New countries lead the way in Asia

There are a lot of countries in Asia – but most businesses tend to think only of a few when considering international expansion or investment.   Interest in China has faded as more realise how difficult it is to deal with, and outsourcing to India is drying up as wage inflation eliminates its competitiveness.   The tiger economies of Japan, Singapore, Taiwan and Hong Kong continue unabated.  However, those looking for new opportunities, whether it’s a matter of tapping export markets or seeking better value and quality manufacturing or outsourcing, should look elsewhere. 

The biggest “rising star” country in the last few years has been Malaysia.  The reduction in red tape has been notable, and strong action has been taken against corruption.  The government is pushing Kuala Lumpur as a regional and international financial centre (particularly for Islamic finance).  However, it’s a great country for trade from many other perspectives – good value, good infrastructure and communications, growing market and a well-educated workforce.   Like most of the countries I’m including here, it’s in the ASEAN Free Trade Area, so establishment in any one of them can open up significantly wider markets.

Philippines fell out of consideration in the 90’s for various reasons, but foreign business interest has been increasing in the last few years.  It is arguably the best country in the region for Shared Service Centres and Outsourcing, and has been taking business away from India, with its flexible workforce and excellent English language skills.  Other types of business face difficulties that can’t be overcome – it may be one country, but made up of over 7,000 islands, and plagued by typhoons on an annual basis, so economic activity is centred in just two or three locations. 

Recently, the most heavily promoted country for trade has been Indonesia.  There are many government incentives and the statistics are all encouraging, but many shy away because of security concerns. 

Vietnam’s economy continues to expand rapidly, and it’s a country worth considering as a more manageable alternative to China – although there’s still plenty of red tape.  For a number of years the pace of inward investment exceeded the availability of skilled personnel, but that issue is quickly being overcome.   Trade treaties with China and Japan, as well as other ASEAN countries, make Vietnam an attractive base.

Slightly more intrepid businesses that want to stay ahead of the curve should now be looking to neighbouring countries which are now opening up.   In my opinion, Cambodia will rival Vietnam and Malaysia within another five years, and although smaller, Laos won’t be far behind. 

The country that over the last few years has emerged from nowhere – in business terms – is Myanmar (Burma).  There have been rapid changes since 2010, five years before the new democratic government led by Aung San Suu Kyi came to power – and there were a lot of regional business leaders already negotiating deals there when I first visited in 2013.  It is a big country, most of the labour force work in agriculture, the infrastructure is terrible and the education level is poor, but the opportunities feel terrific. 

Other major countries in Asia have been declining as attractive business destinations.   Thailand has labour availability issues as well as a system that discourages foreign business ownership.  South Korea is a vibrant economy boasting some of the world’s leading brands, but is difficult for foreigners to penetrate, with almost all economic activity in the hands of a small number of powerful “chaebol”, and the country feels to be in gentle decline.   Sri Lanka and Bangladesh continue as important textile manufacturing centres, but rarely figure in any other international business considerations. 

Asia as a whole remains as attractive and important as ever – but it’s the emerging countries that are the most exciting.

 

by Oliver Dowson, CEO at ICC – International Corporate Creations

8 Do’s and Don’ts for businesspeople facing Brexit

  1. DON’T go to any seminars, conferences or events dedicated to talking about Brexit. You have better things to do with your time. I can paraphrase them all for you in one sentence – “We have no idea what is going to happen, but when we do we will have an opinion”.
  1. DON’T think that because some economic indicators are improving, Brexit has passed, the experts were wrong, we’re all still alive and it’s no big deal. It’s all still to happen…. and it could take a long long time.
  1. DO panic – or at least make plans. Business people are supposed to be permanently optimistic, but this time take a break to be a pessimist. Think what the worst scenario could be for your business, and then plan accordingly. The government won’t tell us what their plans are until it’s too late for you to take effective action.
  1. DON’T lose sleep though. At least, not over Brexit. It won’t turn out as bad as you’ve been imagining it while you made those plans.
  1. DO change any branch offices that you may have in other EU countries to subsidiaries instead. It’ll take a little time to organise and it’s better to do it now in case any new rules come in.
  1. DO discuss contingency plans for any EU staff you have in the UK and UK staff you have in the EU, before they make their own. Most politicians say that nothing will change for employees already in place, but this is a time when it’s wise not to assume anything. Your staff are your most critical asset, and they’ll be worried about this, even if they’re not saying anything to you.
  1. DON’T stop planning your international business expansion. Whatever happens, your business will make more money in the short term and be worth more in the long term if you expand your operations internationally. In the worst case scenario, you’ll have another established business base in a less volatile location. It’s short-sighted to hold back on investment – and in any case, setting up overseas doesn’t have to cost a lot.
  1. DO please ask me and my team for advice on points 4 and 5 (and possibly 2 as well!).

