Research & Books

FDI optimism: Australia still top choice for Asian investors

AUSTRALIA continues to be the most favoured foreign direct investment (FDI) destination among Asian investors of all Asia Pacific countries – and it is ranked the eighth most popular investment destination globally. That is according to the 2014 Foreign Direct Investment Confidence Index (FDICI) results released this month by global management consulting firm A.T. Kearney from Washington DC.

In a report that is well regarded internationally for providing an in-depth view of forward-looking investment sentiment, A.T. Kearney also found the US has not only maintained its first place position from last year, but also increased the lead it had in the 2013 study, which was referenced in the recent White House report, Winning Business Investment in the United States. 

According to A.T Kearney’s notes on the report, the findings bode well not only for the US, but for the global economy as a whole – almost four out of five respondents are more optimistic about the global economy than they were a year ago.

Since its inception, the A.T. Kearney study has consistently pointed toward top global choices for foreign direct investment, with the top 10 most attractive FDI destinations receiving a majority share of global FDI inflows roughly one year after the survey.

Asia, which attracts roughly a third of all foreign direct investment, has shown particular resilience.

A.T. Kearney's Asia Pacific leader, John Kurtz said, “With investment still pouring into China and with India now on the rise, we notice too the collective strength of ASEAN as an investment destination of choice especially with the coming of the AEC.

“Last year ASEAN total investment outstripped even China and this year's FDICI seems to presage more of the same.”

China is at number two on the index, attracting higher-end manufacturing from overseas and increased inland investments.

India has dropped two notches in the Top 10 to seventh since 2013, the result of a cooling off in investor sentiment in such sectors as multi-brand retail and mining. However, the A.T. Kearney report indicated India’s new government and its Look East policy were expected to further buoy outbound FDI in South East Asia as well as inbound FDI sentiment.

Singapore, with its famously predictable regulations and low corporate tax rate, strengthened its standing in the Top 10 to ninth.

The strongest individual performance on the 2014 study came from Malaysia, which surged 10 points to 15th, benefitting from strong inbound regional FDI flows and good performance in financial services, heavy industry and primary industry.

Founder of the FDI Confidence Index and A.T. Kearney chairman emeritus, Paul A. Laudicina said, “Despite racking volatility and economic uncertainty on a global scale, the findings from the 2014 FDICI suggest that a corner is being turned. Corporations sitting on massive cash reserves are increasingly confident that they can parlay these into productive investments with attractive returns.” 

Other key survey highlights included:

  • Despite unresolved deficits in the Eurozone, 11 European countries still rank in the top 25, some entering the ranking for the first time;
  • Canada moved into the third spot;
  • 39 percent of respondents voiced a more positive sentiment than last year for second-ranked China; and
  • Russia, at number 11 last year, fell out of the top 25 rankings, even despite the fact that the survey was fielded prior to the current political problems in Ukraine.

“We feel confident that despite a slow and uneven economic recovery, executives who make FDI decisions are regaining a sense of measured confidence,” said Erik Peterson, A.T. Kearney partner and a co-author of the study.

“The 2014 FDICI is not only an indicator of FDI flows, but an excellent telescope into specific economic stories around the globe. We’re pleased that this year’s study portrays a more optimistic picture globally.”

Mr Peterson said each region has an interesting unfolding story seen through the lens of the FDI Confidence Index, with many of the winners riding on stability after the ongoing post-recession economic turbulence.

In the Americas, Brazil ranked among the top five most preferred FDI destinations for the fourth consecutive year, incentivised by new industrial policy measures.

Mexico, ranked 12th, is a quiet beneficiary of the wave of US reshoring, due to its integration with US supply chains. Chile’s stable economy and investment climate translated to a five-notch climb in the index, to 17th.

The index shows Europe attracts more than a quarter of the world’s total FDI inflows, due to its highly qualified labour force, sophisticated, well-heeled consumers, and world-class infrastructure.

Northern European nations Sweden and Denmark make it to the top 25 for the first time this year, while Belgium and the Netherlands return to the index after some time off investors’ radars.

