution centers and factories, including engineering centers in china, Taiwan, Korea and most recently Japan. The leadership team is not in one location, but at sites across the region. This led to a core issue that had to be

CEO DIAlOguEs

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CEO DIAlOguEs

overcome: a lack of cross-functional collaboration, stemming from strong functions and weak regional management. There was high employee turnover, low employee engagement and less than optimal productivity.

Seeing the Same picture The first step to a solution was to find a shared vision for growth that would garner buy-in and support. Zhang recounts an early offsite meeting during which the leadership team was asked what growth they expected the company to achieve in the next five years.

“There was a huge difference in answers, ranging from from no growth to a variety of percentage growth targets,” he said. “nobody saw the same thing.”

“i asked, “Where are we going to be? how are we going to get there and an even more interesting question: What were the key issues we have to resolve?””

he found the answers varied from one extreme to another.

participatory change management Wanting to build ownership into the process from the outset, Zhang decided not to hire consultants to deliver a solution. instead, he found an experienced executive coach to help facilitate the team to find answers. Together they came up with targets that were ambitious and achievable.

“Our thinking was, as a growth engine, we have lots of opportunity that we were not previously able to capture,” says Zhang. “We went through lots of analysis and lessons learned to identify the gaps, done with key stakeholders and management.”

Today, he says, from board level to staff level, the objectives are understood and supported – in large part because it was a shared exercise to identify them.

This set the stage for the next big task: to develop a leadership team strongly aligned with the global Southco core principals and culture.

greater alignment with global The executive coach was brought in to work one-on-one with executives to develop a

common leadership practice that would be passed on to the whole organisation.

in came a new routine of regular meetings, (face-to-face or teleconference) and team building exercises that brought greater communication and, with it, trust and understanding - shrinking the geographical and functional divides.

“as part of the alignment with global, we changed how evaluations were done to build accountability and more clearly reward achievement,” said Zhang. “also, being rewarded together, and punished together, strengthened our regional focus.” This has led to an improvement in the trust between members, who today work together with less conflict, according to Zhang. “We challenge each other and work through the issue and try to build that accountability and commitment.” a return to double-digit growth…With these qualitative improvements, Zhang says that from a business point of view the execution is more solid and productivity has improved. “Overall we grew last year. aP was the fastest growing region in the company. We had a record year for both bottom line and top line growth,” says Zhang. “it was the first full year my team was leading in the region, and now we have double digit growth.”

…next up, building SuStainable growth. Zhang started out with a three-step plan: discover a shared vision of growth, develop the leadership team and improve the organisational alignment to better manage future growth, sustainably.

global connectivity is very important to Southco, which operates SaP and salesforce.com. Zhang is looking to build alignment to enhance greater fact-based decision-making in day-to-day operational execution “We are looking in the long term to be sustainable,” Zhang says. “We focus on our people, which means we want to inspire them, communicate to them that they have a valuable role to play and there is a future in which they can be a part.” n

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is your company reaDy for the Digital WorlD?

Richard suhr, Partner, Asia Pacifi c Digital leader at EY

tHERE IS one question that Richard Suhr, Partner, Asia Pacifi c Digital Leader at EY wants companies to think about: “Is your

corporate strategy fi t for a digital world?”

There is a lot at stake. Every industry in every country around the globe is experiencing some form of digital disruption: fi nancial services, consumer products, media and entertainment, oil and gas, power and utilities and technology. And even within industries — or within single organizations — digital is transforming business strategies, operating models and relationships with customers.

Although a constant barrage of new technology is partly responsible for driving this disruption, customers are the real disruptors. Whether it’s B2C, B2B or B2B2C, customers are demanding more services and products at an amazingly fast pace.

The question, says Suhr, is how your digital strategy is harnessing the value of your entire business, while also serving as a vehicle to plan and measure risk.

More so, how is it not only driving benefi t for your business today around customer, brand and effi ciency but also its potential to disrupt and create new business in the future?

the time is noW - Digital Disruption Won’t Wait Every day brings a new level of urgency. Where digital disruptions used to occur over the course of years and then months, today’s shifts can be counted in days. The most disruptive, viral technologies can now reach 50 million users in less than 35 days. 1

Netfl ix, Amazon, Uber and Airbnb are only some of the examples of companies that have completely altered their industry segments. And even within these organisations, innovations in technologies and business models have fundamentally shifted their own organisational ecosystems.

