‘Definitely an opportunity’ for Asia-Pacific economies as the world becomes more complex: Egon Zehnder CEO
Francesco Buquicchio notes that chief executives are eyeing South-east Asia and India to establish new business partnerships
Lionel Lim
[SINGAPORE] Decades of economic growth that relied on the strategy of offshoring may be “dead”, according to the chief executive officer of Zurich-headquartered leadership advisory firm Egon Zehnder.
The days of Western European companies looking to China to expand their manufacturing footprint is “something of the past”, Francesco Buquicchio told The Business Times in Singapore, citing views from his conversations with CEOs.
He was speaking to BT after Egon Zehnder published its annual survey titled The CEO Response last month, which asked business leaders a series of questions about how they view an increasingly complex global landscape.
While the global economy post World War II was anchored by a US that was keen on free trade, actions in recent years such as trade wars and more protectionist policies suggest that the view in Washington may be changing.
And that changing global trade dynamic is weighing on the majority of the 1,235 CEOs surveyed by Egon Zehnder who see the prospects of global prosperity decreasing in the face of an ever-changing and more complex environment.
Yet, the same survey revealed that while the majority of CEOs see the most promise in strengthening business partnerships in their own region to hedge against a multipolar world, these CEOs are also eyeing parts of Asia, such as India and South-east Asia for new partnerships.
“The number of people looking into this has gone up year on year,” said Buquicchio.
And though interest in the Asia-Pacific (Apac) is still largely driven by Asia-based CEOs, he said the “good news” for the region is that the number of leaders from Western Europe or the Americas looking to Apac for new partnerships have gone up and that is “definitely an opportunity for the economies here”.
What used to be an offshoring strategy that involved manufacturing in China is now “dead”, said Buquicchio, and business leaders are looking for other locations to expand their footprint.
Diversification
In the last few years, India and certain economies in South-east Asia have been beneficiaries of Western companies looking outside of China for new manufacturing locations.
Vietnam and India, for example, have received investments from companies such as Apple and Micron among several other European and American companies. Japanese and South Korean companies have also looked towards South-east Asia and India for new manufacturing capacity.
“People are starting to hedge risks. You want to diversify your footprint as much as possible because in a complex world you don’t know where the next thing is going to be or where it’s going to come from,” Buquicchio said.
Diversification also offers opportunities for brands to create new products for new markets. Buquicchio referenced the bottle of water that was served during this interview. He explained that the particular brand served was well-known in Europe for stillwater and that he was surprised to see that brand serving sparkling water in Singapore.
Fifty-nine per cent of the 1,235 CEOs surveyed by Egon Zehnder are from companies headquartered in Europe, with 23 per cent from North America and 11 per cent from the Apac region.
The survey also showed that in addition to focusing on innovation, investing in talent development and in artificial intelligence, Asia-based CEOs are also more keen on forming new strategic partnerships and alliances compared to their global counterparts.
Asia-based leaders were also slightly less worried about the increasing chance of military conflict, or increasing nationalism and populism when compared to leaders in other parts of the world.
Buquicchio acknowledged that the threat of conflict is “objectively there” but that it could be a matter of perception for Asia-based business leaders.
“I think it’s maybe a matter of calibration. Lots of Western leaders grew up in a world that was very stable,” he said. Yet, he argued that business leaders in Asia have had to deal with geopolitical tension, inflation, negative interest rates and even very high interest rates.
“They (Asia-based leaders) are more ready to deal with the complexity, and therefore maybe are more optimistic,” he said.
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