The UK, amid discussions of a potential opt-out from the EU, rose four positions to fourth.

France, currently under President François Hollande’s efforts to increase the country's competitiveness, has reclaimed a place in the top 10.

 

BACKGROUND

THE 2014 FOREIGN DIRECT INVESTMENT CONFIDENCE INDEX

The FDI Confidence Index is constructed using primary data from a proprietary survey administered to senior executives of the world’s leading corporations by A.T.Kearney.

Respondents include C-level executives and regional and business heads. The 300 participating companies represent 26 countries and span all industry sectors.

All companies report global revenue of more than $500 million. Companies surveyed are evenly distributed across the globe, with roughly one-third headquartered in Europe, a third in the Asia-Pacific region and a third in the Americas.

The survey was conducted in January and February 2014. While the FDI Confidence Index provides readers with a sense of investor attitudes about the future, it is not designed to reveal specific reasons for the results. This study reflects upon likely causes for upward or downward changes, but the conclusions must be regarded only as considered judgment on the part of A.T. Kearney’s Global Business Policy Council.

The index is calculated as a weighted average of the number of high, medium, and low responses to questions about the likelihood of direct investment in a market over the next three years. Index values are based on non-source-country responses. For example, the index value for the US was calculated without responses from US-based investors. Higher index values indicate more attractive investment targets.

FDI flow figures are the latest statistics available from the United Nations Conference on Trade and Development (UNCTAD). Other secondary sources include investment promotion agencies, central banks, ministries of finance and trade, and major periodicals.

For past editions of the FDICI: www.atkearney.com/gbpc/foreign-direct-investment-confidence-index

A.T. Kearney is a global partnership organisation that focuses on problem solving for international businesses by assisting with collaboration across borders to co-create sustainable results. Operating since 1926, A.T. Kearney has worked as trusted advisors on what it calls “most mission-critical issues” to the world’s leading organisations across all major industries and service sectors, and today has 59 across 40 countries.

www.atkearney.com

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Entrepreneurial intelligence: develop four vital pillars

LOOK hard enough and you will identify four key factors that drive all entrepreneurs to success. That is the basis of research by Australian author Allan Bonsall, outlined in his new book Entrepreneurial Intelligence, which draws on the approach of Australian coffee trailblazer, Phillip Di Bella.

While the book looks at the some of the world’s most successful entrepreneurs – such as Richard Branson, Gerry Harvey and Steve Jobs, who largely attribute their own success to perseverance, commitment and hard work – Mr Bonsall outlines the ultimate formula for entrepreneurial success by identifying four key principles of vision, passion, brand and emotional intelligence.

Mr Bonsall said Entrepreneurial Intelligence was inspired by the philosophies of Queensland coffee entrepreneur Phillip Di Bella, and aims to present a new and enlightened way of looking at entrepreneurship that is immediately relevant to Australians. 

“Many people associate entrepreneurial success with commitment and preparedness to work hard, though if we delve deeper it becomes clear all successful entrepreneurs share several other distinct traits,” Mr Bonsall said.

“Vision for instance is a key driver for any entrepreneur. It is the ability of an individual to define a purpose, a goal or personal agenda and share that vision with others so it grows into the future place every successful entrepreneur can see clearly in their head.

“Passion is another key characteristic that envelops us all and fuels us to achieve our goals. Passion is the life-force of ambition, it propels entrepreneurs to the top and sets them apart from the rest.”

Mr Bonsall said the third part of the formula was more tangible than vision or passion and is the key to building loyalty and generating repeat purchase and referral.

He said the most fundamental of business principles is to place the customer at the very heart and core of a venture, this is done by harnessing the power of a brand.

“Successful entrepreneurs intuitively know that understanding their brand is the most powerful link they have with their customers,” Mr Bonsall said.

Mr Di Bella, who created the highly successful Di Bella coffee brand out of a sense of purpose in elevating the Australian coffee scene, said from his experience the final principle in the formula is perhaps the most complex: it grows from the combination of vision, passion and brand and is truly what sets successful entrepreneurs apart.

