APAC Insider December 2015

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APAC Insider Magazine / Issue 4

ESG in APAC

How Environmental, Social and Governance factors are increasingly making their way into Asian funds

South Korea Goes Mobile Exciting new investment opportunities in South Korean mobile tech sector

World Banks Says East Asia Growth is Still World Class Despite tough times region is still on course to be key growth driver in world economy.

Asian Market is Researching as well as Developing New study shows Asia is top region for corporate R&D spending.

APAC Insider Magazine / Issue 4

Editor’sNote Welcome to the December issue of APAC Insider.

As ESG becomes a global investment phenomenon, Jonathan Blake and Guo Sun from King & Wood Mallesons talk us through how these factors are now being increasingly integrated into Asia Pacific funds.

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Singapore is clearly the destination of choice for expansion into the APAC market as two major financial firms take up offices in the city.

As technology takes off, we explore how Asia is rising up and taking over this market.

H&Q Asia Pacific is moving into Silicon Valley in a bid to expand their global reach, and in addition, we profile the Suzhou Industrial Park, an innovative new technology park set to increase China’s impact on the industry.

A new study shows that Asian countries are dominating top pensions trusts, highlighting major growth in this industry as the region continues to steadily increase its wealth and plan ahead for the future.

The shipping industry is another sector which is reaping the benefits of Asian growth, as the East Africa-China trade routes are shown to be the fastest growing in the industry.

Additionally, the EU has announced a new trade strategy which looks set to increase trade between the Union and Asia, providing vast investment opportunities.

We hope you enjoy this issue.

Photo: Investment Firms Lured by Singapore / Page 40

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Contents 4. News

Features 12. Asia Becomes the Top Region for Corporate R&D Spend 16. The Growth of ESG in Asia Pacific Funds 20. European Commission Presents New Trade and Investment Strategy to Facilitate Trade with Asia 24. Suzhou Industrial Park: The Pilot for Change 30. Asian Countries Dominating Top Valued Global Pensions Trusts 34. Asian Trade Steering International Shipping Market 38. Leading Asian Private Equity Firm Moves into Silicon Valley 40. Investment Firms Lured by Singapore 44. Investment Opportunities in South Korean Mobile Technology Sector 48. Growth in East Asia Pacific Likely to Moderate But Still Remain Solid, Says World Bank Report

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APAC Insider Magazine / Issue 4

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BNY Mellon Expands Asia Pacific Capabilities with Extension of Common Depositary Services

WeBNY Mellon, a global leader in investment management and investment services, has been appointed by Clearstream and Euroclear (International Central Securities Depositaries or “ICSDs”) to provide sub-depositary services in Asia Pacific (“APAC”) allowing APAC issued global notes to be deposited locally in Hong Kong with BNY Mellon.

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This extension of BNY Mellon’s established sub-depositary capability into the APAC region offers Asian issuers greater access to global capital markets and enhanced efficiency and flexibility in their settlement processes.

Gary Lew, head of Corporate Trust in Asia Pacific for BNY Mellon, said the decision to expand this service is designed to meet the growing demand for bond and note issuances in the APAC region.

“With bond issuance volumes in Asia continuing to rise, BNY Mellon continues to be invested in the development of its resources and technologies to broaden our offering in this area”, said Lew. “This new capability will enable us to deliver value added solutions to our clients who are issuing securities into the international debt markets and this will further complement our existing Corporate Trust product suite. We will offer our Asian sub-depositary capability in APAC with Euroclear Bank and Clearstream, both of which are long-term partners of BNY Mellon.”

Alton Chan, Clearstream’s Regional Head of North Asia, said: “Clearstream is very pleased to collaborate with BNY Mellon to extend their offering of Common Depositary services in Hong Kong, supporting the Asia Pacific region. The development of this service shall bring added value to issuers in the region and investors globally, increasing efficiency and access to global capital markets. Clearstream will increasingly use its operational presence in Singapore to support the development of the international securities market.”

“I am delighted that our long-standing European relationship with BNY Mellon acting as a Common Depositary has now been extended to the Asia Pacific region”, stated Euroclear Bank Hong Kong branch Chief Executive Officer, Ivan Nicora. “This expanded service offering further illustrates the continued importance of the region in the capital markets space. Throughout the region, in particular via our 150 operational staff based in Hong Kong, we have been serving the needs of regional issuers and investors alike for years. This development underscores BNY Mellon’s regional aspirations and we look ahead to the continuing growth of the international securities market together with BNY Mellon as a key partner.”

This new service complements BNY Mellon’s existing Corporate Trust capabilities in the region to position itself at the forefront of initiatives to provide full service closing facilities in region, in collaboration with its ICSD partners.

BNY Mellon Corporate Trust clients include governments and their agencies, multinational corporations, financial institutions and other entities that access the global debt capital markets. The Corporate Trust business utilizes its global footprint and expertise to deliver a full range of issuer and related investor services and to develop customized and market-driven solutions. Its range of core services includes debt trustee, paying agency, escrow and other fiduciary business. As of June 30, 2015, BNY Mellon Corporate Trust has served as trustee and/ or paying agent on more than 60,000 debt-related issues globally.

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Investment in APAC Insurance Market

Bima receives a $5mn investment from Digicel Group to bring microinsurance to Asia Pacific and the Caribbean, with new operations launched in Haiti and Papua New Guinea.

Bima, the leading global microinsurance provider, announced a 5 million USD investment from Digicel Group, the leading total communications and entertainment provider in the Caribbean, Central America and Asia Pacific regions. This investment and the resulting partnership will help Bima to deliver access to affordable insurance on a scale never seen before in those regions.

The market opportunity for microinsurance in Asia Pacific and the Caribbean is vast, with insurance penetration at less than 7% (as a percentage of GDP). Bima’s success is based on overcoming barriers to entry for the mass-market through the development of simple and affordable products as well as innovative modes of distribution. The company already has successful operations in 11 markets across Africa, Asia and Latin America, and Digicel’s investment will provide resources and insight to help Bima rapidly build its presence in these new regions.

The partnership has already launched two regional operations, in Haiti and Papua New Guinea. Both markets leverage Bima’s expertise in mobile-delivered insurance, wherein customers can pay for insurance cover via their prepaid airtime. This model provides a safe and trusted route for customers to register and pay for valuable insurance protection.

Digicel customers in Haiti and Papua New Guinea can now register for paid life insurance products for a few USD cents per day, with claims paid within 72 hours of submitting the necessary paperwork.

Colm Delves, Group CEO of Digicel, commented on the investment and how it will affect the firm.

“We are committed to providing our customers with valuable and relevant services in addition to delivering first class telecommunications. We believe that everybody should have access to insurance and that the Bima portfolio of products delivers real benefits to our customers.

“When looking to roll out an insurance offering, Bima was a natural choice of partner for Digicel and our investment reflects our belief in its business model”.

Gustaf Agartson, CEO BIMA added his comment on the investment.

“There is significant demand for our products in the Pacific and Caribbean, where the mass-market has been underserved by traditional insurers to date.

With access to Digicel’s network of customers, we have the potential to provide access to insurance at a scale never seen before in these regions.”

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APAC Insider Magazine / Issue 4

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Government Backing Bolsters Medical Tourism in Asia-Pacific

New medical tourism hotspots like South Korea to challenge the supremacy of the incumbents including Malaysia and Thailand.

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Frost & Sullivan’s research on medical tourism in Asia-Pacific reveals that the majority of medical tourists to the region are from Asia, the Middle East and Africa with a smaller proportion from the US and Europe. Quality of medical care, immediate access as well as cost effective treatments drive the choices of location. Additional, as medical tourists tend to travel with their spouses, relatives or friends, these travellers represent additional revenue generation opportunities for the hospitality and airlines sector.

New analysis from Frost & Sullivan, Asia-Pacific Medical Tourism Outlook, finds that the market earned revenues of US$9.62 billion in 2014 and estimates this to grow at a compound annual growth rate of 16.3% to touch US$20.47 billion by 2019.

The study provides an analysis of the current trends, market size, revenue forecast, drivers and restraints in the regional medical tourism market. Market participants and key opinion leaders in Asia-Pacific hospitals were interviewed to obtain their perceptions of trends and opportunities in the hospital industry. The geographic scope of this study covers India, Malaysia, Thailand, Singapore, South Korea, the Philippines and Vietnam.

“The medical tourism industry in Asia-Pacific has been experiencing a boom owing to its offer of quality healthcare, ease of access due to availability of travel options and the affordability of treatment compared to western countries,” said Frost & Sullivan Partner, Rhenu Bhuller.

