Monday, March 22

CoreNet Global India Summit Opens

More than 230 corporate real estate professionals from across Asia and around the globe have convened in Mumbai (Bombay), India for the 2004 Asia Global Summit, themed "Enabling Work in an Integrated World: Challenges & Opportunities in Asia."

Richard Watton, chair of CoreNet Global Asia and head of real estate and business services for Asia-Pacific, JPMorgan Chase & Co., kicked off the Summit on Monday with a warm welcome for attendees. He noted India's rapid rise as both a business location and an important part of CoreNet's global membership. "India is a preferred location for many multinational companies, including my own corporation," he said. "And India is the fastest-growing membership base in the Asia-Pacific region for CoreNet Global." Watton also recognized the leadership provided by Ashok Kumar, principal, CRESA Partners and chair of the India chapter, and the entire host committee.

Watton then introduced a special guest of honor, Mr. Deepak S. Parekh, chief executive and chairman of the Housing Development & Finance Corporation (HDFC), India. "It is an honor for me to welcome the CoreNet Global Summit," he said. "You have come to the commercial capital of India."

Following Parekh's remarks, Watton outlined the strong education program set for the three-day event and thanked Summit sponsors for their support. Next Bruce Davidson of Jones Lang LaSalle (sponsor of General Session I) came forward to introduce the first keynote speaker, Linda Yuen-Ching Lim. Lim is Professor of Corporate Strategy and International Business at the University of Michigan and the founder and editor of The Journal of Asian Business. Her keynote presentation was titled, "Asia's Rise in the Global Economy: Reshaping World Business?"

General Session I:
Asia's Rise in the Global Economy
Asia currently accounts for 22 percent of world GDP - and growing. "Asia's share of world GDP will exceed North America's by 2030," Lim predicted. Despite the rise of emerging markets such as China and India, Japan still accounts for some 58 percent of all Asian output.

Emerging Asia's growth is based on several factors, including:

• Large inputs of labor. Asia - especially East Asia - has a high percentage of its population in the working-age group. While 17.6 percent of the Japanese population and 12.6 percent of the U.S. population is over age 65, only 6.4 percent of East Asia, and 4.6 percent of South Asia, is over 65.
• Large inputs of capital. Savings as a percent of income is 36 percent in East Asia (19 percent in South Asia) compared to 17 percent in the United States.
• Increasing skills and productivity. Asia has made substantial investments in education and infrastructure in recent years.
• Technological innovation, derived from both indigenous sources and imports.

Indeed, Asia's business advantages have reshaped global manufacturing. "East Asia is the most competitive production location in the world for a wide range of manufactured goods," Lim declared. The region is well integrated into global supply chains and has large, rapidly growing regional markets, she noted.

No other place in the world, Lim contended, has a wider range of cost levels than East Asia (e.g., Japan, Korea, China, Philippines, Vietnam, Indonesia, Thailand, Hong Kong, Malaysia and Singapore). "You can pick your comparative advantage," she pointed out. "You can pick where you need to be for what you're doing."

Fully 50 percent of China's trade is with other Asian nations, with just 15 percent going to the United States. India, by comparison, also has 15 percent of its trade with the United States - but less than 10 percent of its trade is with other Asian countries. Asian economies overall are becoming more integrated with each other, Lim said.

The Truth About Offshoring
While India has become a preferred location for outsourcing of various corporate services, such as call centers, the phenomenon of outsourcing is actually spread all over the globe, Lim observed. Inexpensive, educated labor, adequate telecom infrastructure and lack of trade barriers are the only essential ingredients. On the other hand, being competitive in manufacturing requires assembling a wider range of assets and tools, she said.

Outsourcing benefits companies by opening up new sources of skill and talent. And it brings lower costs to both business and consumer alike. But it's currently a hot topic in the United States - a political football, if you will - in this, an election year.

While news reports detailing the offshoring of U.S. jobs to other countries are grabbing big headlines these days, the number of jobs affected is tiny compared to the size of the economy. "A recent Wall Street Journal survey of economists indicated that outsourcing accounted for only 690,000 layoffs of almost 59 million that U.S. companies undertook from 2001 to 2003," Lim pointed out. "That's only 1.1 percent. From an economist's view, it is surprising that this is such a big issue."