“It is the individual’s ability to be both aware of their own emotions and the emotions of those around them,” Mr Di Bella said.

 “Great entrepreneurs know how to effectively engage with people and recognise and prioritise the needs of others, often subjugating their own ambitions in the process.”

Di Bella established Di Bella Coffee in 2002 by leasing a roaster part-time. He roasted coffee at night and went door-to-door to attract clients by day.

His story fascinated Mr Bonsall, who had previously co-authored a book with Dr John Harrison from The University of Queensland, BRANDAID, Brand Power at the heart of your business.

Mr Bonsall spent two and half decades in advertising, delivering branding and marketing solutions to a line-up of top Australian and international companies and has since developed a strategic planning tool based around the principles of branding.

Entrepreneurial Intelligence is available online at MyDiBellaCoffee.com, Di Bella Coffee retail outlets, all online book sellers and Estee Media’s website.

Entrepreneurial Intelligence is also available as an eBook from Amazon, Kobo, Google and Apple as well as the Australian eBook Publisher.

www.mydibellacoffee.com

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Entrepreneurial intelligence: develop the four pillars

LOOK hard enough and you will identify four key factors that drive all entrepreneurs to success. That is the basis of research by Australian author Allan Bonsall, outlined in his new book Entrepreneurial Intelligence, which draws on the approach of Australian coffee trailblazer, Phillip Di Bella.

While the book looks at the some of the world’s most successful entrepreneurs – such as Richard Branson, Gerry Harvey and Steve Jobs, who largely attribute their own success to perseverance, commitment and hard work – Mr Bonsall outlines the ultimate formula for entrepreneurial success by identifying four key principles of vision, passion, brand and emotional intelligence. 

Mr Bonsall said Entrepreneurial Intelligence was inspired by the philosophies of Queensland coffee entrepreneur Phillip Di Bella, and aims to present a new and enlightened way of looking at entrepreneurship that is immediately relevant to Australians.

“Many people associate entrepreneurial success with commitment and preparedness to work hard, though if we delve deeper it becomes clear all successful entrepreneurs share several other distinct traits,” Mr Bonsall said.

“Vision for instance is a key driver for any entrepreneur. It is the ability of an individual to define a purpose, a goal or personal agenda and share that vision with others so it grows into the future place every successful entrepreneur can see clearly in their head.

“Passion is another key characteristic that envelops us all and fuels us to achieve our goals. Passion is the life-force of ambition, it propels entrepreneurs to the top and sets them apart from the rest.”

Mr Bonsall said the third part of the formula was more tangible than vision or passion and is the key to building loyalty and generating repeat purchase and referral.

He said the most fundamental of business principles is to place the customer at the very heart and core of a venture, this is done by harnessing the power of a brand.

“Successful entrepreneurs intuitively know that understanding their brand is the most powerful link they have with their customers,” Mr Bonsall said.

Mr Di Bella, who created the highly successful Di Bella coffee brand out of a sense of purpose in elevating the Australian coffee scene, said from his experience the final principle in the formula is perhaps the most complex: it grows from the combination of vision, passion and brand and is truly what sets successful entrepreneurs apart.

“It is the individual’s ability to be both aware of their own emotions and the emotions of those around them,” Mr Di Bella said.

 “Great entrepreneurs know how to effectively engage with people and recognise and prioritise the needs of others, often subjugating their own ambitions in the process.”

Di Bella established Di Bella Coffee in 2002 by leasing a roaster part-time. He roasted coffee at night and went door-to-door to attract clients by day.

His story fascinated Mr Bonsall, who had previously co-authored a book with Dr John Harrison from The University of Queensland, BRANDAID, Brand Power at the heart of your business.

Mr Bonsall spent two and half decades in advertising, delivering branding and marketing solutions to a line-up of top Australian and international companies and has since developed a strategic planning tool based around the principles of branding.

