Does Asia Still Need ‘Traditional’ Western Expats?

Five years ago, the majority of expats in Asia were Westerners on short-term assignments with multinational corporations that offered generous housing, schooling and travel packages. They came for the experience and compensation, and knew they would leave.

That profile is changing significantly, especially in the more developed economies of Singapore, Hong Kong and China. Only around 30% to 40% of the expat population in these parts of the region fits this description now, according to Lee Quane, Hong Kong-based regional director of ECA International, a company that helps corporations manage expat assignments.

The trend started soon after the 2007 global financial crisis as companies, forced to cut costs, began reducing expat packages. At that time, expats were sent largely by multinationals to set up operations: open offices, train and transfer knowledge, protect companies from corruption and standardize corporate cultures. Since then, markets such as Hong Kong, China and Singapore have matured. As consumption grows in Asia, multinationals are becoming more localized to better meet the needs of their regional consumers. A large number of Western-educated Chinese, known as “sea turtles,” have returned to lead companies, boasting better cultural fluency than expats.

Likewise, a new generation of younger expats from Western countries, many from Europe where opportunities are harder to come by, are being lured to Asia by better economic prospects and adventure. They are arriving with a deeper willingness to assimilate and stay longer term. As a result, the expat talent pool is becoming more and more diverse on all levels – from ethnicities to job descriptions to compensation. “There isn’t the vanilla workforce of expatriates anymore,” says Mr. Quane. The demographics, he says, are also spreading more broadly across Europe, India and Southeast Asia.

So does Asia still need “traditional” expats, meaning short-term expats from the West, or will they soon fade out altogether? Global leaders will always be in demand, say recruiters. But what companies say they need now are internationally-experienced emigrants, or smart “permapats” — skilled people who value the expat lifestyle with or without corporate packages, are more invested in local languages and cultures, and intend to build careers in the East. Examining how and in what industries points to the future of expats in the economic hubs of Singapore, China and Hong Kong.

In 2013, investment in ASEAN (Association of Southeast Asian Nations) countries surpassed China and has since continued to grow. Much of this has flowed into Singapore where Western and Eastern companies have enjoyed the city’s efficient business environment and comparatively liberal policies on hiring expats. The number of Employment Pass (EP) holders, who are foreign professionals and business owners, grew almost 25% between 2009 and 2014 and represented 11% of the non-resident population, according to the government of Singapore.

However, that growth slowed to 2% between 2013 and 2014 as Singapore is becoming increasingly more selective with its EPs. This is due to growing concern among locals that they aren’t getting access to the top jobs nor participating equally in the country’s prosperity. In response, the government has raised the qualifying salaries for certain EP classes, and requires companies to look locally first by posting qualifying positions on a government website for 14 days before considering foreigners.

These measures are in many ways symbolic and they have to be, says Declan O’Sullivan, a long-term expat in Singapore and managing director of recruiting firm Kerry Consulting. “You simply can’t find people domestically in some niche areas,” he says, because of the demographics. Singapore’s local population is less than half of that of New York and London and already has an unemployment rate of only 2%. Multinational corporations require more globally-minded talent than the local population can provide. This is particularly true in areas such as executive-level management, human resources, finance, and cross-collaborative and creative positions.

As a result, the expats hired into Singapore justify their status with both high-end skills and regional expertise that can’t be found locally. This has led to a diverse population of expats that reflect the equally diverse operations of multinational corporations. Asian expats in particular are on the rise, with Chinese-speaking professionals in highest demand.

Together, these expats are leading the region’s “permapat” trend. They’re less likely to return home where their regional knowledge won’t be valued. Chinese nationals take a significant risk pulling their families out of the Chinese school and  household registration hukou system, upon which social benefits are determined. Those willing to do so intend to have futures abroad.

Singapore is an attractive hub to live, work and raise families so expat tenures are being extended, says Parag Khanna, a senior fellow at the Lee Kuan Yew School of Public Policy. “People who used to rotate in and out of assignments for just a year or two now find themselves there for a decade or more,” he said.
Mr. Khanna sees these trends continuing as Singapore’s population gradually expands toward what he calls the “next million” – meaning the next generation of young, mostly ASEAN originating expats who will help Singapore build deeper commercial bridges across the region. They’ll bring even greater diversity and longevity to the expat population.

