These nations have the potential to reshape the global economy
By Myra P. Saefong, MarketWatch

As the big headliners for economic growth lose their appeal, the search for new stars has begun.

The “New Tigers” of the world are nations that have flown below investors’ radar, but are most likely to stand out in the years ahead as economic powerhouses such as the U.S., Japan, Germany, France, the U.K., Italy and Canada give up the spotlight to countries experiencing stronger growth.

Poland and Turkey in Europe, Peru and Colombia in Latin America, the Philippines and Indonesia in Asia, and Ghana in Africa, among others, have the potential to draw attention away from their better-known regional peers, defy the global slowdown, pique investor interest and reshape the global economy.

“An economic tiger should have a pattern of growth that is more than just a quarter or two,” said Karim Rahemtulla, emerging markets/options director at Wall Street Daily. “It has to be growing due to some type of competitive advantage that is afforded by its population, either through education or skilled or unskilled labor.”

Also, the political system must “recognize the need for growth and encourage it through looser monetary policy and with incentives for foreign direct investment, while at the same time moving to a system of legal protection for investors’ capital,” said Rahemtulla.

The world has already seen much of these strengths in Brazil, Russia, India and China, also known as the BRICs, which have taken center stage in recent years. Growth there remains strong, but they’re no longer seeing the spectacular expansions investors have come to expect.

The growth available in the BRICs is far from over, and “years and years of growth are left as the countries modernize, increase efficiency and continue to expand their middle classes,” said Bill Kornitzer, a portfolio manager of the Buffalo International Fund.

But the “avenues of growth will change as these economies mature and I believe we are already witnessing this as China moves from an economy focused on cheap exports to one focused more inward toward a rising consumer class,” he said.

Against this backdrop, “some other smaller ‘emerging’ or ‘growth’ economies are becoming increasingly important,” said Gene Huang, FedEx chief economist. “These countries may not have the size of the BRICs, but they play a significant role in the global supply chain.”

Source: Market Watch

By Michael Gerrity

Photo on right side: Jeremy Sheldon, JLL

Last week Jones Lang LaSalle’s Asia Pacific market experts told World Property Channel that strong corporate tenant demand in emerging South East Asian economies are now driving rental growth in that region.

Jones Lang LaSalle is now forecasting 6 to 8 percent growth in grade A office rents in Jakarta this quarter and 3 to 5 percent in Manila. At the same time the bigger, more established markets which are dominated by financial services, Hong Kong and Singapore, are experiencing a decline in grade A rental values as the banking and finance sector remains focused on managing costs.

Jeremy Sheldon, Managing Director, Markets Asia Pacific Jones Lang LaSalle says, “We are witnessing a polarisation in the region. Whilst we are seeing a slowing of leasing activity levels in the established markets, there is increasing activity in South East Asia, where we are experiencing higher enquiry levels than we have seen before. Companies are taking advantage of the major labour cost arbitrage within these markets and we expect this to continue this year. Overall our forecast for grade A rents is for limited growth this year in certain markets. The market generally looks to be much slower than 2011, although last year was a record in terms of take up, surpassing even 2007 which was the last peak of the market.”

Sheldon further commented, “Our outlook is positive in that the Asia Pacific region continues to experience economic growth at a faster pace than the rest of the world and this is forecast to continue this year. Current conditions may be a good opportunity for companies to find space that represents good value for money and to secure opportunities to expand and consolidate in a region that will continue to grow in economic importance globally. Much will of course be dependent on events in the Eurozone and the United States; we have already seen positive news from the latter in recent weeks and like everyone else we are keeping a close eye on the Eurozone debt crisis.”

As well as the growth in Jakarta and Manila, Jones Lang LaSalle expect to see growth in Beijing in Q1 of between three and five percent. Grade A office rents in most other markets are expected to remain relatively stable, whilst the firm anticipates falls of circa five percent in Singapore, and between six and seven percent in Hong Kong this quarter.

Regional Market Overviews by Jones Lang LaSalle in Q1, 2012:

CHINA
• Beijing: demand remains strong on the back of on-going expansion, albeit with smaller spatial requirements in general, but quality space is still difficult to find, especially for large blocks of contiguous space. Landlords continue to set high rental expectations, but rental levels achieved in actual deals have been generally stable.

INDIA
Delhi: we see sluggish new demand and vacancy levels remain high. We expect rents to remain stable or increase marginally in the near term.

Mumbai: there is limited expansion by non-IT occupiers, vacancy levels remain high and we expect rents to remain stable in the near term.