 

by Oliver Dowson, CEO at ICC – International Corporate Creations

Georgia on my mind

International business expansion can bring even more successful and rapid results where there are unique opportunities.   So I’m always on the lookout for them, especially in countries that aren’t top of most people’s lists.  Last week I visited Georgia, and discovered an incredibly exciting pace of growth in a beautiful and welcoming country that exceeded all my expectations.  As soon as you step off the plane you start to see the potential.

It’s a small country with a population of just 3.5 million, and from 1921 to 1989 was part of the USSR.  Now it has reverted to proud independence, and is capitalising on its geographic position at the “crossroads of Europe”, a logical transport link between Asia and Europe.   As a result, most Foreign Direct Investment has been in infrastructure – new rail lines and motorways, and a deep water port in Anaklia on the Black Sea coast.   Now the country is starting to focus on other opportunities, and I see excellent potential for mid-range businesses – but it will be necessary to grasp them quickly.

At present, getting there can be a challenge – there are relatively few direct flights from Western Europe to the capital, Tbilisi (and none from the UK), and almost all of those arrive and depart at an unconscionable hour of the early morning.   That’s set to change over the next year, with budget airlines now negotiating access to other airports that are convenient both for the capital and the coast.  Once landed, immigration is a breeze, and it’s just the first warm welcome one receives.

In recent years Georgia has modernised rapidly, with glitzy new buildings and malls, but all the history has been retained.   The old town of Tbilisi is charming, and the remote cave monasteries fascinating – and between the two is some of the most beautiful countryside in the world.  The coastal resorts are similarly stunning.  Costs are low, the people are welcoming, summers are hot and sunny, the food is delicious – and it’s the country where wine was invented.  The potential for developing tourism, therefore, is huge, and arguably the top motive for FDI.

The country is also justifiably proud of being rated the 3rd safest in the world, and ranks highly for ease of doing business, economic freedom, lack of corruption and economic stability.   Taxation, an important consideration for most businesses, is simple and low – it claims to be the 9th lowest tax burden country in the world – and new policies from 2017 will make the system more attractive still.

I met with the Ministry of Economy, and learnt that their other priorities are energy, transport and manufacturing.  Even without the attractive government incentives, the free trade agreements with the EU, EFTA, CIS, GSP and Turkey, availability of a young educated workforce with low labour costs (average US$ 355/month) and inflation at a low 4.2% make a compelling case for considering manufacturing.

One thing there is no shortage of is water, and only 20% of the potential for hydro-electric generation has been exploited.  The value here is not just domestic, but in exports to Turkey and Russia, neighbouring countries with power deficits.

I was quickly convinced that almost every type of business should think seriously about expanding to Georgia – the time is right.

 

by Oliver Dowson, CEO at ICC – International Corporate Creations

My 3 enduring fundamentals of successful entrepreneurship

Technology changes, but the Art of Business doesn’t.   Methodologies come into and out of fashion, and get expressed in different ways, but the fundamentals of success are always the same.  My “Top Three” were instilled in me by one of my first employers when I was in my early twenties – and since then, I’ve validated them by reverse observation – the entrepreneurs behind every small business failure that I’ve personally witnessed since then have failed on at least two of these points.