In China, outward-looking enterprises and small businesses are leading the trends in expat hiring. Start-up companies like PureLiving China, an environmental safety consulting company, are relying on a growing population of young expats to liaise between local staff and global clients. Chinese-American founder Louie Cheng says: “I go to hire the local expats who have been in China at least five years, young professionals in their late twenties or thirties.”

He says that in top-tier cities, these early-career foreigners from the West are willing to work in nontraditional or entrepreneurial ventures in exchange for gaining insight into local culture, language experience and greater responsibility than available in traditional multinational companies. They are also willing to go to second-tier cities (where they are in higher demand) and commit longer term to more local lifestyles, unlike their expat predecessors.

Middle-management expats are being increasingly sought after by Chinese companies with global ambitions, and particularly in areas like human resources, international sales and marketing. These local corporations want expats to make them more globally minded and help them develop relationships outside the country.

On the multinational and executive level, the demand for expats has shifted heavily toward Asian expats. Atomic Recruitment, a China-focused recruiting firm, recently did a study of eight leading multinational consumer brands in China and found that of more than 120 employees in the R&D and sales functions – places formerly rich in Western expats – only 4% of the top two layers of management were non-Asian.

This composition, says Atomic’s Business Director Jeff Hu, makes sense in today’s Chinese market. The country is rich in Western-educated mainland Chinese people, Asian expats from Taiwan, Hong Kong and Singapore, and Westerners of Chinese heritage. They are able to do all that other Western expats used to do plus navigate more effectively through the local environment. Multinational corporations also need to have a more sophisticated understanding of the local Chinese consumer and retain younger employees who can see a better future for themselves at companies led by Chinese.

In all cases, the wage gap between locals and expats has flattened at lower levels, and is rapidly doing the same at leadership levels, with the exception of top senior talent, according to headhunters. Expats’ wages are no longer being determined by their home-country benchmarks but by supply and demand. Packages are increasingly creative, often based on a combination of company and employee requirements, and vary widely. In many cases, skilled Chinese job candidates will now even command a premium to Western peers due to their cultural fluency. As a result, China’s 600,000 foreigners, a tiny proportion of the country’s total population, are becoming more diverse in age and job descriptions.

Hong Kong
In Hong Kong, these same trends in China apply with one noticeable difference: expat entrepreneurship. Because Hong Kong’s traditional powerhouse sectors – finance, tourism and property – are slowing down, more and more investors are looking to the start-up world for returns. Likewise, because of the island’s legal protections and business language of English, many entrepreneurs wanting to start businesses dependent on China feel more comfortable setting up shop there.

Investors and start-ups are meeting in co-working spaces. Two years ago, there were only 10 shared office spaces in Hong Kong, with the majority being government enterprises. Now private companies have driven that number up to nearly 40, according to Henry Bott, who co-launched Blueprint, a co-working space and incubator backed by Swire Properties, in December.

Membership in Blueprint was full by February with 140 members across 55 companies. The demographic split between Westerners and locals was 50-50 on an island where only 4.2% of the population is made up of foreigners. Mr. Bott says this demonstrates a rise in East-West collaboration. Locals and foreigners are increasingly working together to build the next generation of technology and design.

Finally, with more and more expats becoming “permapats,” more and more people are fully assimilating into lifestyles that resemble those of immigrants including with their legal status. Hong Kong allows expats to seek permanent residence. Shanghai announced in July a series of new green card and visa policies that make it easier for expats to come and stay long term.
Ken Kuguru, an American expat who has spent nine years in China, says: “I would definitely consider seeking Chinese PR  [permanent residence] for the convenience of keeping a link for my children, who consider China to be their place of birth and first home.”
Singapore is the leader in this trend, with its transparent permanent residence and citizenship pathways for foreigners that almost 50,000 people use each year.

Source: The Wall Street Journal
By: Rashmi J. Dalai



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