PHILIPPINES
• Manila: we expect to see 10-15 percent growth in grade A office rents over the next 12-18 months. We saw 360,000 sq. m transacted last year, which we are confident to use as the demand projection for the next five years. In 2013 and 2014 we expect to see higher demand from traditional non Business Process Outsourcing (BPO) offices that will add another 50,000 sq. m of demand on top of the BPO demand of 360,000 sq. m.

AUSTRALIA
• Melbourne: the downsizing of major Australian banks is creating sublease opportunities. Some large occupiers are exploring the suitability of using alternative workplace strategies to reduce their occupied footprint. We are seeing healthy levels of pre-leasing activity (up to 80% of net lettable area in upcoming projects). Tenants electing to stay put and renew leases are being charged a premium compared to new leasing transactions, which need to support fit-out and relocation expenses.

• Sydney: most global firms are putting real estate decisions temporarily on hold, despite the relative health of their Australian operations. We are seeing more relocations and increased activity from smaller tenants, particularly in the premium sector. Deal activity by major occupiers is seeing the number of large tranches of contiguous space reduce. The limited new supply in 2012 should support rental growth, albeit at a slower pace than in 2011.

Source: World Property Channel

By Kathleen A. Martin

GLOBAL CONSULTANCY firm Tholons, Inc. has cited talent pools as a major challenge to the Southeast Asian countries’ business process outsourcing (BPO) industry but said it foresees niche specializations of the sector to continue to grow.

This, as 12 cities from the Southeast Asian region, including five from the Philippines, made it to Tholons’ Top 100 outsourcing destinations.

The five Philippine cities are Manila (4th), Cebu (9th), Davao (69th), Sta. Rosa (86th), and Iloilo (92nd).

“Addressing talent pool shortages will be the most critical issue in the Southeast Asian region’s IT (information and technology)-BPO industry as a whole. These should be immediately addressed to further drive the growth of the services outsourcing industry,” the firm said in its 2012 Tholons Top 100 Outsourcing Destinations: Southeast Asia executive summary released yesterday.

“This is especially significant as widespread cost-cutting measures brought upon by the recession in the US and UK markets are being pursued, which in turn, are driving up the demand for outsourcing,” the document read.

Tholons said BPO firms are experiencing difficulty in hiring and retaining “capable employees,” thus, resulting in higher attrition rates and an increase in hiring and retention costs.

“[Such] has resulted in greater initiatives by service providers to train fresh graduates or reskill lateral hires themselves, an exercise becoming increasingly common albeit more costly,” Tholons said.

Already, Tholons noted an initiative for skills development currently being undertaken in Manila is needed to increase the country’s talent supply.

“The Technical Education and Skills Development Authority (TESDA) of the Philippines, for example, has been continuously providing Finishing Courses for Call Center Agents targeted to near-hires in the Contact Support space,” the document read.

Despite the region’s foreseen supply problems, Tholons said niche specializations offered are expected to grow.

“Tholons sees that the region’s current niche specializations will continue to grow and pave the way for the development of higher-value services in Southeast Asia,” the document read.

Tholons said that in 2011, Southeast Asian countries have been steadily building their own outsourcing identities.

The Philippines has continued to be the premier contact support services destination, while Singapore and Malaysia have become financial and accounting outsourcing and back-office process outsourcing pillars, Tholons said.

Vietnam and Indonesia, meanwhile, have established themselves as strong providers of IT services, Tholons said.

“As confidence and maturity builds, process and delivery innovation will thrive as well. Tholons sees this as necessitating Southeast Asia’s smooth transition up the services value chain,” the document read.

The local BPO sector is expected to have booked $11 billion in revenues in 2011, then to grow by at least 20% from this number by yearend, the Business Processing Association of the Philippines previously said.

By 2016, the sector is expected to deliver $25 billion in revenues, after recording $9 billion in revenues in 2010. —

Source: BWorld Online

During May Day protests earlier this year, Indonesian labor groups called on the government to abolish the practice of outsourcing.

In Indonesia, outsourcing refers to the hiring of temporary workers on a contractual basis, often through a provider company. The workers are usually hired on short-term contracts and paid a daily wage, without benefits. 
Companies generally do not outsource core jobs, only peripheral work like cleaning and security.

The minister of manpower Muhaimin Iskandaron said he would “eventually” abolish labor outsourcing, starting with restrictions on the scope of the practice. 

“First I will reduce it, then eventually it will disappear.”

Muhaimin pledged to better protect the rights of outsourced workers, including more surveillance of working conditions, ensuring salaries were paid and contracts enforced, as well as clearly defining what types of jobs could be outsourced.

Timbul Siregar, chairman of the Indonesian Workers Association (OPSI), dismissed Muhaimin’s statement as political posturing intended to attract the support of workers.

“Actually, we’re happy if he is serious about his intentions to abolish the outsourcing system. But so far, there has been no effort from government to implement it.”