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Posted: 2005-02-08 Tue 12:20 © Moneyweb 1997-2005
China and India remain top of leading corporate minds, according to the Economist Intelligence Unit's (EIU) CEO Briefing for 2005. And South Africa is does not even feature in the top 20. Based on a survey of 500 senior executives from 75 countries and interviews with more than 20 global business leaders, the CEO Briefing, now in its second year, provides a snapshot of what decision makers in the business world view as the factors that will most impact their companies and the global economy at large.
The report featured a survey on offshoring, and asked respondents to rate countries using criteria such as political environment and security, macroeconomic stability, regulations, labour (costs, skills and availability) and infrastructure. South Africa was rated 34th out of 60 countries that made the list, and was superseded by countries like Vietnam and Colombia.
Gareth Lofthouse, the author of the report, told Moneyweb that although South Africa's scored favourable in the macroeconomic stability and labour cost fields, its relatively low political environment and security score was a deterrent to foreign direct investment in general. He also pointed out that labour skills and availability and labour regulation - both of which were heavily weighted - were areas where SA did not fare well: If South Africa wants to attract more business, these need to be addressed, said Lofthouse.
Fifty-five percent of executives surveyed saw outsourcing and offshoring as "a critical force that is reshaping the global marketplace", up from 51% last year. The report states that "India takes the top spot owing to its English-speaking, low-cost labour force, laws and bureaucracy, and historical relationships with markets such as the USA and the UK", and that China "is to manufacturing what India has become to the service industry, lagging only in its relative lack of English language skills".
Garry Betty, president and CEO of Earthline, an Internet service provider (ISP) based in the USA, was quoted in the report as saying: "This trend won't abate - jobs will find a home where they can be done best, at the least cost."
The report said that Eastern Europe and Canada looked well placed to attract more skills-intensive activity.
The top ten countries after India and China were the Czech Republic, Singapore, Poland, Canada, Hong Kong, Hungary, the Philippines and Thailand. The report also revealed that relative to its size, Singapore is currently the most successful location for offshoring in the world, with 22,6 projects per million people.
Lofthouse writes: "The survey implies that companies will use multiple offshoring centres, with more manufacturing functions being offshored to China, basic services to India, and research and development and other value-added activity focused on major centres of scientific excellence."
Offshoring projects by country
Rank Country No. of offshoring projects 1 India 228 2 UK 187 3 China 132 4 USA 123 5 Canada 98 6 Singapore 95 7 Germany 77 8 Ireland 77 9 Australia 72 10 Netherlands 52 Source: Unctad Trade investment Report 2004, as quoted by the EIU in CEO Briefing 2005.02.07
Prospects for business and the world economy Overall, business leaders are a positive bunch: 65% believed the prospects for business in the global marketplace over the coming three years were good, with 9% saying very good and 17% being indifferent.
Forty-four percent of respondents thought that the mining, oil and gas industries would enjoy the best growth prospects over the coming three years, followed by healthcare, pharmaceuticals and biotechnology, and travel, tourism and transport.
Given that businesspeople thought that their colleagues in the commodities sector would see the best run, 22% of executives cited rising commodity prices as a critical driver of change for the next three years, while 36% of execs said a failure to attract talent was a major business risk.
However, the biggest risk, with 40% of the vote, was failure to keep pace with change. In line with this emphasis on the future, technology advances are seen as the single most important driver of change in business. Also, respondents said that fostering innovation is a key strategic focus this year, with "a stream of new ideas looking set to fuel growth in industries ranging from biotechnology and energy to telecoms and information technology (IT)".
The USA was seen by 23% of respondents as being the country posing the greatest risk to people's businesses over the next three years, with China getting 21% of the vote and Iraq getting 8%. The dollar's ongoing decline created the greatest concern, "already hurting export firms outside the USA, particularly the euro zone".
Asia-Pacific was seen as by 72% of respondents as offering the greatest growth opportunities for business over the next three years, followed by Eastern Europe (34%), North America (27%) and Latin America (24%). Worryingly, sub-Saharan Africa came last, with only 4% of the vote.
