Economic transitions in Asia are influencing the duration and destination of relocation assignments.
By Michael Switow
The days of relocating professionals and their families overseas on two-to-three year contracts with housing, education, and other allowances are certainly not over, but they are waning.
“We believe companies will continue to move staff around the world in ever-growing numbers in 2020,” says Lee Quane, the regional director for Asia at ECA International. “But they will be doing so in a much more varied fashion.”
Traditional expatriate postings declined by 10 per cent from 2013 to 2019, according to the company’s research, and Quane expects the trend to continue.
“The number of white Western people from developed economies relocating for their job on highly paid contracts to other developed economies is rapidly declining,” agrees Yvonne McNulty, a senior lecturer at Singapore University of Social Sciences’ S R Nathan School of Human Development. “These people will still move in the hundreds of thousands every year but will do so on significantly scaled back salaries.”
Whilst traditional assignments still account for 45 per cent of postings, multinational companies are increasingly sending staff overseas for significantly shorter or significantly longer periods of time. Short-term assignments are particularly popular with younger workers.
“People need international experience on their CV because they do not intend to stay with one company for their entire career,” McNulty says. “We have moved to a world where ‘future employability’ is a greater commodity than ‘current employment.’”
These short-term assignments have become an important employee retention tool, whilst also enabling companies to meet urgent needs or provide training and rewards to staff. It’s worth noting that this trend applies largely to North American and European multinationals; large Asian firms still rely more on traditional assignments.
Meanwhile, in markets like Hong Kong and Singapore where the local talent pool is finite, companies are hiring locally-based expatriates or asking staff to relocate for an indefinite period of time.
Staff commuting between countries is becoming more common; for example, an employee might work in Jakarta during the week but return to Singapore to be with family on the weekends. This is being enabled by the rise of low-cost carriers that have increased the number of routes across Asia, enabling travellers to fly directly to second- and third-tier cities without being forced to transit through a hub.
China Slowing Down
Two major trends can be observed when it comes to the destinations for foreign talent:
- China is expected to remain the top destination in Asia for foreign assignments, despite its slowing economy and international trade disputes.
- Those two economic factors are among the reasons why other Asian markets will also see an increase in foreign postings. Taiwan and ASEAN countries are among the biggest beneficiaries as U.S. tariffs lead businesses to re-examine their supply chains.
Whilst some companies are finding it too complex to shift out of China, others have already made the shift.
Just take a look at the smartphone industry: LG Electronics is shifting to Vietnam; Sony has closed its Beijing smartphone factory to make phones in Thailand; and Samsung has closed its last plant in China. Samsung’s move, though, has been a decade in the making, in part a result of rising Chinese wages plus the company’s declining Chinese market share. Nearly two-thirds of Samsung’s smartphones are now made in Vietnam. In July, it also announced plans to create a massive factory in India.
Lower down the value chain, there are a host of companies that are being forced to relocate due to rising costs.
“As companies hedge their bets, they’re moving to other locations like Indonesia, Malaysia, Thailand, and Vietnam,” says Quane. “Therefore, we’ll see more mobility into these locations.”
“For every foreign company that left China in 2019, there were two to three more seriously contemplating doing so and we expect more companies to leave China in 2020 than in 2019,” adds Dan Harris, founder of law firm Harris Bricken, in an article on the China Law Blog.
China’s dominance in the 5G market is also creating more demand for talent outside the country. In part, this may be due to U.S. sanctions placed on Huawei, but it’s also a reflection of the fact that many of the related products and parts, including chips and processors, are not produced domestically. Quane predicts that the shift to 5G will increase demand for Taiwanese parts and result in more companies increasing their presence there.