Total commitment

This doesn’t necessarily mean working 7 days every week, but it does mean at least thinking work every day.  It’s essential to always be available – pick up every call, and answer every email, whether it’s day, night or weekend.  The best opportunities are often unexpected and come up at crazy times. Unfortunately, there are very few entrepreneurs who are both successful and lucky enough to be able to maintain that aspirational work-life balance.

Time management

Plan every day in advance to make at least a little time for everything.   If it’s quick, do it now.  Never ever let a day pass without doing at least one constructive thing to generate new sales.   Insist on quality but don’t aim for perfection – assign sufficient time to do each task well, but don’t keep polishing.  Don’t end up skimping on the next task – it could be the one that makes your fortune.

Humility

If you’re an entrepreneur, you’ll spend a lot of your time selling.   Potential customers don’t like hard sells and they particularly hate exaggerated claims.  You’re human and your product or service isn’t perfect – admit it.  Just aim to be the best person you can, managing the best company you can establish, selling the best product your company can make – and remember to ask everyone, especially every customer, how you could improve.

 

by Oliver Dowson, CEO at ICC – International Corporate Creations

Australia

After 25 years growth, what next?

Although it’s one of the most attractive international investment destinations for UK companies and investors, Australia is always a difficult market to read.  It’s not just the distance and time zone.  Perhaps the conflict comes from the fact that it feels so “British” in so many ways, but is economically so different.  The heavy dependence on mining and a services sector focused on Asia-Pacific tends to mean that economic cycles are almost the inverse of those in the UK and USA.

So back in 2008-2011, when doom and gloom hit the West, Australia powered ahead, with rapidly improving GDP and strengthening exchange rates – almost solely built on Chinese demand for raw materials.  Over the past two years, however, the economy has retracted as mining has suffered.

That’s not to say that the economy has not been resilient.  Despite negative factors, the end of the financial year last Thursday (June 30) brought with it official confirmation of 25 years of uninterrupted growth.   In the last year, though, whilst GDP grew by 3.1%, net disposable incomes actually fell by 1.3%.  So the country is producing more but earning less.  Average salaries have fallen as high-paying manufacturing and mining jobs have been replaced by low-paying service sector jobs, many of which are part time.

Now economists are worrying about what will happen in this new financial year, with uncertainties around Brexit (despite the distance!), the Chinese economy and many other international factors which have significant effects on Australia.  A new government and new budget may mean increased taxes.

As a result, Australians are spending less, and companies have drastically cut back on investment.

So is this a crazy time to consider trading with Australia?  Not at all, if the focus is right.

The Australian dollar continues to trade at around 20% less than in 2013-14 and is around 30% less than its peak in 2012, when its value made it basically impossible for any business to sell anything in to or out of the country.  The costs for visitors, whether on business or tourists, were painful.   Now costs seem more reasonable and the country is once again viable for visitors and investors.

Key reasons for foreign direct investment into Australia are the high skill levels, geographical positioning to act as a base for the whole APAC region and, of course, the ease of doing business and easy cultural fit.  Although salaries are still relatively high compared to most other developed countries, Australia is definitely viable as a base for R&D and other skilled activity in sectors such as Healthcare and IT.  Tourism also presents good guarantees of investment return.

Since the exchange rate is only likely to reverse in the future – albeit it’s unlikely that will happen very soon – it could be a wise moment to make long term investments in Australian companies.  The ones that dominate their part of the world stage, and demonstrate great long term potential, are property investment companies such as Macquarie, AMP, LendLease and Westfield.  Their well-diversified portfolios mean that A$ growth should be reliable, and future exchange rate changes are likely only to improve the valuation.

From the exporter’s perspective, the opportunities for selling goods seem poor.  On the other hand, it could be a better time to be selling services, especially those that can be delivered into Australia from lower cost economies.   For example, “in time zone” outsourcing to Philippines has been undersold in the past, but must now be increasingly attractive as businesses seek to control costs.  More cost-effectively, Australian companies could be encouraged to invest in setting up their own offshore Shared Service Centres for even greater economic benefit.