The industry is becoming more competitive with the emergence of new medical tourism hotspots, more healthcare providers expanding in the area as well as source countries strengthening their local healthcare infrastructure to minimize the outflow of tourists.

A majority of the governments consider medical tourism an important revenue stream that will enhance their country’s economy as well as profile in the healthcare industry.

“Overall, medical tourism revenue growth is expected to be in the double digits till 2019,” observed Bhuller. “The traditional markets like Thailand, India and Singapore are expected to grow at a steady pace, whereas Malaysia and South Korea are likely to experience stronger growth albeit from a lower revenue base.”

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Buildings Rising in the East: The Construction Market in Asia

Urban regeneration and private sector investments to drive the Asia-Pacific repair construction Market, with Grupo ACS, Vinci S.A., Hochtief AG, Bechtel Corporation, Uretek, Leighton Holdings, Shanghai Construction Group and STRABAG among the major market players.

Mordor Intelligence has released their report, the Global Repair Construction Market. The report elucidates the situation of the market around the world and studies the market sectors which include infrastructure, oil & gas, medical, power and mining. The report is also divided by geography - North America, Europe, the Asia-Pacific (APAC), South America and Middle-East & Africa (MEA); where-in the market share of each region is analysed and estimates are provided for the next five years.

The Global Repair Construction Market has been predicted to grow at a CAGR of 8.1% until 2020.

The North American market, which has become energy independent over the last 5 years, is predicted to see a gradual slope in growth at 6.4% CAGR due to the falling oil revenues. The Asian markets, which are entirely dependent on oil imports, have a higher potential for penetration and are poised to register a growth of 10.5% CAGR (2015-2020), which is much higher when compared to the growth of 7.6% from 2008 to 2014.

After the 2008 economic slowdown, most of the countries started trimming their budgets and big-ticket items were shelved as a concerted effort to reduce spending. Europe is still recovering with many countries’ economies still in the red. However, 2013-14 saw a resurgent Europe and North America pulling through and putting their days of economic austerity behind them. Investments started to pourin into the construction industry and these investments consequentially repaired the industry, which was on a hiatus.

Falling oil prices has been a boon to countries that import oil. The price of crude oil has dropped over 40% this year and as a result, many countries have benefited from the drop in inflation. Reduced spending on oil imports has allowed governments to use oil savings to boost domestic investments.

Asian economies, being among one of the top oil users, have seen a rise in investment and opportunities. India and China have commissioned

a surfeit of projects for construction to boost domestic demand and reduce unemployment. Middle Eastern countries, which form the majority of OPEC countries, have huge foreign exchange reserves and can withstand this slump in prices for an extended period. These Middle Eastern countries have stated that there will be no slowdown in domestic investments and are going ahead with their pipelined projects, and have commissioned more. Their strategy for the past decade has been to diversify their economy from crude oil and gas based revenues; research proves that this strategy has paid them off handsomely.

Saudi Arabia, which is the world largest producer and exporter of crude oil, has increased spending in the construction sector. By 2015, the government hopes to have built and/or renovated over 4,000 schools, 50 new technical colleges, 50 higher institutes of technology for women and four teacher training colleges, in order to increase the schooling capacity to over five million and university capacity to 1.7mn students. The Government is also developing six new economic cities across the country all requiring extensive new infrastructure. The need for new roads, bridges, homes and other structures is significant; this need provides opportunities for contractors and consultants worldwide to participate in their delivery.

Repair Construction can be segmented by ‘Ingredients’, ‘Submarkets’, ‘Geographies’ and ‘Companies.’ Ingredients of this market are polyurethane foams, ethylene propylene diene monomer (EPDM), flame-retardants, silicones, adhesive, silicone, green coating, paints & coatings, adhesives & sealants, etc. Geographies of this market are Asia-Pacific, Europe, Middle East, Africa and North America.

Companies in this market space are Grupo ACS, Vinci S.A., Hochtief AG, Bouygues S.A., Bechtel Corporation, Uretek, Leighton Holdings, Shanghai Construction Group (SCG), STRABAG and Others.

The major market drivers for the industry are: economic growth of countries; social pressure for infrastructure development and maintenance; urban regeneration and private sector investments and reconstruction time and raw materials (availability of technology and expertise).

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APAC Insider Magazine / Issue 4

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Mercer to Extend Career and Talent Solutions across Asia by Acquiring HRBS Deal enhances Mercer’s talent and rewards leadership across Asia

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Mercer, a global consulting leader in advancing health, wealth and careers, and a wholly owned subsidiary of Marsh & McLennan Companies has announced the acquisition of Human Resources Business Solutions, a provider of career and talent consulting and information services to clients across Asia, with concentrated strength in Hong Kong, Singapore and mainland China. The acquisition will extend Mercer’s leadership in Asia in compensation and benefits expertise, an area of critical importance in the region’s high demand talent markets.

Founded in 2001, HRBS has offices in Hong Kong, Singapore, Shanghai and Beijing and employs approximately 45 professionals. The company has built a strong brand on the bedrock of its operation being the high quality and consistency of its executive remuneration information assets, which cover both multinational and publicly listed firms. The company is a dominant player in the compensation and benefits space for inbound multinationals and has established market leadership in the luxury goods, retail and apparel-sourcing sectors across Asia.

“Our clients across Asia are experiencing incredible growth and change and, as a result, they are facing new and greater complexities in talent management,” said Susan Haberman, Mercer’s Talent Business Leader for Growth Markets. “HRBS has an excellent reputation for talent consulting combined

with consistent, highly sought after information. The acquisition will strengthen Mercer’s competitive position in its core Talent business and will fuel faster growth than we would have achieved organically.

Together, we will bring the best possible information and solutions to our clients.”

HRBS will enhance Mercer’s portfolio in the areas of remuneration strategy, pay structure design, shortand long-term incentive design and performance management. It will also bring a range of regular surveys to Mercer clients, including an Executive Pay Survey, an Employee Benefits Survey and industry-specific surveys across numerous sectors, including luxury goods, retail, garment buying, market research, marketing services, internet and construction. HRBS also conducts surveys on merit increases, bonuses, attrition and ad-hoc surveys on market conditions.

“We are delighted to be able to do more for our clients by merging with the global Mercer team,” said Elaine Ng, Managing Principal and Co-Founder of HRBS. “This strategic move is a win-win for both companies and our clients. Few organizations can offer high quality data and advisory capabilities in executive compensation. By combining HRBS’ skillsets with those of Mercer, we will be redefining executive compensation solutions in the marketplaces of Asia.”

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Merck’s Consumer Health Business Counts on Latin America for Growth

Firm finds demand in Latin America region has fuelled double-digit sales growth in the second quarter of 2015.

Merck, a leading company for innovative, top-quality high-tech products in healthcare, life science and performance materials, expects the Latin America region to keep driving growth at its Consumer Health business, as demand for consumer goods in the region is constantly rising.

“Our business is well positioned to anticipating the region’s rapidly changing demographics and responding to consumers’ healthcare needs.”

“Along with a growing consumer demand, Latin America sees a rise in the need for healthcare products and a trend towards consumer goods making daily life more convenient,” said Uta Kemmerich-Keil, CEO and President of Merck’s Consumer Health business, at the Financial Times Latin America Healthcare & Life Sciences Summit, held on 29 September 2015 in Miami, USA. “Our business is well positioned to anticipating the region’s rapidly changing demographics and responding to consumers’ healthcare needs.”

She detailed the business answers to emerging consumer trends such as increased investments into digital communication, and to the consolidation in the wholesale and pharmacy sector. Also, she outlined the business propositions to meet the needs of the local emerging middle classes, for example the consumerization of the Neurobion and Floratil brands as well as the geographic expansion of the Bion brand into Brazil. As a solid signal of Merck’s Consumer Health business commitment to the region, Kemmerich-Keil pre-announced the launch of a new innovative product across almost the entire Latin American region in 2016.

As the successful implementation of the 3x3 strategy in the region remains the focus – aiming at a minimum of 3% market share and at least 3 leading brands per market – Latin America has been showing the best performance for Consumer Health

globally. The region is expected to see the majority of the business global strategic initiatives by the end of the decade. Consumer Health is present in the three biggest categories in the region: a) Vitamins, Minerals and Supplements; b) Cough and Cold; c) Allergy and Analgesics; all categories experiencing strong market growth of around 5%.