According to Constellation Research, “digital disruption has demolished 52% of the Fortune 500 since the year 2000.” 2 And according to Cisco’s chief technology offi cer, we haven’t even reached the tipping point of disruption as “only 1% of what could be connected in the world actually is connected.” 3 The number of internet-connected “things,” such as RFID chips and sensors, is expected to be 50 billion by 2020. 4

It is likely that organisations that take a wait-and-see approach to digital will fi nd themselves on the digitally demolished list. And while some organisations may be more digitally mature than others, few, if any, have mastered

1 “Reaching 50 Million Users,” Visual.ly website, visual.ly/reaching-50-million-users, accessed 16 February 2015.

2 Wang, R. “Ray,” “Big Ideas: Dominate Digital Disruption Before It Dominates You,” Constellation Research, 17 February 2014, www.constellationr.com/users/r-ray-wang?page=5.

3 Jennex, Murray, Knowledge Discovery, Transfer, and Management in the Information Age, IGI Global, 2014.

4 Burkitt, Frank, “A Strategist’s Guide to the Internet of Things,” strategy& (formerly Booz & Company), 10 November 2014, www.strategy-business.com/article/00294?pg=all.

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a holistic digital strategy.

Digital means continuous Disruption “Digital is a continuous form of disruption to existing business models, products, services or experiences enabled by data and technology across the enterprise,” says Suhr.

He relates the case of a leading retail bank that outperformed its competitors by being first to market in offering mobile check depositing. The service enabled banking customers to connect to their accounts using their smartphones, take a snapshot of their check and deposit the money without ever having to go to a branch or an ATM.

It proved so popular with customers that the bank’s competitors had to scramble to catch up. Many, surprised by the disruption, found themselves

unique impact on each organisation. Some will choose to sustain, making only incremental improvements to existing solutions and protect core value propositions. Others will take what EY calls an adjacent approach, expanding a core value proposition that may alter the competitive environment.

But to be truly disruptive, is to redefine, disrupt the core and potentially deliver an entirely new value proposition that turns the market on its head. Suhr recommends companies taking a holistic approach when fitting a business strategy to the digital world. Digital will impact every facet of an organization. As such organisations need to break down the silos in order to allow visibility across business and functions.

EY has developed a four-step process that helps companies achieve business agility to ride the wave of digital disruption:

1. Challenge the organisation to define and align around the real business problem.

2. Create a digital strategy, define the concept and design the products, services or experiences that deliver the right solutions and capture economic value within the business and within the organisational ecosystem.

3. Incubate recommended solutions through prototyping; test and validate initiatives and “de-risk” investments through small- scale experimentation. Evaluate teaming opportunities.

4. Activate recommended solutions on a commercial scale to help clients capture economic value for the business; continually sense, monitor and adapt to maximize value.

By taking a holistic approach to digital and developing an agile business strategy that enables organisations to flex and adapt to a constantly changing digital environment, organizations can seize opportunities and manage risks at every stage of their value chain. n

“analytics are an integral part of digital strategy. The process of analysing data to reveal patterns not only provides the basis for effective decision making, it enables organisations to predict employee and customer behaviour, improve workforce productivity and reduce operational costs. When managed correctly, data can change how organisations compete and win in the digital world.”

sunny chu, partner, aDvisory services

having to develop a feature in three months that the pioneering bank had taken six months or more to create.

Yet as fast as the trailblazing retail bank marketed the new service for its customers, it was facing digital disruption of its own from challengers outside of the banking industry offering adjacent business models.

Fortunately for the bank, new entrants had yet to take on the risks of operating in the strictly regulated financial services industry, particularly around the use of data. For as long as it can, the leading retail bank has decided to use this advantage to try to insulate itself from the disruption of external forces.

But given the pace at which change occurs in today’s digital world, the bank will need to innovate and adapt again before it gets left behind, says Suhr. And the cycle of disruption will continue.

a holistic approach to digitalDetermining risk appetite and how corporate strategy fits in a digital world will dictate digital’s

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The nexT fronTier for daTa analyTics: your properTy porTfolio

David Brown, head of business intelligence, AP at Jll

it is not news that the hunt for enhanced productivity is in full swing. there is a slowing Chinese economy to outrun and mixed

prospects across the Asia Pacific that are hard to capture. this means executives running MnCs have to work just that much smarter to squeeze the most from every resource.

one bright spot for many firms in their quest to control costs has been data analytics. But corporate real estate (CRE) departments have been slower to catch on to this trend - that is, until now.