 

by Oliver Dowson, CEO at ICC – International Corporate Creations

Starting up in the UK

The ultimate step by step guide

 

Probably one of the most asked questions during the 65, 619 new company incorporations in the UK (according to the latest statistics for April 2016) was “how much?”. Well not a lot to register it… but quite a bit to set up and  maintain it.

There are definitely some factors to take into account that, if overlooked, can be deadly for your business, even before you start trading.

Yes, the idea motivates you, and your will is stronger than ever, but how solid are your finances and how long can your business survive without profit? It is vital that you think  through all the potential costs properly, and include a contingency plan. There are always unexpected expenses. Those, along with poor budgeting are the most common reasons for start-up failure.

Once the money is sorted and your idea is finally turning into reality, you should be able to answer these basic questions and include them in your business plan along with all projected costs.

  • What is your market?
  • Who are your competitors?
  • How useful is your product and how will you position it?
  • What is your Unique Selling Point?
  • Are you going solo or setting up a limited liability company?

Now, all you’ve got to do  is make sure you include all these costs before you get started:

  • Business premises: after staff salaries, probably the biggest operating cost. Whether you use serviced offices or retail business premises, bear in mind that normally these come with agency fees and service charges. You may also have to pay a big sum upfront on your lease, as some landlords and agencies operate on a quarterly rather than monthly basis.
  • Professional advice: Include these services in your budget. The planning stage is one of the most important. It’s OK if you are not an expert, but find some legal and financial advisors to help you with your plan. Keep these contacts for future occasions – when you employ staff or have questions or on projected costs and profits, taxes… Then you’ll definitely need an accountant, payroll agent, lawyer or solicitor.
  • Business travel: when starting a new business, you’ll probably have to attend meetings outside the office. Have some budget allocated to travel, either by public transport or using your own vehicle.
  • Stock, tools and equipment: if you’re not operating a service this can also mean a significant upfront cost. You need to make sure that you’ve got all the material needed to carry out your work smoothly from the start.
  • Insurance: this should be done straight away. It’s important that you protect yourself and keep your company from any type of liability. Insurance is not that expensive but it is important to get the right type of cover. The most common (and essential) is Employer’s Liability Insurance. The certificate should be displayed in your office along with the Certificate of Incorporation or Business Name Registration. Don’t make your business vulnerable.
  • Marketing: as you’re starting a new business, you need to make people aware of its existence! Include events and networking on your budget as part of your awareness strategy. You can opt by traditional methods such as direct mail or spend a small amount in ensuring your website is well placed in search engine results. Invest some time and money in creating your brand: leaflets, logo, corporate brand sheet, business cards, etc. Create an identity that makes your company unforgettable!
  • Staffing and employment: refer to your professional advisers to have guidance on recruiting new employees, wages, tax, National Insurance or any other payroll or HR matters – again, no need to be an expert, just seek some help to save time and effort and ensure you “do it right”. Companies nowadays tend to outsource these services, and there are various packages sold depending on the size of the company.
  • Other expenses normally overlooked:
    • IT and other equipment- computers, printers, toners
    • Office furniture
    • Business stationery and office supplies
    • Website development
    • Postage
    • Utilities – electricity, water
    • Phone and internet charges

Go ahead!

  • Choose your business structure
  • Find a location
  • Register your company with Companies House
  • Register for tax and national insurance
  • License your business (if applicable)
  • Get a website
  • Good luck!

Any questions? We’d be happy to help – get in touch with me or any of my colleagues at ICC -International Corporate Creations.

 

by Joana Miranda, Admin and Finance at ICC – International Corporate Creations

 

Iceland beats England

A lesson for British Business

To add to all the disruption and apparent chaos that the country has descended into over the last few days, soccer fans are shocked – or at least disgruntled – by tiny Iceland’s defeat of mighty England in the European football cup yesterday.

What happened there?  Pundits were united in saying that the key factors were the commitment and enthusiasm of the Icelandic team. It proves that with determination and a good plan, even the unlikeliest of the teams can succeed.