Latin America played a key role in the consumerization of Neurobion and Floratil from Merck Serono, the former most contributing to absolute growth in the region. In Brazil, the Floratil consumerization approach drove a 34% net sales growth in 2014 versus 2013 and the franchise is expected to be the second fastest growing in the Latin American portfolio by the end of the decade. Bion is expected to become the fastest growing brand in the region, after the successful launch of Bion3 in 2014 in Brazil. In Chile, thanks to a consumer approach with focus on digital already initiated in 2010, Bion3 has become the 2nd biggest OTC brand and the best-selling multivitamin with a market share of ~60%.

In the second quarter of 2015, Consumer Health reported net sales of € 227.6 million, indicating a strong 16% organic growth versus the year-earlier period. Consumer Health continues to be the fastest growing business at Merck. All global strategic brands outperformed versus last year with Neurobion, Dolo-Neurobion and Femibion being key contributors. Key geographies with strong growth momentum were Chile and Mexico for Latin America, as well as Indonesia and the Philippines for Asia Pacific.

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APAC Insider Magazine / Issue 4

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Mixed Predictions for M&A Activity in Asia Pacific

Uneven prospects for this sector during 2016 as region statistics show outbound announcements eclipse inbound transactions.

Early-stage merger & acquisition (M&A) activity in Australia in Q3 2015 declined by 2.6%, in line with a sharp fall in growth in the Asia Pacific (APAC) region as a whole, indicating a flat start to announced deals for the first quarter of 2016, according to the latest Intralinks Deal Flow Predictor (DFP) report released today.

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The Intralinks DFP for Q1, 2016 is published by Intralinks® Holdings, Inc. the leading global provider of software and services, including Virtual Data Rooms (VDRs), for managing M&A transactions, private equity fund raisings and corporate development. It forecasts the volume of future M&A deal announcements by tracking early-stage M&A transactions that are in preparation or have reached the due diligence stage and are six months away from their public announcement, on average.

The APAC region saw a 3.2% year-on-year increase in early-stage M&A activity in Q3 2015, compared to 34.1% in the previous quarter. The current Intralinks DFP reports that, in Q3 2015, North America (NA) experienced a decline of 3%, Europe, the Middle East and Africa (EMEA) saw an increase of 11% and Latin America (LATAM) experience an increase of 48.6% in early-stage M&A activity. While Intralinks predicts that 2015 will be a record year for global M&A announcements, deal making confidence for 2016 appears to have weakened in NA and APAC, driven by concerns over a China-driven global economic slowdown, fears of a further correction in global equity markets and confusion among dealmakers over the pace and timing of expected U.S. interest rate rises.

Philip Whitchelo, vice president of strategy and product marketing at Intralinks, said: “Activity in APAC has been a mixed-bag, with some markets showing signs of continued growth in M&A, while others are struggling. Australia, which has benefited over the past 15 years from increasing Chinese demand for its iron ore and coal, has also historically seen significant inbound M&A flows from China.

With the precipitous decline in global commodity prices and a slowing Chinese economy, Australia is adjusting to a significant M&A slowdown in the previously dominant metals & mining sector.”

“While inbound M&A into Australia appears to be suffering, the number of announced outbound M&A transactions increased by 14% in Q3 2015. With increasing signs of a more fundamental slowdown in the Chinese economy, M&A practitioners ‘down under’ have been busy refocusing their M&A strategies on new deal destinations so Australian corporates can keep up with their global counterparts pursuing M&A-driven expansion strategies,” Mr. Whitchelo concluded.

Sectors in Australia showing increased early-stage M&A activity, indicating an expansion of M&A announcements over the next six months, include media & entertainment, consumer, financials, and healthcare.

The Intralinks DFP’s findings are consistent with the responses to Intralinks’ most recent global sentiment survey of M&A professionals, which was conducted in late September/early October. The survey received 575 responses from M&A professionals.

Highlights from the survey results include: •

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Globally, the percentage of dealmakers who are optimistic about the current deal environment fell to 43%, compared to 51% in the previous quarter’s survey. This is the lowest level since Q4 2013 and the first time that the percentage of optimistic respondents has fallen below 50%.

In response to three key questions asking about optimism, expected deal participation and general deal volumes, dealmakers in EMEA were the most positive, with a combined 57% optimistic rate, while dealmakers in NA were the least positive with a combined 48% optimistic rate. The figures for optimism in APAC and LATAM were a combined 54% and 50%, respectively.

Respondents in all regions except LATAM expected a global economic slowdown to have the most impact on M&A activity over the next 12 months, while dealmakers in LATAM expected monetary policy (i.e., quantitative easing and rising interest rates) to have the most impact on M&A activity in their region over the next 12 months.

Dealmakers in APAC and LATAM were the most concerned about a slowdown in Chinese economic growth having an impact on M&A activity in their region over the next six months, with 67% and 77%, respectively, compared to 51% and 46%, respectively, in NA and EMEA.

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Revinate Announces Strengthening of the Executive Team With Changes in Singapore and San Francisco Headquarters

Management team evolves to support growth in AsiaPacific region, customer demand, product innovation and commitment to developing global talent and culture Revinate, the leading provider of hospitality software for guest feedback and guest marketing, is pleased to announce the hiring of three critical roles. These new leaders reflect the company’s continued commitment towards hiring top talent.

Kelly Buchanan was appointed Vice President of People, Kenny Lee was appointed Vice President of Marketing and Dany Bolduc was appointed General Manager, AsiaPacific.

“Revinate’s exponential growth and market adoption is due to the fact that we hire the most talented people across all disciplines, from engineering to marketing,” said Jay Ashton, co-founder and Chief Product Officer. “These latest hires ensure our continued success as we strive to reinvent the guest experience.”

Kelly Buchanan joins Revinate from Zynga, where she led global learning, culture and organization development. Prior to Zynga, she was based out of Lucasfilm’s APAC headquarters in Singapore, running the global training function and Jedi Masters Program. She held several other key leadership roles at Lucasfilm and Industrial Light & Magic, spanning leadership development, change management, and process re-engineering. She brings additional consulting and project management experience in tech and public relations.

Kenny Lee is a 20-year global marketing technology veteran with a multi-disciplined background in Field, Product, Campaign and Demand marketing.

Lee recently led digital and demand transformation at social CRM vendor, Lithium Technologies. He also served in leadership roles at Dynamic Signal and Adobe Systems, managing EMEA, LATAM and APAC regions.

Dany Bolduc has over 20 years of global business experience in executive, senior management and sales leadership roles in travel & hospitality, mobile, cloud computing and e-commerce. Prior to Re-

vinate, Dany was SVP – APAC for Silent Circle, an encrypted communications firm based in Geneva.

He was previously Chief Operating Officer at Crescentrating/HalalTrip.com, the world’s leading Halal friendly online travel agency, GM of AirAsia iVentures, responsible for online and ancillary income business units, and Vice President for Southeast Asia at BlackBerry.

In addition to these new hires, Revinate’s co-founder and former CEO will become the company’s first Chief Product Officer. Marc Heyneker, co-founder and former Global VP of Sales, will take over as CEO. Heyneker says, “As leaders in a competitive market, it’s critical that we maintain our lead in product innovation and usability. Jay is incredibly passionate about our products and has led all our product development to date. We’re all very excited about what he will be able to accomplish by dedicating his role to it.”

These hires come on the heels of tremendous momentum for the company, including surpassing 25,000 hotel clients this summer, strong customer adoption of Revinate Marketing™ and Engage™ and an expanded partner ecosystem that has helped the company further expand their global presence.

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Asia Becomes the Top Region for Corporate R&D Spend

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Europe Falls Behind and North America Remains Consistent according to the 2015 Global Innovation 1000 Study from Strategy&, PwC’s Strategy Consulting Business.

Asia has become the top destination for corporate R&D spend in 2015, accounting for 35% of total in-region R&D, including both domestic and imported R&D. This places Asia ahead of North America and Europe, who dropped to third, in a complete reversal from 2007 when Europe was the previous leader. This is according to the newly released 2015 Global Innovation 1000 Study, from Strategy &, PwC’s strategy consulting business, which uniquely examined the R&D footprint of 207 of the world’s largest corporate R&D spenders.

Robust growth in China and India drove Asia’s growth, recording increases of 79% and 116%, between 2007 and 2015, in imported spend, respectively, as more R&D moves into these regions mainly from the US. Results find that China in particular has become the most popular destination, with 71% of R&D professional survey respondents indicating that the most important reason for moving R&D to China is proximity to high-growth markets. They state other benefits of moving R&D functions to China include: “proximity to key manufacturing sites,” “proximity to key suppliers,” and “lower development costs.”

