6th APEC SME Business Network Promotion Forum

SMEs Take on the Global Economy: Strategies for Success in East Asia

November 2003

JETRO

Japan External Trade Organization

Introduction

APEC SME Business Network Promotion Forum was proposed by the Japanese government as

Japan’s APEC contribution project and subsequently approved at the 5th meeting of SME ministerial

meeting at Kuala Lumpur, Malaysia, in September 1998. The session in FY2003 will mark the 6th

Forum. It is aimed at promoting mutual understanding / business networking of small and medium

enterprises in APEC economies, creating new business opportunities and seeking industrial

revitalization in the region. Coinciding the Forum, JETRO conducts a survey on major industries in

the APEC region or other specific themes each year, and compiles the results into a report.

This year, under the theme of "SMEs Take on the Global Economy: Strategies for Success in East

Asia", JETRO has conducted a case study on SMEs in APEC economies, identifying business

opportunities in dynamically transforming East Asia and taking on the tide of globalization. We

interviewed SMEs, chambers of commerce and industry, and industry organizations based in the

APEC region on their business strategies for success in East Asia.

It is hoped that this report will contribute to SMEs in APEC economies in their efforts to conduct

global business in East Asia.

Finally, we wish to express our sincere gratitude to all parties who have extended cooperation in the

survey.

November 2003

Economic Research Department,

Japan External Trade Organization (JETRO)

Content

Japan Kitakyushu Asia Business Committee (KABC) ............................................................................. 1

Asia Giken Co., Ltd. .........................................................................................................................4

Ujiden Chemical Industry Co., Ltd...................................................................................................6

Kazuma Co., Ltd. ..............................................................................................................................8

Environmental Technology Service Co.,Ltd.....................................................................................9

Shikoku Kakoki Co., Ltd. ...............................................................................................................11

Taiko Kikai Industries Co., Ltd. .....................................................................................................13

Tokai Kagu Kogyo Co.,Ltd.............................................................................................................15

TOWA Industrial Co.,Ltd................................................................................................................17

Hokiyama Cutlery Co., Ltd.............................................................................................................19

Company Ａ ...................................................................................................................................21

China Hangzhou Initial Development Co., Ltd. ........................................................................................23

Shanghai JT-Omron Software Co., Ltd...........................................................................................24 Hong Kong, China

Hong Kong Small And Medium Enterprises Association...............................................................25

Federation of Hong Kong Industries...............................................................................................27

Silicone Zone International Limited ...............................................................................................29 South Korea

Small Business Corporation............................................................................................................31 Chinese Taipei

Taiwan Electrical and Electronic Manufacturers’ Association........................................................33 Chin-Poon Industrial Co., Ltd.........................................................................................................35 JyeTai Precision Industrial Co., Ltd................................................................................................36

Singapore Singapore Furniture Industries Council ..........................................................................................38 Singapore Manufacturers’ Federation (SMa) ................................................................................41 Abitex Design (S) Pte Ltd...............................................................................................................43 Company B .....................................................................................................................................45 Company C .....................................................................................................................................47

Indonesia Compartment Indonesian SMEs - Indonesian Chamber of Commerce( KUKMI) .........................49 PT Maspion.....................................................................................................................................51

Malaysia

Malaysian Plastics Manufacturers Association (MPMA) ...............................................................53 Thailand

The Board of Investment of Thailand .............................................................................................55 Philippine

Cebu Furniture Industries Foundation, Inc. (CFIF) ........................................................................56 Raphael Legacy Designs, Inc..........................................................................................................57 Nature's Legacy Eximport Inc. .......................................................................................................58

Vietnam Vietnam Chamber of Commerce and Industry................................................................................59

Brunei Darussalam National Chamber of Commerce and Industry Brunei Darussalam................................................60 Company D.....................................................................................................................................62 Company E .....................................................................................................................................63

Papua New Guinea Papua New Guinea Forest Industries Association ..........................................................................65 Arabicas Limited.............................................................................................................................67 PNG Balsa Company ......................................................................................................................69

Australia IDP..................................................................................................................................................71 Macquarie University, Macquarie International .............................................................................74 UniAdvice, University of Wollongong ...........................................................................................76