A 2014 commissioned study conducted by Forrester Consulting on behalf of JLL, entitled Mind the Data Gap, found that aspirations are high to bring the latest advances in data driven decisions making to bear on real estate strategy. While today only 28% of companies surveyed in AP say they use data analytics to shape corporate real estate decisions, this is expected to double in the next two years.

it makes sense, given that keeping up with the furious pace of change in Asian cities requires the most up-to-date tools.

in JLL’s City Momentum index for 2015, seven of the world’s most dynamic cities are found in China, while stalwarts Hong Kong, singapore and tokyo have fallen off the rankings. With this much fluctuation, it is the cities where change is occurring the fastest that need to be the most closely monitored.

properTy: your Top-3 expense this is especially true when one considers the sobering fact that, except for virtual companies that exist online, “occupancy costs are a top three expense of any company out there,” according to David Brown, head of business intelligence, AP at JLL.

With so much at stake, JLL’s strength is to maximise corporate productivity outcomes through their clients’ occupied real estate portfolios. they provide a range of services for MnCs wishing to outsource their property requirements – whether these are offices, factories or retail spaces.

daTa-cenTric real esTaTethe level of data JLL generates, captures and stores across all real estate functions has a practical granularity. For example, through its lease management business, JLL has access to information on rental cost, lease terms and lease expiry dates, while its call centers receive hundreds of calls daily, enabling it to track repair and maintenance information. JLL also helps companies maintain environmentally sustainable buildings, and holds data on the cost of utilities and energy spend.

“in servicing our clients, we have captured a wealth of real estate data across AP on a daily basis. However, we need additional data sets, such as demographics, zoning and crime rates. these might be easily available in the Us; but in Asia, things are often less transparent,” says Brown.

Finding trustable sources of information in Asia can be a challenge, although the team sees gradual improvement.

“We seek data from official, reliable sources, such as demographic data from government census or traffic data from transport bureaus. For critical data that is not available, we will invest to access it. if a data source cannot be trusted, we won’t use it because it might lead to poor decisions,” says William Chong, head of business technology, AP for JLL.

Beyond daTa: acTionaBle insighTs this information shines when it is brought together

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and analysed scientifically using analytical and mathematical models. insights can be distilled from data to drive real estate decisions that support business goals, such as deciding where to acquire, where to renew and where to dispose of corporate sites.

seeing the growing power of data and analytics, JLL invested to upgrade their infrastructure and acquired advanced tools for data analytics, visualisation, and master data management (MDM).

to get the most out of the technology, JLL also invested in hiring experts in the areas of Big Data, data analytics and data governance. Many were recruited from outside the commercial real estate industry, from sectors that have had transformational success with data analytics such as banks, cable companies and consultancies.

Flash-forward to today, and the company is

By analysing these two datasets together along with external data, insights were uncovered that would inform location decisions. this included identifying poor-performing branches with near-term lease expiries as candidates for disposal; high-performing branches with mid-term expiries as opportunities for early renewal; and poor-performing branches in key locations that were crucial to retain in order to keep competitors at bay.

Break The silos: Bring real esTaTe and Business Teams TogeTherthe integration of business and real estate data does not happen easily. For competitive reasons, business units are not often keen to share data such as revenue and profit outside their group. it was a challenge that the JLL team had to overcome.

it is often common for business leaders to make location decisions based solely on branch performance factors such as

revenues, which would lead to unnecessary costs, such as paying penalties for early lease termination. Worse, the bank would fail to capture insights that would allow it to capitalise on opportunities.

“When CRE first approached the consumer banking head about joining data sets, the idea was summarily thrown out. there was just no way they were willing to share branch revenue and profitability data,” adds Chong, “But when we developed a few analytical models and put it across, they quickly saw the value and we were off and running in no time.”

the pilot project was expanded to cover 14 cities and has succeeded in:

• Maximising Roi by identifying locations that improve business performance;

• Avoiding unnecessary expenses by optimising timing of acquisitions and disposals; and

• improving competitiveness by dispelling competitors’ monopoly in target locations. n

“By connecting the physical portfolio to the wider business strategy

through the use of data analytics, The Bank was aBle To develop, model and assess fuTure scenarios,” says chong.

William Chong, head of business technology, AP for Jll

positioned to break new ground, bringing data analytics to large-scale corporate property planning. “Bringing data analytics to bear is a natural evolution, as a firm, we make that investment to drive more insight and value for our clients,” says Brown.

this is evident in a client case shared by Chong, of a leading bank managing a large portfolio of real estate, in the form of bank branches as well as AtMs.

Explaining the substantial complexity of the task, he says, “if you have thousands of AtMs in a dozen cities, you have to pay attention to lease expiries and pay your rents on time. otherwise, you might lose that AtM location to one of your rivals.”

But rents are just one part of the picture. Going into its annual network planning process, the bank asked JLL to help generate next-level insights by bringing together real estate data and business data.