“Asia taking the lead as the top destination for corporate R&D is not surprising when you look at where companies are spending their R&D dollars to support their revenue growth goals – a prime indicator of how R&D is trending globally – and how much of R&D is headed to the Asia region,” says Barry Jaruzelski, a US firm principal with Strategy& as well as the study’s creator and lead-author.

The study finds that Europe’s fall to the third largest region for corporate R&D spend is a result of low growth in domestic and imported R&D, coupled with a substantial rise in exported R&D – particularly from France and Germany. Comparatively, Europe’s domestic R&D spend growth has risen just 2% between 2007 and 2015, compared to gains of 40% in North America and 60% in Asia. At the same time, European countries have increased their R&D allocation to high-cost offshore countries in North America and Asia, but not

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to nearshore Western Europe. In particular, France has decreased domestic R&D by 20%, has decreased imported R&D by 21% and has increased exported R&D by 46% between 2007 and 2015. Additionally, while Germany’s domestic R&D has increased 48%, imported R%D has fallen 7% and exported R&D has increased 76% between 2007 and 2015.

“Europe went from being the largest region for the execution of corporate R&D to the third behind Asia and North America – it’s the hollowing out of Europe,” comments Barry Jaruzelski. “The high growth of exported R&D to other countries, particularly from France and Germany, are huge factors in this reversal.”

Additionally, according to this year’s results the US remains the largest spender of in-country corporate R&D, with in-country (domestic & imported) R&D spend at $145bn in 2015, up 34% since 2007. Imported R&D spend to the US, mostly coming from Europe, in 2015 is $53bn, up 23% from 2007. Exported R&D spend in 2015 is $121bn, up 51% from 2007, predominantly going to Asia where previously in 2007 it was going to Europe. Despite these figures, the US lead over other countries is narrowing – in 2007, relative corporate R&D in China was 23% of the US total, while in 2015 it now amounts to 38% of the US total.

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“While the US lead may be tapering, it still remains the biggest global market and despite the high cost of labor, it offers a more agile and sophisticated workforce. As such, companies look at the US as a desirable market with a capable workforce, an innovative culture and a more flexible business environment that cultivates top talent, all of which are conducive to R&D functions.

The US also has accessibility to strategic markets, which is desirable to foreign companies when exporting their R&D functions, with Silicon Valley a particularly powerful draw,” comments Barry Jaruzelski (left).

As globalization increasingly becomes the norm (94% of firms conduct R&D beyond just their home country), companies are reaping the benefits of conducting R&D outside of their home country. Companies with more global R&D footprints now perform as well or better than companies with a narrow footprint, the study finds, suggesting that there are material advantages to exporting R&D and that multinationals are able to coordinate successfully across many global sites.

Additionally, companies seem to derive benefits from a diverse global footprint as survey respondents say access to technical talent (71%), being close to customers (68%) and gaining insight into local market needs (64%) are important attributes in choosing where to conduct R&D. In addition, Strategy&’s annual analysis of the world’s 1000 largest R&D spenders found: • R&D has returned to its long-term growth trend post-financial crisis: In 2015, R&D spend by the Global Innovation 1000 has increased 5.1% to $680 billion, the largest year-over-year increase within the last three years, moving it back to a long-term average growth rate post the financial crisis, with a 10-year CAGR of 5.4%.

• Industry Breakdown: The three largest industries for R&D Spend in 2015 are computing and electronics (C&E), healthcare and auto. In particular, healthcare is on track to pass C&E as the largest industry by R&D spend by 2019.

Meanwhile, the software & Internet industry has the highest growth rate of all the industries between 2014 and 2015 (27%), pushing it past the industrials sector to become the fourth largest industry by R&D spend in 2015. “It is not surprising that the software & Internet industry surpassed the industrials sector as the fourth largest spender of R&D. However, it is a noteworthy milestone, marking how software, the new economy, is trading places with industrials, the older economy,” says Barry Jaruzelski.

• Top 20 R&D Spenders: Within the Top 20 R&D spenders of 2015, the top three companies have remained fairly consistent over the years – Volkswagen, Samsung, Intel. For the first time Apple has joined the Top 20 R&D spenders 0f 2015 list at #18.

• Top three Most Innovative companies in the world for 2015: Global innovation professionals have ranked Apple, Google, and Tesla as the three most innovative companies in the world, with Tesla jumping to third place from fifth in 2014.

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The Growth of ESG in Asia Pacific Funds

The last decade has seen the rise of Asia Pacific as a key market for investment, but also as a source of capital for global alternative asset fund managers. The steady rise of funds raised in the region peaked in 2008 and, as with the rest of the world, dropped off in 2009 due to the global financial crisis. The initial recovery was swift, with the aggregate funds raised in 2011 at US$61bn compared to $26bn in 2009, but following the peak in 2011 several challenges led to a slowdown in 2012 and 2013. Despite that, 2014 was another strong year in Asia with the aggregate capital raised approaching 2011 levels, and it is to be hoped activity will continue to rise.

As managers in the region continue to raise capital, one important element that should not be overlooked is ESG - environmental, social and governance considerations. There are however many strands to ESG, and it means different things to different people. On the one hand there is social impact investing - where funds are set up specifically to raise money to tackle a social or environmental problem – but there are also large established buyout funds who have integrated ESG policies into their investment processes whose strategy is still focussed primarily on solely value creation.

Emerging markets, of which there are several in the Asia Pacific region, have no shortage of opportunities for social impact investing and the market is growing substantially. Data collected as part of the 2014 Global Sustainable Investment Review shows the market growing from US$40bn in 2012 to US$53bn in 2014, with Malaysia, Hong Kong and South Korea as the largest markets .

These funds are no doubt helping in tackling issues such as climate change, pollution and social challenges, but it is not necessary for GPs to establish these types of funds in order to make a difference on the ESG front. And while in the past some Asia-based GPs (and others across the globe) focussed more on maximising returns and considered the cost of implementing complex ESG policies as prohibitive, it is now seen by many as key to a successful fundraising as more investors push for managers to adopt sound policies. In particular, it is becoming essential for managers wishing to attract investors such as Development Finance Institutions (DFIs) – and first time funds in frontier markets such as Indonesia, Malaysia, Philippines and Indochina are very difficult to raise without relying heavily on DFI money. In addition to investor pressure, many GPs are also seeing it as a factor in improving returns.

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In terms of the strategy adopted by fund managers, there are several options.

On the one hand, some funds may choose to deal with investors’ ESG requests by adopting a list of excluded sectors and/or geographies which are perceived to be not conducive with responsible or ethical investing, while other funds may actually target specific sectors or companies that have a positive ESG impact (as well as several other factors). A more detailed and perhaps the more difficult approach is to include ESG factors into a manager’s analysis of target companies when carrying out due diligence, and it is this approach, combined with ESG disclosure and reporting often demanded by sophisticated investors, that can really have a positive impact on returns.

One of the reasons for this is that analysing potential ESG issues during the due diligence process can mean avoiding purchasing a company with a potentially costly liability. For example, with many environmental issues being strict liability, identifying an existing pollution or other environmental issue could be the difference between a successful investment and a write off. On the social side - detailed due diligence on the target and its subsidiaries may discover labour management or human rights issues, which have the potential to cause serious reputational issues not only for fund managers but also their investors. It is true that these issues would often be the subject of detailed due diligence regardless of the existence of an ESG policy, so the benefits are more obvious on the ongoing monitoring and reporting side. Detailed reporting obligations adopted as part of an ESG policy mean that fund managers will need to pass these obligations down to the boards of their portfolio companies, and actively monitor compliance and report back on it to their investors. This can help to identify potential issues before they arise, as well as keeping portfolio company directors focussed on ESG during the day to day management of the company. It is not just investors in the Asia Pacific market that are pushing managers and their portfolio companies to consider and report on ESG, several regulators in jurisdictions such as India and Vietnam, and stock exchanges in China, Hong Kong and Singapore have introduced guidelines and requirements for companies in relation to ESG – which play a huge part in promoting and encouraging compliance.

There are several reasons therefore why ESG should be at the top of the list for a fund manager in Asia: increasing the attractiveness of a fund for non-Asian investors who are more used to stringent ESG policies, acting as a risk management system prior to acquiring a target and on an ongoing basis, and also easing compliance with the increasing regulation and law in this area in certain jurisdictions. As managers based in Asia and throughout the globe have seen over the past few years – ESG is no longer an option which sets a fund apart from others, it is now a necessity to ensure one does not get left behind.

