East Asia: What engines of growth need

By Gary Coleman - June 12, 2014

WEF EA post blogIn his opening address at the World Economic Forum on East Asia, Vietnamese Prime Minster Nguyen Tan Dung said that efforts to boost the region’s engines of growth are needed to help reinvigorate slowing growth rates. And according to a number of other leaders at the event, there are a variety of ways to achieve this.

Chief among these is the growth-enhancing potential of ASEAN’s full economic integration in 2015. The ability to function as one industrial and production base was seen by leaders as critical to the region’s competitive advantage—putting it possibly on par with the regional power of the European Union. ASEAN’s ability to participate and negotiate as one region in a range of free-trade agreements—including the Trans Pacific Partnership and the bilateral ASEAN Plus One agreements—also provides considerable opportunity to attract foreign investment to its markets. With the burgeoning middle class of a country like Indonesia—where consumers are now more and more in a position to buy cars and electronics—the draw is strong.

Leaders at WEF East Asia also pointed to the importance of regulatory reform as a means to spur growth and competitiveness.  To this end, a minister from Cambodia touted his country’s receptivity to investment, noting that “every sector is open to FDI” and that there are no “alien investor” laws in his country. One Malaysian government official emphasized that his government is “pushing hard” for reforms to improve competitiveness. Already, ASEAN countries have made significant progress on lowering barriers in the trade in goods across the region—with tariffs on more than 99 percent of goods expected to be at zero by 2015. ASEAN is now working on liberalizing regulations pertaining to services to ease access across borders in such sectors as banking.

The focus on services and the difficulty of moving to this next stage, however, points to a continuing stumbling block in ASEAN’s ability to function as one region—the lack of connectivity. Not only do services like finance need a strong ICT network to facilitate transactions and connectivity among countries, businesses in both services and the manufacture of goods alike need well-developed physical transport to ease movement in this geographically dispersed area. The ASEAN Open Skies initiative, which will allow all airlines within ASEAN to compete on intra-ASEAN routes, is one initiative that aims to promote better connectivity among ASEAN nations and there is hope it will be implemented in 2015. But rail, roads, seaports, airports and broadband are all areas in need of investment. On the bright side, the scale of the transport infrastructure requirements—as a minister for transportation from Singapore noted—can represent a substantial opportunity for international financing institutions as well as for public-private partnerships.  

All of these efforts can accelerate the engines of growth and help rev up East Asian economies. But will they bring high-quality growth—that is, the kind that encourages innovation and stimulates quality job formation? There are indications that this may be the case. President Aquino in his opening address noted that the Philippines’ rates of employment for graduates in IT, business processing operations, and electronics exceed 70 percent, with some sectors exceeding 90 percent. And the greater competition that ASEAN economic integration brings is expected to spur businesses to become more innovative and compete more keenly for talent, according to the minister from Cambodia mentioned above.

However, there is one thing that all of these efforts to drive engines of growth need—and that’s stability. The prime minister from Vietnam made this clear in his remarks: “Development is not possible without peace and stability.” He pointed out that any disruption in the region’s shipping lanes—a distinct possibility given recent tensions with China—could mean major disruptions to East Asia’s economy and the world’s. So even if East Asia gets the engines of growth to again fire on all cylinders, the geo-political environment may turn out to be the most critical—and most challenging—factor holding the region back.


Dttl_garycoleman_56x56Gary Coleman is Managing Director, Global Industries, of Deloitte Touche Tohmatsu Limited. He is a member of Deloitte’s Global Markets Committee and is the lead partner in Deloitte’s strategic relationship with the World Economic Forum. Follow him on Twitter @gcoleman_gary.

Growth in a disruptive environment

By Tim Hanley - June 09, 2014

Ind_lsh_glb_ho_1958I heard some fascinating stories recently of how three European manufacturing companies are innovating and growing in the face of a disruptive environment. Senior executives from a growing commercial aircraft supplier, global process manufacturer, and leading consumer and industrial products company were featured speakers at a Deloitte manufacturing industry event. Despite the different sectors in which they compete, common threads emerged, including how the companies are embracing new technologies to innovate, how they are harnessing the power of collaboration in that effort, the new approaches they are taking to compete in growth markets, and a shared focus on developing talent.

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Is the next manufacturing revolution here?

By Tim Hanley - May 27, 2014

Thumb_ind_man_glb_ho_1929_resize_1024_0It is estimated that there were over 12,000 articles and media stories published over the last year on additive manufacturing, more popularly known as “3D printing”. This topic has been discussed at many of the industry events, client meetings, and strategy sessions that I attend across the globe. While additive manufacturing has recently been a topic of growing interest, the technology has evolved over the last three decades. I wanted to highlight additive manufacturing as it is likely that we are only just seeing the beginning of the potential that this and other advance manufacturing technologies can bring to manufacturers’ innovation and growth strategies.

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The Philippines: the next GVC success story?

By Gary Coleman - May 21, 2014

Manila, Philippines blog jpegAccording to the United Nations, economies with the fastest growing global value chain (GVC) participation “have GDP per capita growth rates some 2 percentage points above the average.”1 Much of the remarkable growth in Asia is attributable to this ability to participate in GVCs. The Philippines, where the World Economic Forum on East Asia is opening today, may very well be the next example of this success.

