Asian firms poised to be global giants
The Straits Times
June 30, 2005
By Narendra Aggarwal
Asian companies, especially those in China and India, will soon be ready to take the next big step to achieving global pre-eminence—by acquiring more and more major American and European rivals.
That is the view of some key business figures attending a meeting in Singapore on Tuesday on building global Asian companies. They argue that these budding global giants of the next decade or so will ride to success on the back of the turbo-charged economic growth being experienced in their home markets in countries such as China and India.
The Singapore meeting was part of the Eisenhower Fellowships Conference, being held for the first time in Asia. The fellowships, named after the late US president Dwight Eisenhower, aim to foster contact between emerging leaders around the globe.
Mr Jeffery Koo, the chairman and chief executive officer (CEO) of Taiwan’s Chinatrust Financial Holdings, told the meeting that Asian firms will soon be poised to buy more United States and European companies in their bid to penetrate larger markets.
Giving the example of his own Chinatrust Commercial Bank, he said that since obtaining the first banking licence in Taiwan in 1992, the bank has now spread its operations to 12 countries in Asia, the US and Europe with 61 offices and branches. “Our vision is to become a global bank,” he said.
McKinsey & Company’s Mumbai-based director, Mr Ranjit Pandit, said that benefiting from the rapid expansion of their domestic markets, Asian companies are now able to achieve a global scale in countries such as China and India.
In fact, most multinational companies expect about half of their global profits to come eventually from the rapidly growing markets in Asia.
Mr Pandit said many Asian firms are setting new global benchmarks that their Western counterparts may not be able to match.
While telcos in China are able to market cellular services at four US cents (6.7 Singapore cents) a minute, new players such as Reliance in India are able to do so at half that cost.
And this, too, with a 30 per cent return on capital plus a service quality that is better than that in some Western countries.
The car industry is another area in which Asian companies are likely to excel as they will soon be able to produce cars at US$7,000 each, complying to European safety standards.
The development costs for producing a new model are just US$150,000, far less than even the more than US$1 billion that South Korea’s Hyundai spends on developing a new model.
Still, IE Singapore CEO Lee Yi Shyan said many growing Asian firms fell short of the best of corporate America, Japan and Europe. “Many large Asian companies still lack depth in core technology, distribution channels, managerial talents and innovation capacity.”
But looking ahead, Asian companies would have to secure new growth markets outside the comfort zone of their domestic markets, he added.