By Jonathan Blake, Partner and Head of International Funds Practice at King & Wood Mallesons and Guo Sun Lee, Partner in the Hong Kong office.

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European Commission Presents New Trade and Investment Strategy to Facilitate Trade with Asia

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EU believes that this more responsible approach responds to new economic realities in line with the EU’s foreign policy.

The Commission is proposing a new trade and investment strategy for the European Union, entitled ‘Trade for All: Towards a more responsible trade and investment policy’. Based on three key principles - effectiveness, transparency and values, the new strategy aims to ensure trade policy benefits as many people as possible.

The new approach builds on Europe’s excellent trade track record. EU companies export nearly as much as China to the rest of the world and more than firms in the United States or any other country.

More than 30 million jobs already depend on exports outside the EU. 90% of future global growth will happen outside Europe’s borders. A new strategy that will make trade agreements more effective and that will create more opportunities means supporting jobs in Europe.

The new strategy is also a direct response to the current intense debate on trade in the EU – including on the Transatlantic Trade and Investment Partnership (TTIP) that is being negotiated with the United States. It is also an implementation of the Juncker Commission’s pledge to listen and respond to European public’s concerns.

“We’ve listened to the debate,” said EU Trade Commissioner Cecilia Malmström. “Europeans know that trade can deliver jobs, growth and investment for consumers, workers and small companies. And they want more of those results. But they don’t want to compromise on core principles like human rights, sustainable development around the world or high quality regulation and public services at home. And they want to know more about the negotiations we carry out in their name.

So trade policy must become more effective, more transparent and more in tune with our values. In short, it must become more responsible. That’s what we’re doing today.”

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The new strategy will make EU trade policy more responsible by basing it on three key principles: • Effectiveness: Making sure trade actually delivers on its promise of new economic opportunities. That means addressing the issues that affect today’s economy, which involves services and digital trade. It also means providing the means and information necessary to ensure European small and medium-sized businesses (SMEs), consumers and workers can take full advantage of – and adapt to – more open markets. This means, for instance, including effective provisions for SMEs in future trade agreements.

• Transparency: Opening up negotiations to more public scrutiny by publishing key negotiating texts from all negotiations, as has been done in the TTIP negotiations. As of today, the Commission has already published some new texts (i.e. the Economic Partnership Agreements with East and West Africa) on its website.

• Values: Safeguarding the European social and regulatory model at home.

Using trade agreements and preference programmes as levers to promote, around the world, European values like sustainable development, human rights, fair and ethical trade and the fight against corruption. This means to include anti-corruption rules in the EU’s trade agreements, and to see that our trading partners implement provisions on core labour standards, like the rights of workers to organise and the abolition of child labour. It also means broadening efforts to ensure responsible management of supply chains.

A responsible EU trade strategy also requires an up-to-date programme of trade negotiations that can help shape globalisation to the benefit of European citizens, companies and beyond: It prioritises concluding major ongoing projects like the Doha Round of WTO talks, TTIP, the EU-Japan free trade agreement (FTA) and the EU-China investment agreement.

It opens the door to new negotiations in the vital Asia-Pacific region (like Free Trade Agreements with Australia, New Zealand, the Philippines and Indonesia) and plans a deepening of the EU’s relationships with African partners.

This includes specifically requesting a mandate from EU Member States for free trade negotiations with Australia and New Zealand.

Modernising existing Free Trade Agreements with Mexico and Chile and the Customs Union with Turkey.

A responsible EU trade strategy has also to be in touch with the big challenges of our time. That’s why, just as the European Agenda for Migration calls for the better use of synergies across policy areas in order to incentivise the cooperation of third countries on migration and refugee issues, the trade policy should take into account the policy framework for the return and readmission of irregular migrants and, where relevant, visa facilitation.

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Suzhou Industrial Park: The Pilot for Change

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At an executive meeting of the State Council Sept. 29, Chinese Premier Le Keqiang said that the country “must rely on innovation and entrepreneurship to further develop Chinese economy and society — they are the new driving force for China’s development.”

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Nowhere is that philosophy more clearly at work than in the Suzhou Industrial Park (SIP), a 25-minute bullet train ride due west from Shanghai, where for the last fifteen years, domestic and foreign companies alike have strived to innovate in a Silicon Valley-like environment in which business, academia and R&D cross-pollinate.

In more recent years, SIP has shifted focus from an investment site for foreign and domestic manufacturing toward higher tech innovation and entrepreneurship, and has built a services sector that is made up mostly of companies providing shared services centers for multinational corporations, R&D in the information and knowledge management industries, and financial-tech services, or FinTech.

Today the services sector makes up about 41.3% of the industrial park’s total GDP, according to Liu Hua, head of SIP’s Bureau of Services, and out of the total incremental investment in the park each year, more than 75% comes from the services sector.

There are already more than 2,000 service outsourcing companies in the park and they, too, are moving up the value chain, Liu says in an interview. “More and more companies are now turning to areas like big data, cloud computing, mobile internet, and the Internet of things, and they are staying away from low value-adding activities such as labor-intensive outsourcing work.”

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“It’s fair to say,” Liu adds, “that with more and more companies becoming solution providers in their subject-matter domains, they are actually KPO companies, which already account for about 51% of the park’s total outsourcing companies.”

Since SIP was created two decades ago as a joint-venture project between the Chinese and Singapore governments, the park has attracted world-class universities that have opened campuses and research facilities that are conducting basic research and creating cutting edge R&D, often in joint ventures with local companies.

SIP has also developed hubs for high-tech and high-value industries in fields such as cloud computing, nanotechnology, bio-pharmaceuticals and the life sciences; and lured domestic and foreign incubators delivering services for start-ups and introductions to venture capital.

In addition, of the 3,000 industrial parks in China, SIP is home to the highest number of returnees (118) under the country’s Thousand Talent Program, which was designed to attract China’s smartest scholars and scientists to return to China after pursuing graduate degrees and careers outside of their homeland.

The park also offers tenants a lifestyle and environment that is hard to find in many other parts of China, with attractive and relatively inexpensive housing, as well as good schools, hospitals, restaurants, public transportation systems and leisure areas such as around the man-made Jinji Lake. This year SIP is hosting the 53rd Ping Pong World Championships, as well as the Jinji Lake Marathon and Dragon Boat races.

The park supports the growth of small and medium-size companies in all sectors by providing a one-stop shop for legal, financial, accounting, human resources and intellectual property rights protection. It has even set up a Patent Exchange Navigation Centre, where tenants can search for existing patents as well as buy and sell them.

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“It’s a trading system for patents -- you can exchange patents through the system and you can value how much a patent is worth, and you can buy them legally,” says SIP Chairman Barry Yang, adding that SIP has been “active and effective in areas such as IP enforcement and protection.”

One way SIP has climbed the value-added chain so quickly is by creating a dynamic environment that can foster what Yang likes to describe as “chemical reactions” between companies.

“It’s interesting to see these chemical reactions taking place among the diverse members of the whole ecosystem,” he says in a recent interview, pointing as an example to a US$100 million deal in April last year in which a U.S. based company and the world’s second-largest medical diagnostics company, Beckman Coulter Life Sciences, acquired SIP start-up Xitogen Technologies.

Beckman Coulter specializes in cytometers, which are used to measure and observe the characteristics of biological cells, and Xitogen Technologies develops flow cytometers.

Xitogen has fully staffed facilities in Suzhou and will function as a research and development and manufacturing centre for Beckman Coulter. In addition to providing an operational base in the China market, Xitogen offers Beckman Coulter a research instrument to round out its cytometer offerings, as the Chinese company developed the XTG-1600, a small footprint cytometer that can detect objects in the 100 nanometer range—viruses, bacteria, microparticles and cell organelles — for basic research investigations.

“We believe that, viewed from a capital, innovation, talent and mindset perspective, such big-&-small reactions can create a very interesting and healthy environment,” says Yang. “We hope the big and small companies in SIP will have better connections in future and believe there will be good results.”

One of the achievements that most excites Yang about SIP is that it is the first park in China to implement the Marketing Authorization Holder System, also known by its acronym MAH, which allows pharmaceutical companies to focus on what they do best — finding and developing new drugs and treatments -- rather than spending billions of renminbi investing downstream in sales and marketing and distribution networks.

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“This was something that was never implemented before in China,” Yang says.