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Charts

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IMa asIa CEO DIalOguEs Spring 2015

source: IMa asia

ASEAN iN StEp with thE world

180

140

100

60

160

120

80

40

020

2.5

1.5

0.5

2.0

1.0

0

-2

4

6

0

-4

2

-20

40

60

0

-40

20

oECd lEAdiNg iNdEx vS ASEAN-6 ExportSyoy % chg

ASEAN-6 trAdE iS lEvElliNg off

Export outliErS: viEtNAm SoArS, whilE thE philippiNES lAgS

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

When looking to the future, the OECD composite leading indicator is a good place to start. It tends to accurately reflect world economic activity, with its turning points proceeding those of the global business cycle by up to six months. And with ASEAN economies being among the most open to international trade and investment, it follows that ASEAN combined merchandise exports correlate closely with the OECD composite leading indicator.

trade orientation has declined 17% in 10 years for the ASEAN-6 economies …The share of ASEAN country exports to their respective GDP ranges from Singapore’s’ stratospheric 133% to Indonesia’s 20%. However, with the exception of Thailand and Vietnam, the ASEAN-6 exports-to-GDP ratio has receded to 53% in 2014 from a 2005 peak of 70%. Only Vietnam and (to lesser extent) Thailand have became more export-oriented economies in the last 10 years.

Expect vietnam exports to keep soaring Vietnam’s exports have soared since the early-1990s, both as a share of the country’s GDP, and as a share of global exports. A combination of strong demographics, political stability, and a favourable cost structure has made Vietnam a very attractive destination for foreign direct investment (FDI), the bulk of which has been flowing into export manufacturing. We expect this to continue into 2020.

But ASEAN-6 exports in terms of world share remains steady.The ratio of ASEAN-6 exports to world exports has settled at a record high of 0.66-0.67% in 2010-14, having risen from around 0.35% in the early-1980s. Singapore, Malaysia, Indonesia, and the Philippines have lost some ground in recent years, which was offset by gains from Thailand and Vietnam.

philippines exports still lag behind ASEAN neighboursDespite a favourable population profile, the Philippines has been ASEAN’s laggard in attracting export-enhancing FDI. Chronic corruption and inadequate infrastructure have contributed to a steep drop in global exports over the last 15 years and in the declining share of exports in the Philippines’ GDP. The outcome of the mid-2016 presidential election could shape the country’s prospects for catching up with its ASEAN neighbours.

ASEAN-6 ExportsOECD Lead Index

ASEAN Exports as % of gdp

vietnam Exports

ASEAN Exports as % world Exports

philippines Exports

n 1994n 2004n 2014

n 1994n 2004n 2014

Singapore SingaporeVietnam VietnamMalaysia MalaysiaThailand ThailandPhilippines PhilippinesIndonesia Indonesia

1980

1988

1984

1992

1998

1982

1990

1996

1986

1994

2002

2000

2006

2010

2012

2004

2008

2014

1.0

0.6

0.8

0.4

0.2

% of Vietnam GDP% of World Exports 90

70

50

30

80

60

40

2010

0.7

0.5

0.6

0.4

0.3

% of Philippines GDP% of World Exports

2000

1980

1988

1984

1992

1998

1982

1990

1996

1986

1994

2002

2006

2010

2012

2004

2008

2014

50

40

30

20

45

35

25

15

Will you go With the biggest opinion in the room? or the best data in the World?At JLL we favor a scientific approach to real estate strategy. We’ve upgraded our data governance, analytics and knowledge sharing, culminating in the launch of RED – a new platform that combines the best of technology and people. It’s a way of working developed to give you rock-solid insights, measurable productivity gains, and a set of instruments for staying ahead of changing markets. Learn more at jll.com/red

Welcome to data-driven real estate

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IN-TOUCH AND IN-COUNTRYEVERYWHERE IN ASIAHELPING TO GUIDE YOUEVERY STEP OF THE WAY

Our Network Partners are highly-experienced country analysts and advisors, each with at least two decades of in-country professional experience. They each run local peer group briefi ngs programs and meet with local business leaders and key government offi cials daily.

As a network we lead the largest peer group briefi ng program in Asia Pacifi c, incorporating over 3,000 members and running over 500 meetings a year.

Our Network Partners are available for one-on-one meetings with IMA Asia members for an in-country, in-formed, and impartial perspective on market or management issues. IMA Asia members can also sit in on the local peer group briefi ngs of our Network Partners when travelling.

Contact [email protected] to learn more.

500 executive briefi ngs a year3,000 membersOne vital network

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ima asia ceo dialogues - issue 4 - spring 2015

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