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Three countries’ young, productive, prosperous workforces are enticing companies to the region
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There are workers to be found in Southeast Asia, but setting up operations there is not without challenges, according to a white paper released Aug. 19, 2014, by workforce solutions behemoth ManpowerGroup.
Big populations yielding a large supply of young workers in Malaysia, Indonesia and the Philippines (the MIP countries) are making these countries attractive destinations for global businesses, according to the report, titled The Next Big Thing in Southeast Asia.Other factors influencing corporate decisions to start operations in this “relocation triad” are high workforce productivity and the region’s growing middle class and consumer markets.
“Major companies, including Fortune Global 500s, are starting to locate their operations [there] the way they once flocked to China,” where offshoring was largely driven by the availability of cheaper labor, wrote Danny Yuan, chief operations officer, ManpowerGroup Asia Pacific and Middle East.
But operating in the MIP market isn’t devoid of problems and risks. For example, just like in the U.S., the skills of many Malaysian college graduates often don’t match the skills employers are looking for, which can dampen hiring expectations.
Meanwhile, high workforce mobility and turnover, coupled with increased wage pressure, makes retention a hot-button issue in Indonesia as do issues like bribery and corruption, which also pose problems for companies wanting to do business with ethical suppliers.
But political stability, a favorable regulatory environment and other practical considerations, such as availability of natural resources, help minimize some challenges. All three countries offer companies favorable investment and tax incentives. Indonesia’s customs reforms and the Philippines’ simplified import/export procedures are stimulating significant amounts of corporate investment.
These favorable conditions have led more companies representing a number of industry sectors, including manufacturing, pharmaceuticals, retail and technology, to explore available business opportunities in the region.
Still, wrote Yuan: “Moving operations into a new market is hardly a turnkey operation. It is essential to have the right people in place, on the ground, including experts who can navigate local markets, regulatory environments and cultural nuances. Companies should also have access to the right talent communities—both local and global—to understand what is needed and when.”
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