“But we at SIP felt it was imperative to change. There is often a great advantage in having separate types of organization doing invention, manufacturing and sales, and not least in the speed with which an innovation can be brought to market.”

Arthur Zhang, East Coast director for California incubator PlugAndPlay notes that in terms of core technologies and core strengths, Suzhou is no doubt the best place.

“Advanced manufacturing including nanotechnology and fabrication is pretty much the guiding core strength and I don’t see anywhere that can compete with Suzhou throughout China,” he says. “And as an extension, because you have that, manufacturing, the cloud computing, then you can talk about technology, media and telecommunications, so companies that are established in Shanghai like Tencent and Microsoft are moving their R&D centers over here because of that.”

Ken Ng, a plant manager at BD would agree. The company -- among the world’s leading suppliers of medical devices and a key innovator in injectionand infusion-based drug delivery — set up its manufacturing site in SIP in 1994, becoming one of the park’s earliest employers.

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Last year the company completed its third manufacturing facility in Suzhou, and now has more than 130,000 square meters of combined space in the park, hiring in total more than 1,500 people in quality, manufacturing, supply chain management, sterilization process, regulatory affairs and R&D functions.

Although the Greater China headquarters is nearby in Shanghai, the Suzhou operation is the key bridge to the local market, where multinational business meets home-grown enterprises.

“In terms of operations, we put all our eggs in one basket because of the confidence we have in the park,” says Ng, adding that from the start the park’s administrators in its Human Capital Bureau helped the company recruit employees, about 30% of whom continue to work for the company.

As BD moved towards greater automation at its plants, it approached a government-backed technical institute for help. After explaining the types of technical capabilities it required, the institute customized a course for BD employees.

“Not only did they customize training courses for us but the government paid 50% of the training fees, so we only had to pay half the cost.”

Ng has seen first-hand how the park has changed over the years. “In the past, people coming here were looking for operation and technician jobs but now we see engineers coming from other parts of China like Wuxi, Hangzhou and Shanghai,” he says. “The park’s success has started to attract higher caliber talent. And that suits us well because we are moving up the value chain as well.”

Most excitingly, the newly setup R&D unit at BD is eyeing collaborative opportunities with local firms - or in other words, exactly the type of cross-pollination that Suzhou was built to facilitate.

“Because land is limited SIP wants to attract the right mix of industries here,” Ng adds. “I think they realize that high-end electronics, medical and health care, clean energy, and sustainable industries are the manufacturing operations they want to keep.”

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Asian Countries Dominating Top Valued Global Pensions Trusts

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Value of top pension fund assets almost double in ten years, with Asian funds dominating list according to new research.

Although the US still dominates the pension fund value globally, Asian firms are catching up, with Japan now having the second largest market share in pension fund assets globally, according to a new study.

The total assets of the world’s largest 300 pension funds grew by over 3% in 2014 (compared to around 6% in 2013) to reach a new high of over $15trn, according to Pensions & Investments (P&I) and Towers Watson research. Ten years ago, total assets at the world’s largest pension funds grew by 27% to reach $8.4trn and move above the previous high of $6.6trn, reached in 2003.

The Towers Watson Global 300 Research, conducted in conjunction with P&I, a leading U.S. investment newspaper, shows that by individual region, North America had the highest five-year combined compound growth rate, around 8%, compared to Europe (over 7%) and Asia Pacific (around 4%).

The research also shows that the world’s top 300 pension funds now represent around 43% of global pension assets.

According to the research, defined benefit (DB) funds account for 67% of total assets, down from 75% five years ago. During 2014, defined contribution (DC) assets grew the most, by almost 5%, followed by DB plans assets (almost 4%) and reserve funds (over 1%), while hybrid plan assets decreased by over 2%.

“Despite significant asset growth over the past decade, there is a growing feeling that the investment industry has not focused enough on the end beneficiaries’ needs or on managing costs in the ‘investment food chain,’” said Steve Carlson, head of Investment, Americas, at Towers Watson. “Instead, it has focused on relative returns over total returns and has allowed excessive risk to build up in portfolios while costs have increased to a level that is far

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higher than can be justified in aggregate. The top funds are moving to address this and related issues. Given the shift to DC plans, where the end beneficiary comes first, we can expect a very different industry in 10 years’ time or sooner.”

According to the research, the U.S. remains the country with the largest share of pension fund assets, accounting for around 38%, while Japan has the second-largest market share with around 12%. The Netherlands has the third-largest market share with 7%, while Norway and Canada are fourth and fifth largest, respectively, with around 6% share each. The research shows that 25 new funds entered the ranking during the past five years, and on a net basis, the countries that contributed the most new funds were South Korea and the U.K. (two funds), and Australia, France, Peru, Russia, the U.S. and Vietnam (one fund). During the same period, Germany and Japan had a net loss of three funds from the ranking. The U.S. has the largest number of funds in the research (128), followed by the U.K. (27), Canada (19), Australia (16), Japan (15) and the Netherlands (13).

Carlson added further explanation on the future of the pension fund market.

“The gradual reduction of extraordinary measures from central governments, which has underpinned equity markets since the financial crisis, is now being felt. Without quantitative easing tailwinds, markets are arguably back to functioning normally, which will reinforce many big funds’ belief in the value of being well diversified, particularly at times of stress, which we are again seeing. As such, we expect mature funds to accelerate diversification away from equities and into other asset classes as they continue to de-risk their portfolios and focus on total returns.”

Sovereign pension funds continue to feature strongly in the ranking, with 27 of them accounting for 28% of assets and totalling around $4.2trn. The 114 public sector funds in the research had assets of $6.0trn in 2014 and account for 39% of the total. Private sector industry funds (60) and corporate funds (99) account for 14% and 19%, respectively, of assets in the research.

As a final comment, Carlson made it clear that changes to the way funds are invested has had a significant impact on the growth of pension funds globally.

“Many large funds have been making significant changes to the way they invest. This is in line with a single-minded approach of working hard in added-value spaces to find the extra returns that no longer come from the market.

In the process, they are increasingly thinking about diversification in the context of all return drivers and adding the necessary governance or outsourcing to ensure success.”

Diversification has become a key issue for many fund managers following a number of financial problems, for example the stock market crash of 2008 that bought the UK, US and other international economies into recession and highlighting the vulnerability of certain financial markets. Additionally, issues such as governance have become increasingly important to investors who are looking for long-term returns.

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Asian Trade Steering International Shipping Market

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East Africa-China trade routes fastest growing, with strengthening trade ties between Southeast Asia and North America increasing business according to new study by HIS. Trade from China and Southeast Asia to North America and Europe is expected to boom in the next five years, according to new analysis released today by IHS Inc., the leading global source of critical information and insight.

The World Trade Service of IHS Maritime & Trade forecasts that China’s trade will continue to increase by more than 5% per year between 2015 and 2020.

This positive medium-term trade growth comes despite more recent setbacks caused by the marked economic slowdown in China and weaker growth among other emerging markets in the current and near-term.

Krispen Atkinson, Principal Analyst at IHS Maritime & Trade, commented on the figures and what they meant for the global market.

“These increases will not be the double-digit rises seen before the 2008 global economic crisis. However, an increase of over 30% in the next five years underscores China’s intent to remain a new trade hub-and spoke lynchpin for the rest of the economic world, cementing the Maritime Silk Road Initiative via China and Asia within the emerging market universe.”

One new trend is the move towards larger container ships to streamline the supply chain. The four alliances that dominate east-west trade are pushing the trend towards containerships capable of carrying 20,000 boxes (20 foot equivalent units), in their quest to reduce unit costs with ever more efficient vessels. Current container ships hold around 13,000 boxes, so the new super-containers capable of transporting over 50% more cargo. Their push has meant further capacity has become available in the trade, boosting profits and reducing the cost of shipping.

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Another factor in the expected future growth is the Southeast Asia-North America trade boom.

“China may be the major powerhouse in the region, but Southeast Asia is making significant headway,” Atkinson said.

Vietnam’s exports are estimated to increase by 44% by 2020. IHS forecasts a 44% increase in trade between Vietnam and North America and a 43% increase in trade between Vietnam and Europe in the next five years.

Atkinson commented on the growth not just of China but of other countries in the region as well.

“China may be the major powerhouse in the region, but Southeast Asia is making significant headway.”

“In terms of actual cargo, the figures are still low when compared with China’s, but these are still huge jumps for these economies,” Atkinson added.

Trade between these two regions is made up of manufactured goods, such as home appliances or mechanical hardware.