Entrepreneurial Intelligence is available online at MyDiBellaCoffee.com, Di Bella Coffee retail outlets, all online book sellers and Estee Media’s website.

Entrepreneurial Intelligence is also available as an eBook from Amazon, Kobo, Google and Apple as well as the Australian eBook Publisher.

www.mydibellacoffee.com

 

 

 

ENDS

China’s innovators patent-ly waiting

 

INNOVATION has replaced imitation for at least 77 leading Chinese companies, according to research by economists from the Technische Universität München (TUM) and the Munich Innovation Group.

Even young Chinese companies are filing international patents on a massive scale, the research discovered.

Economists from TUM and the Munich Innovation Group who analysed the patent portfolios and internationalisation strategies of the 77 Chinese companies found that in the wake of telecommunications and IT companies, other industries are now heavily investing in their own intellectual property as well.

Telecommunications company Huawei’s European Research and Development headquarters is set up in Munich and seeks to employ engineers from Munich’s universities.

The automotive enterprise BYD has filed hundreds of intellectual property rights in Western countries. Chang’an is aggressively internationalizing its business in Russia, Brazil and African countries.

“For a long time, Chinese companies had a reputation for simply imitating their Western competitors. But the number of patent applications filed by them has increased heavily in recent years,” said TUM’s chair for Strategy and Organization, Philipp Sandner.

“China has a large number of up-and-coming companies that are pursuing an aggressive internationalization strategy – but some of these companies are still barely known in Europe or the US,” Dr Sandner said.

He said even young firms were protecting their intellectual property rights on a massive scale in Europe and the US – and yet they are barely known there. There were growing numbers of Chinese-owned patents in energy, chemicals and pharmaceuticals.

Researchers from TUM and analysts at Munich Innovation Group focused on 77 Chinese companies with high potential in innovation, internationalisation and growth. They concentrated on the key industries of  automotive, chemicals and pharmaceuticals, electronics, IT and internet, engineering, solar, telecommunications, and oil and steel.

The economists analysed mainly the companies’ patent portfolios, enabling them to draw inferences about their general development and their internationalisation strategy. For example, by studying the geographical distribution of patent applications, the researchers could conclude which are the firms’ target markets.

One conclusion the research team arrived at is that the imitation strategy of Chinese companies is on a downturn, Dr Sandner said.

He said today, for most of them, self-developed intellectual property plays a dominant role in their businesses.

“Telecommunications companies like Huawei are pioneers,” Dr Standner said. “Many of them have now seen an end to the years with the ever-rising numbers of patent applications, their patent activities having stabilized at a high level. For other industries like energy, chemicals and pharmaceuticals the analyses indicate a strong rise in innovative activity.”

Even young companies are filing 40 percent of their patents overseas, he said.

Researchers found the majority of Chinese companies were still primarily operating in their domestic market, including some companies with very high growth rates. But the number of distributed patent applications in Europe and North America over the last years illustrates the growing importance of these markets.

According to the European Patent Office (EPO), Chinese organisations filed more than 18,000 applications for European patents in 2012. China represented 7.3 percent of all European patent applications in 2012, ranking fourth after the US (24.6%), Japan (20.1%) and Germany (13.3%).

Many relatively new Chinese companies were focused on internationalisation from the start. Non-Chinese patents account for a substantial portion – 20 to 40 percent – of their portfolios.

“It’s these companies that are underestimated in Western countries – because we have never heard of them,”Dr Sandner said. “A large number of firms that could soon be global market leaders are barely known at all.”

One element in the strategy of Chinese companies represents a particular challenge for European and North American economies, the report said – and by inference that holds for Australia: besides patents, Chinese firms are filing a relatively large number of applications for utility models compared to Western businesses.

Being in worldwide IP registers, these intellectual property rights can protect a product in manifold configurations. As such, Chinese firms are securing a great deal of scope for themselves for future product developments, whereas other companies could be seriously blocked in this regard.

The German economists, however, do think it unlikely that Chinese firms will be able to sustain the level of growth in their patent applications given the present economic development.

