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Firms in emerging countries show strong intention to expand business Increased wages of employees pose serious management problems
-Results of JETRO’s 2013 Survey on Business Conditions of Japanese-Affiliated Firms in Asia and Oceania-

Dec. 12, 2013
Between October and November 2013, the Japan External Trade Organization (JETRO) conducted its latest survey on the business operations of Japanese-affiliated firms in 20 countries and regions in Asia and Oceania: Northeast Asia (mainland China, Hong Kong, South Korea, Taiwan and Macau), ASEAN (Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam and Laos), Southwest Asia (Bangladesh, India, Pakistan and Sri Lanka) and Oceania (Australia and New Zealand). The survey received valid replies from 4,561 firms (a 48.7% response rate). Below is a summary of the results.

Summary points:
  1. Sales forecast
    (1) The percentage of firms expecting improved operating profits remained the same level, while varying by country and region
    64.6% of respondents expect an operating profit in 2013, remaining almost the same level as the previous year (63.9%). Looking at the results by country, the percentage for Taiwan is the highest (81.8%), followed by Pakistan (74.1%), South Korea (73.8%), Hong Kong and Macau (72.6%) and Thailand (72.4%), among others. On the other hand, the percentage is relatively low for Sri Lanka (38.7%), Cambodia (38.5%) and Laos (25.0%). Looking at the results by business scale, 69.4% of large-scale companies expect an operating profit, 13.2 points above the percentage for small and medium-sized enterprises (SMEs) (56.2%). In Thailand and China, the percentage for large-scale companies is almost 20 points above that for SMEs.

    (2) Significantly improved operating profits forecasted for 2014, centering on emerging countries
    50.6% of firms forecasted improved operating profits for 2014, while those expecting decreased profits dropped to 10.7%. The diffusion index (DI) – the proportion of businesses reporting increased operating profits minus those reporting decreased operating profits compared to the previous year – is used to measure business confidence and the estimate for 2014 is forecasted to be 39.9 points, up 23.9 points from this year. The most common reason for the increase was “increased sales in local markets”. For emerging countries including Cambodia, Pakistan, Bangladesh and Myanmar, the figure is expected to exceed 60 points, showing a significant improvement of business confidence.

  2. Management issues
    (1) Increased wages of employees pose serious management problems
    The most serious problem in management was increased wages of employees cited by more than 70% overall and by more than 80% of respondents in Indonesia and China. Other issues placed high in the survey were “competitors’ market shares are growing (cost-wise competition)”, “lack of employee performance/awareness among local staff” and “quality of employees”. The results show that management problems largely fall under increased costs and human resources.

    (2) Six countries and regions such as Indonesia and Myanmar achieve double-digit wage growth rate
    Six countries and regions including Indonesia, Myanmar, Pakistan, Vietnam, India and Bangladesh, which have had wage rates increasing at more than 10% for the last few years, realized an average double-digit rate of wage-growth, compared to 2012. The rate was especially high in Indonesia: a 28.4% increase in the manufacturing industry and 17.1% increase in non-manufacturing industries. The estimate for 2014 in these six countries is also expected to be a double-digit increase as in 2013.

  3. Future business plans and countermeasures
    (1) The percentage of firms such as in Myanmar, Pakistan and Cambodia have strong intention to expand business
    The percentage of respondents planning to expand business operations in the next one or two years was 59.8% overall, a 2.0 point rise from the 57.8% in the previous year. Firms in emerging countries such as Myanmar (84.6%), Pakistan (81.5%) and Cambodia (80.0%) have particularly strong intentions to expand their business for the reasons of “sales increase” and “high growth potential.” The percentage for China increased to 54.2%, a 1.9 point rise from 2012 when it had decreased by 14.5 points from 2011. On the other hand, the percentage for Indonesia decreased 10.9 points from the previous year, the largest decrease among the surveyed countries. While the percentages for the Philippines (58.1%) and Sri Lanka (51.5%) are below overall average, they showed significant increase (9.9 points and 14.0 points, respectively) compared to the previous year.

    (2) Approx. 70% of firms enhancing training and cultivation of local human resources in consideration of localization
    In terms of the increase/decrease of the number of Japanese expatriate employees over the next year, a majority of respondents indicated that they will “maintain the current level” (72.2%) followed by “decrease” (16.5%). Only 11.3% of respondents stated “increase.” In China, respondents indicating “decrease” accounted for 25.2%, the highest among the surveyed countries. Regarding the approaches to promote management localization, 68.1% of firms cited “to strengthen system to train/cultivate local human resources by focusing on localization of corporate management” and 51.3% cited “to assign local staff to a general manager/manager position/store managers”.

    (3) Cost cuts through accelerating local procurement of materials and parts
    The ratio of cost of materials/parts to production was an average of 61.2% and that of labor to production was an average of 17.2%. The survey indicated that production costs consist mostly of material costs. According to the survey, 74.8% of firms intend to increase their local procurement rates in the future for the reasons of “to make costs lower” (89.5%) and “to shorten lead time” (66.1%). The local procurement rate in China, which has been increasing yearly, reached 64.2% (compared to 45.8% in 2009).


Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2013 Survey)PDF(9.4MB)
For more information, please contact:
Asia and Oceania Division, JETRO
Contact Person: Mr. Manabu Tsukada
Tel: +81-(03) 3582-5179

China and North Asia Division, JETRO
Contact Person: Ms. Hiromi Hinata
Tel: +81-(03) 3582-5181

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