New Zealand New Zealand Pine Manufacturers Association (NZPMA)..............................................................79 New Zealand Sugar Company Limited...........................................................................................80 Vista Entertainment Solutions Ltd ..................................................................................................81

U.S. Semiconductor Equipment and Materials Institute (SEMI)............................................................83 Semiconductor Industry Association(SIA) .....................................................................................85

Canada Automotive Parts Manufacturers' Association................................................................................86 Canadian Chamber of Commerce .................................................................................................87

Mexico Camara Nacional de la Industria de Transformacion (CANACINTRA) ........................................88 Pescadores Nacionales de Abulon.,S.C. de R.L..............................................................................90

Chile Asia Pacific Chamber of Commerce...............................................................................................91

CESMEC Ltd.. ................................................................................................................................93

Peru COMEXPERU - Sociedad de Comercio Exterior del Perú ............................................................95

Russia National Software Development Association (RUSSOFT) ............................................................96 Artezio, LLC...................................................................................................................................98 SPIRIT ............................................................................................................................................99

Japan

Name Kitakyushu Asia Business Committee (KABC) (Fukuoka Prefecture)

Business Private-sector business organization

Members 15 companies

Overseas Network

URL http://vnt.philly.ne.jp/~asiabiz/asia1.htm

1. Evaluation of East Asia Member companies define East Asia as the production base, market and operation base of

technological / business partners. The region not only provides a market of a very attractive scale,

but also serves as the home base of new business partners, with which partnerships of mutual

complementation can be formed. Members do not perceive East Asia any differently, just because it

is "overseas". For businesses in Kitakyushu in southern Japan, major East Asian cities such as Seoul,

Pusan, Shanghai and Taipei are geographically closer than or about the same distance to Tokyo.

Many members define South Korea, China and Chinese Taipei as the strategic regions for

international business. While business coordination is relatively well developed with South Korea

and Chinese Taipei, their efforts for partnership with China remain in the investigative stage. No

coordinated move to establish business with ASEAN and other South East Asian esonomies have yet

to eventuate, but individual members have already opened operational bases in ASEAN esonomies

or forged business partnerships with local companies in the region.

2. Operations in East Asia KABC was established in June 2001 with the annual membership of 120,000 yen, to promote

business deals, exchange of technological specialists and capital tie-up with overseas businesses,

mainly those in South Korea and Chinese Taipei. It aims at achieving overseas expansion, business

tie-ups, export deals, etc. for member companies. Members gather once every two months for a

study session to exchange information, and organize overseas corporate inspection tours, business

negotiation sessions, and joint participation in international trade shows. The table below lists past

achievements and main results.

Past achievements and main results of KABC

June 2001: KABC established

August 2001: South Korean market survey

December 2001: Member software developer concludes an agreement of technological

partnership and joint development with a South Korean venture business.

1

March 2002: Dispatches a mission to Pusan and Inchon cities for promoting parts /

materials procurement and marketing products / technologies.

July 2002: Organizes a networking session with businesses in Inchon.

September 2002: Forges a business partnership with the Pukyong Asia Business Association.

November 2002: Dispatches a mission to Pusan for promoting parts / materials procurement

and marketing products / technologies.

December 2002: Member communications equipment manufacturer and a major South Korean

company jointly enter a bid in the Pusan subway construction project.

April 2003: Member software developer enters a second agreement with the South Korean

venture business and commences nation-wide marketing in Japan.

May 2003: Participates in the 2003 International Machinery Technology Fair in Pusan.

July 2003: Member stud welding system manufacturer enters a business tie-up with an

equivalent South Korean company to explore new sales channels in Japanese

and Korean markets.

October 2003: Member environmental consulting firm signs an agreement of technological

transfer and business tie-up with a member firm of the Pukyong Asia Business

Association.

November 2003: Sets up a Japan booth at KOMAF (Korea Machinery Fair) 2003 and exhibits

products of member companies.

Source: KABC

3. Markets Where Members Are Active Brunei China Hong Kong

China

Indonesia Japan South Korea

２ 2、6 business

partnerships

Malaysia Philippines Singapore Chinese Taipei Thailand Vietnam

1 business

partnership

1 2 business

partnership

4. Benefits/Risks in East Asia The benefits include reducing business costs, expanding sales channels and streamlining business

through partnership of mutual complementation. The risks involved are basically the same in Japan

and overseas, except in the case of risks specific to certain economies. However, it should be noted

that the amount of information available is much smaller for overseas businesses than for local

businesses, thus hampering the effort to make correct business judgments and decisions. Languages

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also pose a major problem. With limited management resources of SMEs, it is not easy to draw up

and implement overseas strategies.

