Economic transitions in Asia are influencing the duration andÂ destination of relocation assignments.
By Michael Switow
The days of relocating professionals and their familiesÂ overseas on two-to-three year contracts with housing,Â education, and other allowances are certainly not over,Â but they are waning.
âWe believe companies will continue to move staffÂ around the world in ever-growing numbers in 2020,âÂ says Lee Quane, the regional director for Asia at ECAÂ International. âBut they will be doing so in a much moreÂ varied fashion.â
Traditional expatriate postings declined by 10 per centÂ from 2013 to 2019, according to the companyâs research,Â and Quane expects the trend to continue.
âThe number of white Western people from developedÂ economies relocating for their job on highly paidÂ contracts to other developed economies is rapidlyÂ declining,â agrees Yvonne McNulty, a senior lecturerÂ at Singapore University of Social Sciencesâ S R NathanÂ School of Human Development. âThese people will stillÂ move in the hundreds of thousands every year but willÂ do so on significantly scaled back salaries.â
Whilst traditional assignments still account for 45Â per cent of postings, multinational companies areÂ increasingly sending staff overseas for significantlyÂ shorter or significantly longer periods of time. Short-termÂ assignments are particularly popular with youngerÂ workers.
âPeople need international experience on their CVÂ because they do not intend to stay with one companyÂ for their entire career,â McNulty says. âWe have movedÂ to a world where âfuture employabilityâ is a greaterÂ commodity than âcurrent employment.ââ
These short-term assignments have become anÂ important employee retention tool, whilst also enablingÂ companies to meet urgent needs or provide training andÂ rewards to staff. Itâs worth noting that this trend appliesÂ largely to North American and European multinationals;Â large Asian firms still rely more on traditionalÂ assignments.
Meanwhile, in markets like Hong Kong and SingaporeÂ where the local talent pool is finite, companies areÂ hiring locally-based expatriates or asking staff toÂ relocate for an indefinite period of time.
Staff commuting between countries is becoming moreÂ common; for example, an employee might work inÂ Jakarta during the week but return to Singapore toÂ be with family on the weekends. This is being enabledÂ by the rise of low-cost carriers that have increased theÂ number of routes across Asia, enabling travellers to flyÂ directly to second- and third-tier cities without beingÂ forced to transit through a hub.
China Slowing Down
Two major trends can be observed when it comes to theÂ destinations for foreign talent:
- China is expected to remain the top destinationÂ in Asia for foreign assignments, despite its slowingÂ economy and international trade disputes.
- Those two economic factors are among the reasonsÂ why other Asian markets will also see an increase inÂ foreign postings. Taiwan and ASEAN countries areÂ among the biggest beneficiaries as U.S. tariffs leadÂ businesses to re-examine their supply chains.
Whilst some companies are finding it too complex toÂ shift out of China, others have already made the shift.
Just take a look at the smartphone industry: LGÂ Electronics is shifting to Vietnam; Sony has closedÂ its Beijing smartphone factory to make phones inÂ Thailand; and Samsung has closed its last plant in China.Â Samsungâs move, though, has been a decade in theÂ making, in part a result of rising Chinese wages plusÂ the companyâs declining Chinese market share. NearlyÂ two-thirds of Samsungâs smartphones are now madeÂ in Vietnam. In July, it also announced plans to create aÂ massive factory in India.
Lower down the value chain, there are a host ofÂ companies that are being forced to relocate due toÂ rising costs.
âAs companies hedge their bets, theyâre moving toÂ other locations like Indonesia, Malaysia, Thailand,Â and Vietnam,â says Quane. âTherefore, weâll see moreÂ mobility into these locations.â
âFor every foreign company that left China in 2019,Â there were two to three more seriously contemplatingÂ doing so and we expect more companies to leave ChinaÂ in 2020 than in 2019,â adds Dan Harris, founder of lawÂ firm Harris Bricken, in an article on the China Law Blog.
Chinaâs dominance in the 5G market is also creatingÂ more demand for talent outside the country. In part,Â this may be due to U.S. sanctions placed on Huawei, butÂ itâs also a reflection of the fact that many of the relatedÂ products and parts, including chips and processors, areÂ not produced domestically. Quane predicts that theÂ shift to 5G will increase demand for Taiwanese partsÂ and result in more companies increasing their presenceÂ there.