The report said it was unclear whether firms would hold on to their rights when they have to pay renewal fees year by year.

If firms invested their money to keep and defend their patent rights, it can be assumed the protected technology has an economic value, the researchers said. 

The economists have now made profiles of the companies available online, arranged in the form of 77 corporate profiles and nine industry analyses:
http://www.chinese-champions.com
http://www.strategie.wi.tum.de

 

Technische Universität München (TUM) is one of Europe’s leading research universities, with around 500 professors, 10,000 academic and non-academic staff, and 35,000 students. Its focus areas are the engineering sciences, natural sciences, life sciences and medicine, reinforced by schools of management and education. TUM outlines that it acts as an entrepreneurial university that promotes talents and creates value for society. In that, it profits from having strong partners in science and industry. It is represented worldwide with a campus in Singapore as well as offices in Beijing, Brussels, Cairo, Mumbai, and São Paulo. Nobel Prize winners and inventors such as Rudolf Diesel and Carl von Linde have done research at TUM. In 2006 and 2012 it won recognition as a German ‘Excellence University’. In international rankings, it regularly places among the best universities in Germany.
www.tum.de

 

 

 

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Australia’s carbon emissions slow in 2013?

Australia’s greenhouse gas emissions are expected to slow during 2013, with measured emissions expected to grow by just 0.4 percent from 2012 levels because of reduced output from the metals sector – where Australia’s market is in serious decline – and an increase in renewable power generation.  

That is the view of carbon analytics firm RepuTex, based in Melbourne. RepuTex research shows Australia’s emissions forecast to be more than 10 million tonnes, or 3% lower than projected under a ‘business as usual’ scenario without a carbon price.

RepuTex associate director of research, Bret Harper said the Federal Government’s Carbon Price Mechanism (CPM) will play a key role in reducing Australia’s carbon footprint. He said the research shows emissions growth in 2013 to be driven by the power, energy, and mining sectors – with power emissions forecast to grow 1.2%, but muted by increased renewable and gas capacity.

RepuTex forecasts greenhouse gas emissions across the Australian CPM using facility level modelling of more than 750 of the country’s largest carbon-emitting plants and sites.

The power sector will remain the largest source of carbon emissions in 2013 – accounting for 59% of all CPM emissions, followed by mining at 17%.

“One of the key issues facing the power sector is that rising gas prices will hamper gas generation’s ability to compete with coal,” Mr Harper said.

“We see coal maintaining its share of Australia’s generation mix through 2016, when government assistance to brown coal generators expires. From that point the floating carbon price is expected to provide good support to renewable generation, so we anticipate a real decline in power emissions from 2017-18.”

RepuTex forecasts black coal generation to grow by around 20% through 2020, whereas brown coal is forecast to decline nearly 17% over the same period.

Total coal generation is set to increase 8% by 2020, but with a resultant rise in emissions of only 4%, reflecting increased usage of less carbon-intensive black coal.

Emissions from petroleum refining and gas processing – both of which face significant regional competition – will decline in 2013, by 3% and almost 9% respectively as domestic output slows.

Emissions from the metals sector are forecast to drop 6% over 2013, driven by a downturn in Australia’s steel and aluminium industries, with steel emissions forecast to contract over 20% from 2012 levels, in line with reduced production.

“We’re seeing the combined impact of both carbon pricing and major sectoral changes within the Australian economy steadily shifting the country’s emissions profile,” Mr Harper said.

“The effect of forthcoming closures such as Kurri Kurri Aluminium and Caltex’s Kurnell refinery is set to be mitigated by the number of massive new projects within the oil and gas sector.”

The five largest such developments, Browse (Woodside, 2018), Wheatstone (Chevron, 2016), Gorgon (Chevron, 2015), Australia Pacific LNG (ConocoPhillips, 2016) and Icthys (INPEX, 2017), once online, will be the largest emitting facilities in Australia’s energy sector.