5. Competitiveness Issues The development of new products and technologies constitutes the main challenge for strengthening

competitiveness. Some member companies are conducting joint R&D with universities, and actively

entering partnerships with the industrial and academic sectors that provide technologies.

6. Outlook We will continue to support SMEs in their strategic overseas expansion "from the cradle to

successful partnership". KABC seeks involvement in support programs implemented by local

governments and public organizations like JETRO. To this end, individual support programs should

be more integrally streamlined for implementation.

3

Japan

Name Asia Giken Co., Ltd. (Fukuoka Prefecture)

Business Manufacturer of stud welding systems and industrial fasteners

Employees 6

Overseas Network

URL http://www.asiagiken.co.jp

1. Evaluation of East Asia For its proximity to Kitakyushu, we perceive East Asia as part of our local market. We are now at the

stage of planting business seeds mainly in South Korea in preparation for future business expansion.

2. Operations in East Asia We met with our current South Korean partner at a trade show in Pusan in May 2003, and entered a

partnership agreement in August. The partnership is beneficial, despite our technological superiority,

as it enables the use of existing sales networks to market each other's products.

Our attention is now firmly on Vietnam. We plan to conduct recruitment interviews there, and send

successful applicants to Japan for training, so that they will be ready to work at our subsidiary to be

set up in Vietnam in the future. Production by a local subsidiary would effectively contain our

technologies, and has the benefit of being able to collect license fees securely. Vietnam is also an

ideal base for marketing our products in China.

3. Benefits/Risks in East Asia We have successfully attracted enquiries through trade shows. Trade shows are where buyers gather,

and represent an effective means of establishing business deals in the absence of prior contacts.

Marketing our products overseas by ourselves involves risk, but the level of risk is lower for

exhibiting our products at trade shows.

While the distribution of pirate products poses a problem, no countermeasures have been taken for

cost reasons. Once a product is released on the market, it becomes subject to piracy. This is why

products we want to protect from piracy are not provided in the business tie-up with the South

Korean company. Patent is not a fundamental countermeasure, because, with or without patent,

piracy and resulting legal disputes would end up costing us substantial costs.

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4. Competitiveness Issues There is a limit to competing with local businesses in terms of costs. We must differentiate ourselves

through technological edge. Accepting trainees would raise a sense of crisis among employees, and

lead to higher productivity. We have no choice but being cautious about reinforcing staff, although it

is desirable in areas including linguistic supporters, as up-front investments are not an option for a

company of our size.

5. Outlook It is too late to establish an export-oriented production base in China. Manufacturing costs of China

are generally low, but are rapidly surging in cities like Shanghai. In view of overtime allowances,

transportation costs, taxes and other indirect expenses, manufacturing in China will no longer be

beneficial when the manufacturing costs increases by a further 20%. The ideal situation would be to

find business partners in the region, and have them undertake manufacturing for the respective local

markets. Still, it would be too late to expand into a economy once the distribution of our products is

established there.

Market prices for South Korea and Chinese Taipei have already come down to the international level,

making it difficult to generate profits. These regions are therefore not perceived as our future

markets.

5

Japan

Name Ujiden Chemical Industry Co., Ltd (Kochi Prefecture)

Business Manufacturing and marketing of abrasives and grinding machinery

Employees 108

Overseas Network

URL http://www.ujiden-net.co.jp

1. Evaluation of East Asia Our main line of business is manufacturing and marketing abrasives and grinding machinery for use

on metal products. Our main grinding product " TOSA Emery", named after the headquarters

location of TOSA, has around 90% share in Japan's black abrasive material market and around 20 in

the world market.

In the financial year to November 2002, we posted the sales of 1.8 billion yen, around 50% of which

(around 900 million yen) is coming from exportation. Exports operations began in 1959, and now

have trading with over 30 economies. Most of the exports are to East Asia, making the region one of

our most important markets.