With a 7.2 percent growth rate in GDP in 20132, the Philippines possesses many of the traits needed to move up the global value chain. Not only does it have a stable macro-economic environment, but the country also has a emerging services sector, particularly in business process outsourcing (BPO)—services like call centers and IT that are often outsourced from developed economies. The BPO market in the Philippines now accounts for 9.5 percent of the worldwide market, with metro Manila the second-largest global outsourcing destination.3 And more than 50 percent of the Philippines’ overall GDP value-add is contributed by services.4

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Nigeria’s new numbers

By Gary Coleman - May 15, 2014

Nigerian flagRecently, the Nigerian government announced new GDP numbers that now make it the largest economy in Africa. Having overhauled economic data for the first time in two decades, the GDP figure rose by 89 percent from 2003 to 2010. It’s a number that caught the attention of the world and was much discussed at the World Economic Forum (WEF) on Africa, held last week in Nigeria’s capital city of Abuja.

But is GDP really the best measure of success? If you listened to the debate at WEF, the answer is, probably not. Because when you look behind a remarkable number like that, you can see there are many factors not addressed by this figure—factors that provide clues as to how the economy is really unfolding and how it is impacting quality of life.

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Cautiously optimistic: Innovation and Chinese FDI

By Gary Coleman - April 29, 2014

Aisa Society Image for blogA few months ago, after Summer Davos, I wrote and spoke about China’s new commitment to innovation. Chinese Premier Li Keqiang in his opening address had talked of holding the banner of innovation high and the reforms his government were proposing to achieve that goal. I stated at the time that I was cautiously optimistic about the potential these reforms held.

Just recently, I again had the chance to discuss China and innovation, this time on a panel hosted by the Asia Society in New York City. With the session focused on China’s growing investment in U.S. high-tech companies, inevitably the question of innovation came up—and if these Chinese companies were looking to U.S. acquisitions to help build a culture of innovation at home. Innovation remains a challenge in China, with issues from lax enforcement of intellectual property laws to the difficulty of starting a business contributing factors. Moreover, questions have been raised about whether China’s educational system encourages the kind of creative thinking that generates innovation.

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Talent: the first step to innovation?

By Gary Coleman - April 09, 2014

Post WEF LATAMBuilding innovation is one of those hot topics that yield all sorts of discussion about disruptive technology—the cloud, 3-D printing, social media, digital infrastructure, et cetera. But what spurs innovation may come down to something much more basic: talent. And at the World Economic Forum on Latin America  (WEF LATAM) last week, it was clear that participants from this region agree.

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Japanese manufacturers focused on high performance

By Tim Hanley - April 07, 2014

Bzi_gro_glb_ho_1918A few weeks ago, I had the opportunity to return once again to Japan to visit with a number of Deloitte Japan manufacturing clients. One of the many highlights of my trip this month was the opportunity to meet with several manufacturers in Nagoya. Japanese manufacturers have been long admired by many for a relentless focus on continuous improvements to their business. So it is not surprising that during my visit we had rich discussions around best practices of leading manufacturers to sustain top performance.

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WEF on Latin America: Getting there from here

By Gary Coleman - March 31, 2014

Panama.According to the competitiveness index produced by the World Economic Forum (WEF), “innovation-driven economies” is the third and highest stage of development. Many Latin American countries are now poised to make the transition to this stage. Most of the remaining countries are only a step or two behind. 

But how does an economy become innovative-driven? One way is by promoting innovation-driven entrepreneurship. That’s the focus of a panel I will be participating in this week at WEF on Latin America in Panama City. Entitled “Innovating for Competitiveness,” the session will explore what steps the region can take to promote not just entrepreneurship but the innovative new businesses that propel an economy into that sought-after “stage three.”

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Connectivity and innovation underline 2014 for automotive industry

By Tim Hanley - February 24, 2014

Auto showA few weeks ago I had the opportunity to join thousands of global automotive industry executives in Detroit for the North American International Auto Show 2014. The show continues to be a striking demonstration of the dynamic innovation happening in the sector. Original equipment manufacturers (OEMs) use this event to kick the year off with an outstanding showcase of new vehicle designs, many of which feature innovative technologies to help consumers stay connected. (Read Deloitte views on connected vehicles), What was also striking to see this year was the further integration of advanced materials in some of the new models. (Read more on Advanced Materials Systems trends).

During the auto show, the Deloitte U.S. member firm released the 2014 Global Automotive Consumer Study: Exploring consumers’ mobility choices and transportation decisions, sharing perspective on Generation Y consumer trends. Based on a survey of almost 700 U.S. Gen Y consumers, around 60 percent expect to buy or lease a car within the next three years. Not surprisingly affordability and high operational and maintenance costs had been top reasons preventing ownership. But as explained by graduate school students during the annual Deloitte U.S. Gen Y event, as their purchasing power grows, vehicle ownership is more in reach. (Read the Deloitte U.S. press release).  Please stay tuned over the next several months, as Deloitte member firms worldwide launch the local findings of a broader mobility survey of more than 23,000 consumers across 19 countries.

Like in many other countries, the automotive industry is a vital engine for economic growth in the U.S. Given industry sentiment that 2014 is expected to bring growth in production of new passenger and light commercial vehicles, this certainly is a positive sign for the U.S. economy and local industry.


Tim HanleyTim Hanley is the Global Leader of the Manufacturing Industry group of Deloitte Touche Tohmatsu Limited (DTTL). In his global industry leadership role, he directs strategic initiatives and investments to grow Deloitte member firm market share within the manufacturing industry. During his distinguished 35-year career, Hanley has led teams serving all business aspects, including consulting with top management regarding organizational financial strategy development and execution, acquisitions, and market development.