Between them, they are forecast to account for around 40% of the entire sector’s emissions by 2020, according to RepuTex.

www.reputex.com

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Carbon tax irks retailers

A SURVEY by the Australian Retailers Association (ARA) has highlighted new concerns about the impact of the Federal Government’s carbon tax -- 80 percent of respondents said business had been negatively impacted since the July 2012 introduction.

Image
Russell Zimmerman

 

About 60 percent of retailers surveyed said consumers had spent less since the carbon tax was introduced and 98 percent said they were not aware of government compensation programs.

ARA executive director Russell Zimmerman said he was not surprised by the findings of the energy efficiency in retail survey conducted in late 2012. 

“It’s a concern that a vast majority of retailers were struggling on a business level due to carbon pricing and were not aware of government compensation programs in place to assist them,” Mr Zimmerman said.

“The introduction of carbon pricing was a massive legislative change for small business and one which has had a significant impact. In a climate of already suppressed retail spending, retailers are taking the hit of the carbon tax as consumers bypass the stores to pay household bills.

“It would appear that the government, although aware that big businesses would likely choose to pass the tax on to small businesses, the carbon tax was introduced without teaching businesses, particularly small businesses how to reduce their carbon footprint — which we understood is the ultimate aim of the tax.

“The cost of doing business has gone up for retailers due to higher utility bills and costs accumulated throughout the supply chain, which eventually fall onto retailers’ bottom lines and hit their customers’ already-sensitive hip pocket nerve.

“Many retailers reported significant increases in their bills, as well as a willingness to consider measures to reduce their carbon footprint such as more efficient lighting. The key challenge is in ensuring businesses are aware of any assistance they can access.

“The ARA is calling on government to provide the funding and information retailers need to cope with the adverse affects carbon pricing is having on their business.

“As the peak retail association for the $240billion retail industry, the ARA is listening to and liaising with government at all levels on behalf of its members in order to deliver much needed information and training to retailers,” Mr Zimmerman said.

www.retail.org.au

SURVEY RESULTS ENERGY EFFICIENCY MEASURES IN RETAIL (Oct-Dec 2012)

The questions and responses to the survey are listed below:

Please indicate how the Carbon Tax has affected your business? Very negative impact- 23.3% Some negative impact- 54.9% No impact- 16.5% Some positive impact- 2.4% Very positive impact- 2.9%

Do you believe the Carbon Tax has affected consumer spending within your business? Yes, consumers have spent less- 60.7%  Yes, consumers have spent more- 1.0%  No, spending has remained the same- 23.8%  Not sure- 14.6%

Are you aware of any government compensation for retailers? Yes- 1.9%  No- 98.1%

If known, please indicate how much your energy costs have increased: Less than 5%: 10% 5 – 10%: 20% 11 – 20%: 30% 21 – 30%: 15% More than 30%: 11% Not sure: 14%

COMMENTS

ARA also presented a collection of recurring comments from retailers who completed the survey:

What Government supplied programs has your business been able to access to reduce energy costs and consumption?  - None that we are aware of. - Did not know that there was one. - None - didn't know there was any. - Haven't been informed of any so far.

Please indicate how the Carbon Tax has affected your business? - Increase in raw materials, all our merchandise is increasing.  - Cost to operate and not quite sure the impact from suppliers at this stage. Too early to assess. - Very difficult to assess the pass-on costs other than in electricity and this is also caught up with network cost increases. - Increased cost of product. Increased expenses. - It has added a total cost of approx $4000 ex GST per year to the operation of the business. - Rising electricity costs. - Business electricity cost have gone up it may only be 10% but it is a cost all business cannot absorb so will be passed on eventually. - Consumer attitude. - Customers have been afraid to spend money. Fuel Prices keep going up, living in the country it is our main mode of travel. My power bill has more than doubled. - Higher delivery costs for stock and those that used to deliver for free now charge a freight fee - Freight and suppliers prices have gone up about 6%. - Power costs up 40% since July. - Supplier costs have gone up and input costs have also gone up.

 

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