2. Operations in East Asia Majority of our products are manufactured in Japan, but manufacturing is partially commissioned to

South Korea (grinding machinery) and China (abrasive materials). South Korea was chosen for the

manufacturing of grinding machinery because of its high technological standards. In contrast, China

was chosen for producing abrasive materials because the economy is becoming the world's

manufacturing center, and thus a major consumer of our products. In China, we market abrasive

materials widely to Japanese / foreign companies based there as well as local companies. Products

manufactured in China are also brought back to Japan for quality checks before being exported to a

third economy. We spent two to three years carefully selecting the manufacturing contractor, making

candidate companies conduct trial manufacturing. Most raw materials are also procured from China,

Malaysia and other East Asian economies.

3. Benefits/Risks in East Asia One of the factors for our success is the trusting relationship with and full utilization of sales agents

in East Asian economies. We have a trainee program, accepting around 50 trainees in total, including

long-term and short-term trainees. They are developing into human resources that lead our sales

networks in the region. Future successors to existing sales agents are also accepted as trainees.

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Long-term trusting ties are developed this way with sales agents. Also, we assign more than one

sales agents for each economy to make them compete against each other for sales promotion.

Another factor of our success is sales activities on local manufacturers. Initially, we did not have the

sales department, and assigned sales agents and trading houses to fulfill the function. We have since

switched to the policy of conducting our own sales operations, and directly associating with

customers as much as possible, rather than leaving it to trading companies and agents. This strategy

effectively helps gather information on the market and customer needs.

The problem we have encountered in the Chinese market was the circulation of abrasive materials

falsely claiming our brand name. The circulation stopped after we issued a written warning to the

company marketing the imitations that the continued use of our brand name would be reported to the

relevant authorities.

4. Competitiveness Issues Today, the "wet" system is the most widely used for grinding machinery. It uses water and detergent

in the grinding process, and produces waste water. As public awareness on environmental issues

heightens, and in response to the growing calls for grinding equipment free of waste water, we have

developed Japan's first "dry system" grinding machinery and abrasive material to be marketed as a

set. The marketing began in 2000 and the Kochi Prefectural government awarded the 2002

Eco-Industry Award to the products in 2002. The dry system is primarily marketed in Japan, and has

yet to reach the East Asian market. However, some Japanese businesses are entering the region with

dry system products, anticipating tighter environmental regulations in East Asia. Export results are

being established for such companies in Chinese Taipei and Indonesia.

Faced with rising technological standards of South Korean / Taiwanese manufacturers (for grinding

machinery) and Chinese manufacturers (for abrasive materials), we plan to reinforce our

competitiveness through giving added value to products.

5. Outlook Our customers are mainly metal processors / manufacturers (utensils). East Asia is home to many

subcontractors in this field, and its market is set to expand. Key sales markets at present are China,

Thailand, Indonesia, etc., while increasing market development is anticipated in Vietnam, the

Philippines and inland China, prompting export promotion to such regions. As a way of promoting

exports, we are also considering to develop Chinese subcontractors and export products directly

from the Chinese bases.

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Japan

Name Kazuma Co., Ltd. (Fukui Prefecture)

Business Secondary textile products (curtains)

Employees 100

Overseas Network China

URL

1. Evaluation of East Asia The investment in China was made to achieve the immediate effect of enhancing the product lineup for the Japanese market, with the long-term goal of supplying the Chinese, European and US markets. A sweeping trend of housing investments in China is expanding demands for home-related products. In this sense, we find China a very attractive sales market. 2. Operations in East Asia Exclusive homes are selling like hotcakes in China, fanning the sales of home decorator products including furniture. The trend demonstrates the significant presence of consumers willing to pay extra for trendy items and exclusive products with added value. We receive numerous inquiries about our exclusive range of curtains, with Chinese buyers traveling all the way to Fukui for procurement. However, China's property investments seem overheated, causing an economic bubble. Trade shows are used to sell products in China. Chinese trade shows attract buyers from Europe and North America, and create a rare opportunity to market our products worldwide. We have sold to Europe, North America and Turkey via China. 3. Benefits/Risks in East Asia Chinese workers on the production frontline are industrious and enthusiastic. Value-added products that require intricate processing will be manufactured in China Holding the key for success is to gather and educate good human resources for middle management positions. We have employed a system that allows us to directly and constantly monitor and manage production / product quality at Chinese bases while sitting at the Japanese head office via the Internet.