“Vietnam, India and many of the South Asian economies stand to benefit from recent energy and commodity price falls as net importers of these goods,” said Jan Randolph director of sovereign risk analysis at IHS. “They have significant industries and services sectors of their own that benefit from cheaper inputs and have currencies that are not coupled to a strengthening US dollar.”

In addition, the East Africa-China trade boom will provide significant future growth in the market, with trade routes from China to Africa expected to see a marked increase over the next five years, with the highest growth expected to be seen from the East African to China route, incorporating Malawi, Mozambique, Zambia, and Zimbabwe.

“Trade between East Africa and China is expected to increase by 91% by 2020,” Atkinson said. “It’s all around manufactured goods. East Africa is becoming a new hub for the Chinese.”

Chinese leadership has publicly announced its commitment to develop infrastructural and to promote regional integration in East Africa. “In the coming years, China’s relationship with East Africa will change,” said Natznet Tesfay, head of sub-Saharan Africa analysis at IHS County Risk. “Right now, the focus is on importing raw materials and exporting manufactured goods. But, Chinese investments in enhancing regional interconnectivity will enable it to take advantage of comparatively lower operational costs and to onshore manufacturing activity in East Africa.”

Technology, regulation, market risk and geopolitical threats have made the world’s oceans challenging to navigate both profitably and safely, with accurate and timely intelligence vital to ensuring that potential investors in this area understand the global trade flows to make confident business critical decisions.

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Leading Asian Private Equity Firm Moves into Silicon Valley

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H&Q Asia Pacific acquires 260,000 Square feet class A office complex in Silicon Valley from Hudson Pacific Properties for its Global Innovation Centre.

H&Q Asia Pacific, an international private equity firm, has announced the successful launch of its Global Innovation Centre initiative, simultaneously with an investment of US$100 million including $90m to acquire Bay Park Plaza in Burlingame (which has been renamed GIC Burlingame Bay), and $10m to develop and operate the GIC. GIC Burlingame Bay is a 260,000 square foot grade-A commercial real estate complex in the city of Burlingame, approximately ten minutes from San Francisco International Airport.

The GIC Burlingame Bay site will be a hub for technology companies from around the world and will offer its members and tenants the opportunity to benefit from the disruptive technology innovation, entrepreneurial experience, and human capital of the Silicon Valley through a platform of advisory services, programs, and commercial and strategic partnership opportunities. The acquisition of GIC Burlingame Bay from Hudson Pacific Properties follows an acquisition earlier this year of another commercial property in Burlingame as part of the GIC platform.

Dr. Ta-lin Hsu, chairman and founder of H&Q Asia Pacific, commented on the new project and what it will mean for the firm. “I am very pleased to announce the next step in the development of the Global Innovation Center. This project represents the culmination of 30 years of cross-border technology investments by H&QAP and our portfolio of relationships with governments, technology parks, leading technology companies, financial and academic institutions and technology service providers. Our goal is to create a unique ecosystem to foster innovation and provide growing technology companies with access to crucial relationships and value-added services. H&QAP plans to continue exploring opportunities to develop Global Innovation Centers in other technology centers around the world.�

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Robert Shen, Managing Director of H&QAP, added his comment on the new site and how the project would affect development for the business.

“The Global Innovation Center will be a platform for global technology companies, both big and small. We believe that this Class A commercial complex in Burlingame near San Francisco International Airport offers the best of the Silicon Valley with its history of innovation and San Francisco, which has become a new hub for technology, social media, biotech and mobile commerce. GIC will offer both superior returns as a multi-faceted, disruptive technology park as well as create technology investment opportunities for H&QAP’s various funds. I believe this is a significant development in the evolution of H&QAP and Dr. Hsu’s vision for technology migration and innovation.”

H&Q Asia Pacific, which was founded by Dr. Hsu in 1986, currently operates six offices around the Asia Pacific region and has 30 years of experience in venture capital and private equity investment in both the Silicon Valley and throughout Asia. The firm is credited with bringing US-style venture capital investing to Asia and played a significant role in developing various technology parks in Asia, including Taiwan’s Hsinchu Park and a large commercial complex in the Shenzhen Science Park. Since inception, H&QAP has invested in more than 700 companies through 26 funds with a total AUM of US$3.5bn.

The company, which also operates offices in Shanghai, Hong Kong, Shenzhen, Silicon Valley, Seoul and Taipei, invests across a variety of sectors, including technology, manufacturing, branded consumer products, financial services, media, healthcare and real estate.

It is the company’s unique approach to the Asian market which has led to their vast success, which they aim to replicate in their new location. The firm uses investment professionals who are either local to the region or deeply entrenched in the culture and business landscape of their respective markets.

As a result, H&QAP is often regarded as a local partner in the Asia Pacific region as evidenced by its long-standing presence in Japan, Korea, and North Asia.

With over two decades of investment under this ingrained philosophy, H&QAP has earned itself a sterling reputation as a preferred partner in providing exceptional access to key decision-makers of global Asian corporations seeking to enter and establish operations in China; and conversely, help Chinese entrepreneurs and companies with their globalization plans beyond the China market. The company has found that this competitive advantage translates into an extremely well-positioned ability to identify and capture unique cross-border opportunities presented in Greater China and the Asia Pacific region.

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Investment Firms Lured by Singapore

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Two major financial firms, Hawksford and Options Group, are strengthening their Asian presence by expanding into the Malaysian City.

Both firms already hold positions in the Asian market, with Hawksford already operating an office in Hong Kong and Options Group working from offices in Hong Kong and Singapore.

However, the firms are both looking to make further advances into the market, with Options Group recently announcing their proposed takeover of Whitney Correlate’s Business, a premier capital markets search firm in Asia with offices in Singapore and Hong Kong.

Founded in 2009, Whitney Correlate will be a strong addition to Options Group, having won over 40 awards in investment banking, capital markets, and the buyside in Asia Money’s past two Headhunter Polls.

The acquisition, which is expected to close in the fourth quarter subject to completion of certain conditions, will provide Whitney Correlate with access to a larger global client base and the best intelligence and research platform in the industry, while Options Group will strengthen its global investment banking and capital markets practices. Whitney Correlate co-founders, Russell Kopp and Niall MacDonald will join Options Group’s existing Asia team.

Russell Kopp commented on how the acquisition will strengthen Whitney Correlate’s position.

“At a time of growing global interconnectivity, we welcome the fit with complementary platforms in New York and London.”

Niall MacDonald added his comment on the proposed takeover.

“We are all excited to be joining one of the strongest names in global financial services search.”

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Options Group will also bring on board the following staff members: Phoebe Ling, a buyside specialist with a product focus on private equity and regional focus on Southeast Asia, William Raeburn Ward, who will be returning to Options Group as an investment banking consultant, Catherine Chen, a generalist consultant, and Matthew MacDonald, who will relocate to London and serve as a FICC consultant.

“We are very pleased to announce this proposed combination. There are many synergies between our businesses, and we believe this will enhance our strategic growth plans at an opportune time,” said Mike Karp, co-Founder and CEO. Bob Reed, co-Founder and President added, “Matt Pecheur has served as an excellent leader for our Hong Kong office, and combined with Russell, Niall, and their team’s outstanding track record, we are confident this new partnership will accelerate our growth in the region.”

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Hawksford, an international private client and fund business, is also keen to ingratiate itself further into the Asian market after announcing new expansions and appointments in the area.

Group chief operations officer Steve Spybey has been seconded to the Singapore office to support further growth within Hawksford’s Asian business and to consolidate integration across the company’s international offices. Mr Spybey, who was previously based in the Jersey office, will work closely with the existing team, which is led by Asia chief operating officer Jacqueline Low, as well as continuing to have involvement with Hawksford’s wider strategic direction.

Alan Ang and Emma Green have also joined Hawksford’s Singapore office.

Business development manager Alan joins Hawksford from Boardroom and has 12 years’ experience in professional sales and the development of new client business and partnerships. He will help to build the company’s relationships with Asian based intermediaries. Trust manager Emma Green brings 10 years’ private client experience to the role and will help Hawksford to expand its range of services in the Asian market. She held trust roles in Jersey and Switzerland before moving to Singapore in 2013.

The firm is keen to emphasise that these new appointments underscore Hawksford’s commitment to the Asian market and will bring greater consistency in positioning its corporate, private client and funds services across its global offices.

‘I am looking forward to immersing myself in a different culture and applying my experience in European markets to support the next stage of development for Hawksford’s Asian business. There are real opportunities to invest in the business and ensure we are working seamlessly across our global offices,’ said Steve Spybey.