There’s a lesson for British Business here. A disappointingly large number of companies in the UK do not expand abroad, limiting their international activities to exporting via third party distributors or perhaps outsourcing some labour-intensive activities such as accounting or call centres. Quite apart from reluctance to invest and fear of the unknown, I still meet many business people who believe that “we do it better here at home”.

Just as with football, overseas business subsidiary teams, especially those based in developing countries, often overtake their British HQ staff in terms of enthusiasm and commitment. This is particularly true where the company has had the foresight (and some would say bravery) to hire highly skilled individuals to perform strategic roles in the globalised company.

All over the world you can find skilled, qualified professionals determined to prove their worth. Put them into a new international subsidiary operation, and your demonstration of commitment to their country will be repaid many times over with their contributions to your business. Expansion is Great!

by Oliver Dowson, CEO at ICC – International Corporate Creations

And now what?

Companies across the world are locked down in emergency meetings as we all face the reality of Brexit. While there may be panic in financial markets, other businesses need now to look further ahead and quickly put in place contingency plans to protect their companies.

No one knows what will happen with the intricate arrangements and rules that tie the UK to the EU but it’s probable that the UK will stay in an EFTA/EEA arrangement. Considering this scenario, businesses that trade in EU countries from branches will need to make some changes, and all will continue to be affected by currency fluctuations.

Companies that only have domestic business – especially SMEs – need to consider the effect of more volatility in currency, commodity and stock markets. Imports and raw materials are likely to cost more. However, exchange rates staying low will hopefully incentivise those that do not currently export or sell services abroad to look again at their business and seek new opportunities.

The picture is arguably more complicated for overseas companies that invested in setting up subsidiaries in the UK on the strength of using it as a base to trade with Europe. Those with little reliance on manufacturing or services delivered from the UK will no doubt be considering partial or total relocation.

At ICC – International Corporate Creations, we didn’t want Brexit, but we’re grasping reality. We can help your company plan and decide your next steps. Whatever your business or location, talk to us for constructive and clear insights on UK and overseas business growth and prosperity.

 

by ICC team, ICC – International Corporate Creations

Remain or leave the EU

Trade deals work both ways

“If the UK leaves the EU, it will be free to strike its own trade deals”.  So say the Leave campaign – but it makes little sense to me.  Whilst I suppose it’s a true statement, is this really something that the UK really wants or needs?

I won’t provide any facts and figures, because in the current nasty campaign there’s a danger of this article getting tagged as scaremongering or just plain lies.   So let’s just think about it in general.

Britain already has pretty good trade deals with most countries through the EU, and has always been one of the major trading nations of the world.  The Leave campaign cites USA, India and China as countries that the EU doesn’t have free trade deals with, and says that the UK needs them.

The USA is already – by a long way – the biggest export market for the UK.  The EU has been trying to negotiate a trade deal for many years – and it’s still negotiating.  Nothing has been agreed because some American demands are unacceptable to Europe.  Yes, trade deals work two ways – a free trade deal doesn’t only open markets for us, it opens up our market to them!

Among the things that America insists on but Europe won’t accept are reductions in data protection and import of genetically-modified food and beef fed with hormones.  Are these things that the UK on its own should accept?   Britain led the way in consumer rights since the 1960’s, and most EU legislation is derived from that – and now we walk away?  I don’t think most voters would agree.

Removal of trade barriers opens up markets to us – but brings with it a clear danger that we will end up importing more than we do now, and tip the trade balance further against us.  We can only benefit when the overseas market is eager to buy UK products and services and we have exporters ready to take advantage – and, sadly, there’s little indication that is the case.

India is a good example.  It’s another of the countries that Leave cite as needing a free trade agreement – but existing barriers are low, and UK trade under the current regime has actually been declining year on year.  Despite special trade missions to India, lots of government-funded activity to encourage exports, and long-standing ties between the countries, recent years have simply seen a growth in imports whilst India’s interest in buying British – and hence exports – has reduced.

And China?  That’s the most difficult market of all to read.  One certainty is that one reason for the “steel dumping” that has led to the virtual obliteration of the UK industry is that, for other political reasons, our own government vetoed the EU imposing tariffs on Chinese steel.   There seems no doubt that China would only agree to a free trade deal if they thought that would increase their own exports more than the new imports they would be letting in.