4. Competitiveness Issues Curtains can be described as "home fashion". It is troublesome to switch wall papers frequently, but curtains can be changed relatively easily. We hope curtains will turn into a fashion item, which people change several times a year or each season to transform the home's atmosphere. To this end, we must maintain price-competitiveness and enhance the product lineup.

8

Japan

Name Environmental Technology Service Co.,Ltd. (Fukuoka Prefecture)

Business Environmental consulting (research, analysis, environmental design, etc.)

Employees 72 (58 engineers, 6 administration staff, and 8 others)

Overseas Network China

URL http://www.kan-tec.co.jp

1. Evaluation of East Asia In order to expand the environmental business market, it is essential to enter into overseas operations.

Due to cost and time issues, business fields / models for success are restricted, to some extent, to

those in South Korea, China (Shanghai) and Chinese Taipei. Shanghai is defined as the initial

footstep for full-scale entry to the Chinese market.

2. Operations in East Asia In October, an operational and technological partnership was formally established with a South

Korean company engaging in incinerator design / manufacturing in Pusan. We will transfer

counter-dioxin technology and evaluation technology in the forms of dispatching Japanese engineers

to South Korea and providing employee education / training in Japan.

3. Benefits/Risks in East Asia Environmental consulting business is difficult to operate in China, which has a strongly

material-oriented society. Environmental business works alongside laws and regulations, and

somewhat relies on government administration for business needs. One of the structural problems is

that it is cheaper for local businesses to pay fines than take environmental measures. Yet, China's

actively pursuing the policy of switching from coal to oil as fuel, and addressing water

contamination / auto emission issues. This raises our expectation that the demands for the

environmental industry are set to grow.

4. Competitiveness Issues The first challenge is to explore new business opportunities to gain advance profits, while the second

challenge is to take advantage of international standards in foreign trade in this age of environment

as a way of reinforcing competitiveness. For example, ISO17025 should be obtained for use in

operations such as environmental inspections in China and other economies.

We also want to compile a database of overseas expansion know-hows (contracts, expansion means,

9

product packaging). Such a database will facilitate specific business negotiations. External support is

necessary, particularly in the area of contracts.

5. Outlook We will continue to seek business expansion in South Korea, Chinese Taipei and China. Overseas

operations are difficult to manage on our own, and it is our next task to find a reliable local partner.

Sales approaches will be made to Japanese companies based in China. They must comply with

tighter environmental requirements, imposed by local authorities, thus creating business

opportunities for us.

10

Japan

Name Shikoku Kakoki Co., Ltd. (Tokushima Prefecture)

Business Filling / packaging machinery, packaging materials, manufacturing /

marketing of soy-based foods (Tofu)

Employees 632

Overseas Network China

URL http://www.shikoku-kakoki.co.jp

1. Evaluation of East Asia We have three pillars in our business operations; packaging materials such as food containers and packaging films, filling / packaging machinery mainly designed for liquid foods, and manufacturing / marketing of soy-based foods. In the primary area of filling machinery, our gable-top filling machines are the world's fastest, and the company has also established a unique position in the domestic and international markets for aseptic filling technologies. The food processing department, taking advantage of the in-house technologies for filling machinery and aseptic filling, has the economy's largest-scale Tofu manufacturing / marketing operations under the brand name "Sato no Yuki". Filling machines are marketed in East Asia, mainly in the Chinese market, which is considered as highly promising due to the economy's rising household incomes and resulting diversification of food cultures there. 2. Operations in East Asia A quarter of the filling machines manufactured in Japan are exported, with export destinations covering around 40 economies in total, including Europe, North America and East Asia. Products for the Chinese market are manufactured at and marketed from the local factory, which is actively exploring the growing market. In 1995, a subsidiary was established in Shanghai with the capital of US$3.89M. The move was designed to produce parts in China for reverse-importing back into Japan, and to take advantage of the mid- to long-term projected growth of China's domestic market. The subsidiary began manufacturing filling machines for gable-top paper receptacles and plastic cups for desert items in 1998 for shipment to the local market. So far, a total of over 100 units have been sold. Use of paper receptacles in China is growing, as the government begins promoting milk consumption in school lunches, and with the emergence of traditional liquor sold in paper containers.

