Business Advice

Are we missing an opportunity by not being Asia ready?

With the economic globalization and international industrial restructuring, the world service trade market has gained momentum and as a result industrial restructuring has gained speed.

As a result, emerging industries such as ITO, BPO, and KPO, have gradually become the mainstream forms of international service trade.

China’s service outsourcing is gradually expanding from basic transactional work to more advanced businesses. The Chinese service outsourcing sector have moved from low-end customer transaction work to biomedical R&D, hi –tech R&D, industrial design and other high-end processes.

In 2011, over 4,200-service outsourcing enterprises were established in China. This is on top of the 17,000 Chines outsourcing companies already in existence. Most of these companies have all of the now standard international certifications, such as CMMI, ISO27001/BS7799, SA70 and SWIFT.

Given the central governments policy to transition China into a service economy, the central government has designated some cities and industrial parks as the pilot locations. One such location is Wuhu City, which we visited late in August. These people are deadly serious about their intent to build world class facilities, what we saw beggars belief, the size and scale of the construction was truly amazing, we saw a city being built in front of our eyes where only months ago there were rice fields. Mark Atterby wrote last week about it. �?Wuhu is absolutely open for business.”

Some years ago I heard the then Indian Minister for IT, say, “ My job is to turn India from a nation of snake charmers into a nation of mouse clickers.” Similarly China is moving from a �?Made in China” tag line to a �?Serviced by China” tag line.

Meanwhile back in comfy old Australia leading Australian business leaders including ANZ Bank head Mike Smith have warned that the countrys workforce is inadequately prepared for the opportunities of the coming Asian Century. This story was reported in the Fairfax media.

A study by the Asia link Taskforce, which includes some of the countrys most senior executives such as Doug Richie of Rio Tinto and Mike Wilkins of Insurance Australia Group, finds one of the biggest impediments for business push into Asia is the lack of capabilities among the Australian workforce.

Mr Smith said the taskforce had identified many areas of critical skills underdevelopment in Australia that are fast becoming an impediment to fully realising the Asia opportunity. He called for closer co-operation between business, the education sector and government in developing Asia capability throughout the Australian workforce.

When asked about Australian readiness for Asia, Mr Smith said, I think it is quite clear that is something that needs a lot of work. But I think everybody is now beginning to see the opportunities and … that is the most important thing.

Mr Smith, who is spearheading a super-regional strategy for the bank, said more than 60 per cent of ANZs new graduates could speak an Asian language.

The report estimates Australia has the potential to boost its economy by $275 billion (excluding the resources industry) in the coming decade if it has an Asia-capable workforce that is ready to exploit the large and growing Asian market.

Special prime ministerial adviser Ken Henry, who is leading the governments Asian Century White Paper, said the country needed to improve its Asia-relevant capabilities to lift Australias productivity.

He said there was strong interest in the importance of developing an Asia-capable workforce.

This is clear from the submissions to the white paper team. More than a quarter of these were to do with building Asia-relevant capabilities of the Australian workforce, Dr Henry said.

While I was in Wuhu I caught up with a �?China Old Hand’ Jerel Bonne the Founder and Principal Consultant of Sharpen Axes. In his view what was missing was the government incentives to lure business to Wuhu. He said, “Wuhu has a tough road ahead to reach their planned goal of attracting 1000 BPO’s especially without an attractive investment promotion plan. There are two serious conditions that the government must address to meet their goals.”

“The first one is how will any outside organization, Chinese or Foreign find the talent to run the operations. This has nothing to do with work place language skill. It is hard to imagine that the local educational system will produce talent to execute the business functions.” (The Chinese government claims that 70% of the 3 million people currently employed in the outsourcing services sector have a college degree.) “This is leading edge high tech, and you can’t just pull farmers in from the fields to man the stations like a manufacturing plant. Even if the Wuhu government offered great incentive to Chinese employees from Beijing, Shanghai and Shenzhen to relocate to Wuhu, would they really pickup their things and come in droves to fill the critical leadership roles that are required for an aggressive plan as this.”

Bonner went on to say, “The second condition is what is the market opportunity for foreign companies to enter the Chinese BPO market. Can these organizations go it alone and beat State Owned Enterprises (SOE) who already have huge operations, brand awareness, government connections and talent. What would these Foreign companies have to give away when negotiating JV terms to get a footprint in Wuhu? Once they make the leap into Wuhu, will Wuhu have what it takes to attract a senior leadership team and their families to make Wuhu their home? “

Victorian Premier Ted Baillieu,  will next week lead Australias largest-ever trade mission to China, the trade mission will involve more than 600 delegates representing 400 Victorian organisations. Mr Baillieu said it would help Victorian businesses capitalise on a shifting pattern of demand in China from resources to quality goods and services linked to the rise of the middle class.

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