The real reasons for America's so-called "jobless" recovery, she said, are the domestic business cycle, labor market policy and technological innovation.

"It doesn't make sense to restrict outsourcing," urged Lim. "If job creation in the U.S. goes up later this year, the debate will start to go away."

Global Economic Outlook
2004 will be a year of robust, global growth, Lim predicted. Key reasons include:

• A strong, long-delayed recovery of the U.S. economy
• Continued fiscal and monetary stimulus in a U.S. election year
• Recovery in Japan, plus strong growth in China
• Spillover effect to other export-led Asian economies

Still, there are several risks for the global economy in the short term, Lim cautioned. "One is the huge U.S. budget deficits," she said. "And growth in Europe could be stalled due to continuing strength of the euro, which hurts European exports." Yet a third risk relates to fiscal policy in Japan and China. "If those countries allow their currencies to appreciate, and thereby stop funding the U.S. budget deficit, U.S. interest rates would have to rise sharply or the dollar would collapse."

General Session II:
Unleashing the Tiger
After a networking break (sponsored by RMZ Corp.) came General Session II, sponsored by Welsh Development Agency.

Mike Zamora, chair of the India Summit Program Planning Committee and planning manager, Asia Pacific Japan for Cisco Systems, introduced keynoter Adit Jain. Jain is managing director, IMA India - an associate firm of the Economist Group in Asia-Pacific. His presentation was titled, "India Shining - The Tiger Un-caged?"

An Indian native with extensive international business experience, Jain discussed India's economy and growth, and explored business opportunities for investors. While conceding there are challenges, Jain clearly is upbeat about India's future prospects.

"If I had appeared here four years ago, I might not have been as bullish as I am today," he declared. "A 'feel-good' factor appears to have returned. We expect the economy to grow at about 6-7 percent in the middle term, with controlled inflation," he said.

That growth is being driven by a combination of factors, including buoyant capital markets; lower taxes and duties; government spending in infrastructure; growth in business process outsourcing; and a strong market in affordable housing. "Ten years ago, the average house loan in India was 10 times the annual salary. Today it's just 3.8 times the average salary. That has made a huge difference."

Indeed, the average Indian is more bullish today too. According to a recent survey, 85 percent think things have improved enormously in the last six months, Jain said.

Good news also comes in the realm of geo-politics. In terms of India's relations with neighboring Pakistan, dialogue has begun toward resolution of differences, Jain reported. "But in my judgment, there never was any strong probability that India might go to war with Pakistan. We have now moved beyond those issues." Other positives include greater U.S. acceptance of the Indian position on Kashmir, a "reasonably successful" visit to China by the Indian Prime Minister and a likely expanded role in and interaction with ASEAN in the years ahead, he added.

Manufacturing - In India It seems everyone these days is aware of India's suitability for establishing service operations. But the country has a lot to offer manufacturers as well. According to Jain, India is "an emerging factory for the world."

Fifteen percent of the world's leading automobile manufacturers are now sourcing components from India, he reported. And India-based Hero Honda is now the largest manufacturer of motorcycles in the world.

Low costs and available skilled workers - two of the key drivers in India's skyrocketing rise as a business process outsourcing (BPO) location - are also behind the manufacturing growth. Moreover, India offers rapidly improving infrastructure, a maturing policy environment and eased foreign exchange restrictions. "The rupee is convertible," Jain underscored.

Consumer Markets,
The Future
With more than 1 billion people, India obviously has a huge consumer market despite income levels that are substantially below U.S. or European norms. "The size of the market depends on your product and your pricing strategy," Jain explained. What's really important to realize, he said, is that the consuming class is growing. "There has been a big migration from the 'have-nothings' to the 'have-somes,' and from the 'have-somes' to the 'have-mores. ' " That trend is expected to continue.

Looking ahead over the next 15 years, Jain predicted, India will emerge as a country with pockets of excellence. Several industries will be globally competitive, including automotive, pharmaceuticals and biotechnology, textiles, chemicals and IT-enabled services.

Finally, foreign policy increasingly will be driven by economic considerations, he said: "India will emerge as a strategic ally of the United States."