Jacqueline Low added her comment on the strengthening of the company’s Asia arm.

‘It is excellent news that we have added strength and depth to the Asian business through Steve joining us from the Jersey office and Alan and Emma’s appointments. Having a strong team in place will allow us to quickly progress our strategic objectives. In eighteen months Hawksford’s Asian business has seen strong growth and now is the perfect time to combine our expertise to accelerate further expansion.’

Hawksford established a presence in Singapore in March 2014 with the acquisition of Janus Corporate Solutions, followed by an office in Hong Kong in February 2015.

The announcement of further expansion, especially when combined with the news of Option Group’s interest in a Singapore based business, shows that despite recent concerns about some markets in Asia, notable China, other sections of the Asian investment sector are still growing rapidly.

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Investment Opportunities in South Korean Mobile Technology Sector

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Expansion of Kochava into Seoul Office and further announcements on the development of the country’s already impressive mobile network highlight the bright future technology has in South Korea.

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South Korea gathered considerable media attention earlier this year when it was announced that the country would be developing a 5g mobile network, with recent news that a Tripartite Memorandum of Understanding has been signed between the Telecommunications Institute of the Ministry of Science, ICT and Future Planning, China Mobile Research Institute and ZTE to cover in-depth cooperation on TDD/FDD data roaming and VoLTE highlighting the move forward for mobile coverage in the country.

Dr. Cui Kuishi, head of the Convergence Technology research department at MSIP’s Telecommunications Institute commented on the agreement.

“We are delighted to cooperate with ZTE and China Mobile in this project.

China Mobile and ZTE are leaders in the global telecommunications industry, and this strategic cooperation will help South Korea with the deployment of 4G interconnection and interoperability tests, especially the tests based on TD-LTE.” Jason Cao, ZTE’s chief representative in South Korea added his opinions on what the move would do for the mobile technology industry in Asia.

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“We are excited about this tripartite cooperation with MSIP and China Mobile.

The adoption of common telecommunications standards in China and South Korea will generate increased opportunities for industry and commerce, as trade and partnerships between businesses in the two countries grow under the China-South Korea Free Trade Agreement.”

In addition to this, recent news of Kochava, the globally recognized leader in mobile attribution analytics and optimization, announcing its formal expansion into Korea with the opening of a Kochava office in the historic Namsan Tower in Seoul illustrates that interest in South Korea’s technology sector has moved beyond Asia.

Kochava General Manager of Korea David Son is heading up the American firm’s South Korean operations, which are already serving local customers in the region. David Son comes to Kochava from App Annie where he launched a Korean office for the analytics and market intelligence company for app developers, and managed sales operations. While at App Annie, Son grew the Korean office to five times its original size in just two years, maintaining an impressive sales record and closing 90% of the top publishers he pitched.

Previously, Son worked at a leading mobile advertising and engagement company where his clients included Kocca, Gamevil and Nexon. Son also held roles at both Adobe and Com2uS where he was immersed in mobile and social gaming from publishing, to managing and developing projects from inception through to distribution.

“We love working with Kochava! Kochava has allowed me to manage the complex data from our user acquisition campaigns seamlessly,” said BR Yoo, CEO of Mobidays, one of Kochava’s first customers in Korea. “Mobidays utilizes Kochava to test and measure numerous ad networks and end publishers to determine their quality as a user acquisition channel. The Kochava account team is the most supportive that I’ve come across in the mobile space.”

“There is huge demand and great potential within South Korea,” said Charles Manning, Kochava CEO. “Kochava was being contacted by Korean-based companies who were frustrated with the lack of quality attribution services in Korea and we knew we could provide the level of service they were looking for via our global platform. We added a locally based account manager, opened

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an office in Seoul, and immediately landed a host of key clients in the region, including seven top ranking apps. South Korea is ripe with opportunity and we’re ramping up quickly to serve the needs of this rapidly growing market.”

Kochava enables brands to measure app engagements and conversions, demographic information and more. With Kochava, advertisers can visually see the impact of their user acquisition investments across more than 1,300 publisher and network partners. With real-time attribution and analytics, Kochava puts critical metrics at advertisers’ fingertips empowering them to make real-time decisions to optimize mobile ad spend. The Kochava platform and its customers’ data are secure and completely independent.

“Kochava acts as a real partner providing us with very helpful tips and information about the global market,” said Hosun Lee, Joycity Marketing Director.

“As a Korean developer looking to enter the global market, there are so many difficulties. Amongst them, no doubt the language barrier is the toughest one, whether that is localizing a game or simply integrating SDKs with a guide in English. With the Kochava team now stationed in Korea we can easily ask someone here about coding-related questions and receive assistance, saving us both time and frustration. I have previous experience working with other tracking tools but Kochava is the only one that can accommodate both performance and comfort for Korean developers.”

Overall it is clear that there are opportunities aplenty for the mobile technology sector in South Korea, which is already garnering international interest, with these new expansions and partnerships opening up exciting opportunities for investors looking for an emerging technology market.

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APAC Insider Magazine / Issue 4

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Growth in East Asia Pacific Likely to Moderate But Still Remain Solid, Says World Bank Report

Region urged to stay the course on structural reform and macroeconomic management.

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East Asia remains one of the main growth drivers of the world economy, accounting for nearly two-fifths of global economic growth, according to a new World Bank report. Overall, the region is expected to grow 6.5% in 2015, moderating slightly from 6.8% last year.

“Growth in developing East Asia Pacific continues to be solid, but the moderating trend suggests policy makers in the region must remain focused on structural reforms that lay the foundation for sustainable, long-term and inclusive growth. These reforms include regulatory improvements in finance, labor and product markets, as well as measures that enhance transparency and accountability. These policies will reassure investors and markets, and help sustain growth that can help lift people out of poverty,” said Axel van Trotsenburg, World Bank East Asia and Pacific Regional Vice President.

The East Asia Pacific Economic Update explores the challenging global environment facing the region. The recovery in high-income economies remains gradual, global trade is growing at its slowest pace since 2009, and the widespread slowdown in developing countries has intensified, particularly in commodity producers affected by lower commodity prices.

The performance trends across East Asia are diverse. China’s economy is expected to grow at about 7% this year and gradually moderate thereafter, as its economy continues to shift toward a model more dominated by domestic consumption and services, which implies a gradual reduction of growth.

The rest of developing East Asia is expected to grow 4.6% in 2015, similar to the rate last year. Commodity exporters such as Indonesia, Malaysia and Mongolia will see slower growth and lower public revenues this year, reflecting weaker global commodity prices. Commodity importers will maintain a stable — even robust — pace of growth. Vietnam, for example, is expected to grow 6.2% in 2015 and 6.3% in 2016. Growth will ease, however, in many of the smaller economies. In Cambodia, lower agricultural output is hurting the economy, although growth will still be 6.9% this year. In Myanmar, severe flooding in July will likely drive down the pace of growth to 6.5%, from 8.5% in 2014.

Pacific Island countries, meanwhile, will see moderate growth.

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“Developing East Asia’s growth is expected to slow because of China’s economic rebalancing and the pace of the expected normalization of U.S. policy interest rates,” said Sudhir Shetty, Chief Economist of the World Bank’s East Asia and Pacific Region. “These factors could generate financial volatility in the short term, but are necessary adjustments for sustainable growth in the long term.”

The report assumes a gradual slowdown in the Chinese economy in 2016-17.

This scenario is likely because China has sufficient policy buffers and tools to address the risk of a more pronounced slowdown, including relatively low public debt levels, regulations restricting savings outside of the banking system, and the state’s dominant role in the financial system. If China’s growth were to slow further, the effects would be felt in the rest of the region, especially in countries linked to China through trade, investment and tourism.

The report also assumes that a gradual increase in U.S. interest rates will begin in the coming months. While this increase has been anticipated and is likely to be orderly, there is still a risk that markets could react sharply to such tightening, causing currencies to depreciate, bond spreads to rise, capital inflows to fall, and liquidity to tighten.

In the face of these possible headwinds, the report emphasizes two key priorities across the region: prudent macroeconomic management, aimed at shoring up external and fiscal vulnerabilities; and deeper structural reform, focused on encouraging private investment.

The East Asia and Pacific Update is the World Bank’s comprehensive review of the region’s economies. It is published twice yearly and is available free of charge at http://www.worldbank.org/eapupdate

HOIAN, VIETNAM Jimmy Tran / Shutterstock.com

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