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3. Benefits/Risks in East Asia We probably would have been able to garner the Chinese market to a certain extent through exportation, even without establishing the local plant. However, having an operation base locally and marketing products there have helped us gather first-hand information on the market. As for marketing in East Asia, trade shows have been used in conjunction with local sales agents. In China, we are putting emphasis on the packaging industry's trade show "Propack China" in Shanghai, and made an exhibition on the largest scale at the show held in September 2003. Our main task in doing business in East Asia is to raise the local content, as majority of filling machine components are currently brought in from Japan. Although some point to the payment collection issue present in China, we have always demanded advance payments and thus never experienced any serious collection problems. 4. Competitiveness Issues We plan to market the aseptic filling system in East Asia. Tetra Pack company of Sweden has already captured the market with its aseptic filling system ahead of competitors, and we will be a newcomer in the market. Our aseptic filling system was well received at Propack China, with some products already exported to China. In developing economies where cool distribution chains are underdeveloped, there is a strong need for aseptic paper packaging that maintains food quality for long hours at room temperature. The market for such products is projected to grow significantly. This follows a similar logic to mobile phones proliferating faster than fixed phones in developing economies. Our product development function will be also reinforced in the Chinese operation. Since filling machines are tailor-made to the needs of individual customers, they typically have a very high cost associated with design preparation. Reinforcing this aspect of the operation in China is believed to cut costs effectively. At present, some staff at the Chinese plant are brought to Japan for one-year training to develop human resources. In the future, the Chinese subsidiary will also cover the three main business areas of the Japanese parent company, i.e. filling machinery, packaging materials and food processing. 5. Outlook China, India and South East Asia, with projected market growth, will be defined as the focal market and be subject to sales promotion. The Chinese plant should be developed as the export base for the East Asian market.

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Japan

Name Taiko Kikai Industries Co., Ltd. (Yamaguchi Prefecture)

Business Various (Rotor screw, centrifugal, gear) pumps, blowers, screw vacuum

pumps

Designing / manufacturing / marketing of marine pollution prevention

equipment (Sewage Treatment Plant, Oily Water Separator)

Employees 284

Overseas Network China

URL http://www.taiko-kk.com

1. Evaluation of East Asia With belief that manufacturers' fate rests on how deeply we can penetrate China's huge market, we

have established Chinese operations for many years, starting from the 1986 technological provision

and business partnership.

2. Operations in East Asia Vacuum technology is a basic technology with broad applications, including industrial machinery as

well as the field of environmental conservation. Efforts are underway to proliferate our unique screw

vacuum pumps and other products to Chinese Taipei, South Korea and China. We are not only

forging a joint venture with a Chinese company, but also making capital investments in the region,

with the immediate task being establishing a solid operation base for future expansion.

We have established the cycle of manufacturing / marketing products in China, and re-investing

profits there. Overseas success is difficult to attain without a firm sense of purpose. In China, market

prices are tumbling, forcing manufacturers to gain price competitiveness for survival. Our business

resources, including the product lineup at the core, will continue to be injected into the Chinese

market. Incidentally, products are exported to South Korea and Chinese Taipei from the Port of

Shimonoseki.

3. Benefits/Risks in East Asia

The primary factor of our success was the move to bring in latest equipment to the Chinese operation

base to gain the business edge. We commenced service operations ahead of others, and had no

competitors for the initial five years. Another success factor would be to have conducted sales

operations locally, and made full-scale efforts to proliferate the TAIKO brand in the market.

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Problems we have experienced include the high cost of depreciating expensive Japan-made tools /

machinery and leasehold. There was also difficulty in maintaining the quality level, which made it

necessary to permanently station 4 to 5 Japanese staff members with high labor costs.

Significant damage was also suffered due to trademark infringement involving a paper company.

Product piracy is a matter of daily occurrence. Another problem is payment collection. Utmost

caution is required in all transactions. It is also important to maintain good communication with

administrative authorities of the economy, provinces and municipalities.

4. Competitiveness Issues Since China is a high growth market, we must constantly maintain competitiveness in both goods

and services. In addition to continuously maintaining competitiveness in quality, delivery time and

cost, the company must make multilateral, flexible and brave responses to difficulties associated

with piracies, payment collection, price war and localization (hiring local staff).