Conclusion?  Free trade is great, but removal of barriers on their own can create new problems.  The UK has been well served by the EU trade agreements.   Apart from the strength of a much larger negotiating bloc, I’d argue that the EU has added the social responsibility that we lack on our own.  It would be madness to throw it all away and leave.  Let’s Remain.

 

by Oliver Dowson, CEO at ICC – International Corporate Creations

Setting up a business in Brazil

 The ultimate guide – Part II

Is it complicated? Can I have an idea of the different steps?

Brazil has a high level of bureaucracy. We will explain bellow the step by step timeline to the creation of two companies in Brazil. These case studies are based on real companies that set up operations in Brazil.

 

Case Study 1 – Joint Venture

Multi-function business

  • Sell UK-created SaaS to Brazilian companies
  • Provide customer support to existing and growing customer base across Latin America

Why a JV?

  • Customer pressure forcing urgent establishment
  • Had to have branding and country presence
  • Only justified 3 staff initially
  • UK owner could only dedicate minimum resources due to other commitments

 

Case Study 1:

  • UK business determined Sao Paulo as an ideal base                                        [Day 1]
  • 15 possible partners found through remote library research                         [Day 15]
  • Prospectus sent and telephone call with CEO of each of 15                            [Day 18]
  • 3 were not interested, reducing list to 12                                                            [Day 30]
  • 6 of those eliminated by local representative visit                                            [Day 40]
  • Shortlist of 6 – half day visit by UK team (with local support) to each        [Days 55-57]
    • 4 in Sao Paulo metro area
    • 1 in Campinas
    • 1 in Sorocaba
  • First choice – one in Sao Paulo                                                                              [Day 60]
    • Fell through on business negotiation on terms within 3 days

Second choice (in Sorocaba) selected                                                                              [Day 63]

 

Remaining steps:

  • Legal agreements reviewed and refined by both parties                                   [Day 75]
  • Employee hiring process started                                                                             [Day 76]
  • UK Power of Attorney signed and sent for legalisation                                      [Day 76]
  • Company registered as 50/50 JV – Contrato Social signed                              [Day 85]
  • Candidates interviewed, and 3 selected                                                                 [Days 86-87]
  • 3 employees start work and training                                                                       [Day 90]
  • All other necessary business setup arrangements in place                                 [Day 95]

Official launch of Brazil company and announcement to world                                  [Day 100]

 

Case Study 2: Wholly-Owned

Provide communications and hospitality support to broadcasters and sponsors of major events – initially World Cup 2014 then Olympics 2016

  • Branded local presence essential for contracts with certain Brazilian suppliers and partners
  • Paramount need for total control over product quality
  • Urgency dictated by event timings

 

In case study 2:

  • Business requirements and deadlines dictated                                                                    [Day 1]
  • Decision made to pursue Turnkey Solution                                                                          [Day 2]
  • Detailed proposal and company definition drafted                                                            [Day 12]
  • Proposal and Definitions refined and agreed with UK management                             [Day 20]
  • UK contract for ownership handover signed                                                                       [Day 20]
  • Hiring process for Manager and Sales person commenced                                              [Day 21]
  • Contrato Social signed and legalised, interim Administrator appointed                       [Day 30]
  • Serviced offices contracted, initial staff interviewed and hired                                        [Day 44]
  • Banking, Accountants, Lawyers appointed                                                                           [Day 50]
  • Business launched and trading                                                                                                [Day 60]
  • UK Power of Attorney signed and sent for legalisation                                                      [Day 61]
  • Revised Contrato Social signed and legalised                                                                       [Day 70]

Company now fully owned by original UK parent                                                                          [Day 70]

 

Nice… Can I do the same for my company?

Contact us for a free consultation on: +44 (0)20 7278 9210.

 

by Oliver Dowson, CEO – ICC – International Corporate Creations

These case studies were presented at the UKTI Exporting is Great – Opportunities in Latin America Roadshow