The system of Japanese expatriates holding all authorities does not agree with the local culture. A

new type of business management is needed, including the promotion of business localization.

5. Outlook The immediate task is to put the operation of the self-capitalized subsidy on track at an early stage. It

is therefore important and urgently needed to build / develop sales channels, while also paying

attention to manufacturing and brand proliferation.

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Japan

Name Tokai Kagu Kogyo Co.,Ltd (Shizuoka Prefecture)

Business Wooden furniture manufacturing

Employees 870 (120 in Japan and 750 overseas)

Overseas Network Indonesia

URL http://www.tokaikagu.co.jp

1. Evaluation of East Asia Indonesia offers cheap labor and wooden resources in abundance, and is therefore an ideal location

for furniture manufacturing. The economy was also once a Dutch colony, and has a touch of

European taste in design and engraving technologies.

2. Operations in East Asia Two factories in Indonesia manufacture furniture and other wooden products. Around half of locally

produced goods are exported to Japan, and the rest are shipped to Europe, United States and other

Asian economies (South Korea, Singapore, etc.). We also supply wooden parts to Japanese

manufacturers based in Indonesia.

3. Benefits/Risks in East Asia Exporting furniture from Japan is impractical due to cost constraints. Establishing a production base

in Indonesia has enabled us to reach the European, US and Asian markets. Being an SME, we do not

have enough resources to expand into more than one economy. Indonesia's political situation and

currency exchange fluctuations are our risk factors. The current appreciation of the Indonesian

rupiah is creating a problem.

4. Competitiveness Issues It is important to maintain a high quality standard. It has been 30 years since we established the

Indonesian operation, and we have consistently strived to maintain product quality at the highest

level. Local factories have two Japanese expatriates each, keeping an eye on quality and

manufacturing technologies.

5. Outlook We want to increase exports to high-growth areas of Asia, but exchange rate stability and

underdeveloped distribution networks would be our challenges. It is easy to steal furniture designs,

and we therefore must seek protection of intellectual property rights. The Japanese furniture market

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was once more export oriented, as seen in the attempt to exhibit traditional dressing tables from

Shizuoka at the Paris Expo. We will be making a more active campaign to approach overseas

markets.

16

Japan

Name TOWA Industrial Co.,Ltd. (Niigata Prefecture)

Business Precision parts manufacturing

Employees 421(100 in Japan, 420 in Vietnam and 1 in China)

Overseas Network Vietnam and China

URL http://www.towa-mfg.co.jp/j-index.htm

1. Evaluation of East Asia Since its establishment, TOWA has manufactured bobbin cases for sewing machines, boasting over

60% market share in the world and over 90% share in Japan. We have also conducted precision

machinery processing, including automotive parts, since the 1980s. North America and South Korea

were our primary export destinations a decade ago, but today, TOWA products are exported to 90

economies around the world. Over the last 3 to 4 years, strong demand has come from China, which

now accounts for over 50% of international sales. Expectations are high for the Chinese market,

which is set to expand even further.

2. Operations in East Asia TOWA established a subsidiary in Vietnam in 1996, shifting the manufacturing base as a

countermeasure for the rapid appreciation of the Japanese currency at the time. It was a move to

establish a processing and exporting base for the Japanese market, rather than to explore the local

market. The ratio of offshore production for mass production products has been gradually increased

to reduce costs, as the company utilizes its processing technology, nurtured through bobbin case

manufacturing, to commence processing of precision machinery for areas other than the sewing

machine sector.

3. Benefits/Risks in East Asia We considered establishing a production base in China initially. However, the economy's regulations

on foreign capital proved to be too high a hurdle for an SME like TOWA to clear. Vietnam surfaced

as an alternative. Tax incentives in the Special Export Processing Zone and the absence of tight

restrictions on importation have convinced us that the economy has a favorable investment

environment. The strong yen at the time also enabled procurement of manufacturing machines at a

low cost.

Employees are generally well educated and excellently qualified, with many offering technical skills.

However, a cautious approach is taken in technological transfer. We started with training them for

17

manual work at assembly lines, and have slowly raised their skill levels as they clear each stage

successfully.

4. Competitiveness Issues The expanding Chinese market is emerging as the world's largest customer and the benchmark for

international prices. Customers are now choosing suppliers after comparing prices with equivalent

Chinese products. The Vietnamese plant started off with just 30 workers, but has since undergone

production line expansion twice to be manned by 420 workers today. We have cut costs to maintain

price competitiveness, while working toward improving product quality at the same time. Japanese

technology is applied in the final stage of production, including polishing and inspection, for this

purpose. Imitations are the problem that cannot be ignored, putting pressure on our market share. As

a way of strengthening the management, we will work toward securing human resources with

management know-how.

5. Outlook Currently, Vietnam is the only site of our offshore production. However, a Shanghai representative

office has been opened to analyze the promising Chinese market and explore potential sites for new

production bases.

18

Japan

Name Hokiyama Cutlery Co., Ltd. (Kochi Prefecture)

Business Cutlery manufacturing / marketing

Employees 40

Overseas Network China

URL http://www.hokiyama.com

1. Evaluation of East Asia Hokiyama has a factory in China, which is highly attractive as a production base offering an

abundance of cheap labor. We believe our profitability can be reinforced through using the Chinese

plant and expanding our operation internationally.

2. Operations in East Asia We set up a joint venture in 1992 (240 million yen in capital) on the outskirts of Nanjing, China,

with a local cutlery manufacturer, and launched cutlery production there in 1994. Semi-finished and

finished goods are exported to Japan for final finishing touch, and then distributed to Home Depots

and supermarkets. Some are even exported to South Korea. The Chinese plant developed a

technology of producing a composite material combining iron and steel, and is marketing this

material also within China.

We decided to establish a production base in China due to the notable decline in the number of

skilled cutlery craftspersons, difficulty in finding persons willing to inherit such skills, and continued

aging of existing skilled workers in Japan. Kochi Prefecture had 1,107 cutlery craftspersons in 1965,

but the number tumbled to 510 by 1990. Today, 37% of our products are produced in China, and

shipped to Japan in containers. The ratio of offshore production is expected to grow into the future.

Raw materials were initially supplied from Japan, but 100% local content was achieved in around

1997.

3. Benefits/Risks in East Asia We were the first in the Japanese cutlery industry to expand to China. If it had not been for the

decision, we would have had to scale down our operation according to the decline in cutlery

production in the Tosa region.

At the same time, we experienced hardships because of our expansion to China. The joint venture

format was initially chosen due to the pressure from the Chinese government to avert 100%

19

capitalization. However, the local venture partner went bankrupt in 1996 after failing to achieve

management innovation in the process of adapting to the open economy. This forced us to buy out

the partner's equity, causing an unexpected need to raise funds. Yet, acquiring 100% equity in the

business has enabled swifter decision-making. The Chinese subsidiary remained in the red until 1998,

but turned profitable in 1999. Now, the business has recovered to a point where it clears the

accumulated debts and starts paying shareholder dividends. The effect of "planned economy", China

workers initially had low awareness in quality control. However, people's mentality on quality

control has been undergoing transformation in the past 2 to 3 years.

4. Competitiveness Issues Recently, the Chinese market has seen increased competition from cutlery manufacturers from

Chinese Taipei, as well as emerging local manufacturers. In order to absorb demand fluctuations, we

are now nurturing local subcontractors. In terms of sales, payment collections poses a difficult

problem in China's domestic sales, but a growing number of high income earners there are making

the market increasingly more attractive. For this reason, we are planning to start consumer marketing

in the economy.

In order to avoid being drawn into a price war with Chinese competitors, it is important to maintain

competitiveness through producing value-added products such as knives with engraved blades (e.g.

Damascus knives), and enhancing quality control / productivity.

5. Outlook We plan to promote an industrial complex project at the site of our Chinese plant, providing

miscellaneous services to SMEs in Tosa trying to enter the Chinese market. The scope of services

include leasing the land of the Chinese plant compound, providing advice on entry procedures /

employment / material procurement / export procedures, etc., and sharing shipment containers sent

to Japan each month. We are also considering subcontracting production for companies wishing to

utilize China's advantages on a tighter budget.

20

Japan

Name Company Ａ

Business Manufacturing (manufacturing / marketing of bamboo skewers, bamboo

chopsticks, toothpicks, etc.)

Employees 8 in Japan and 800 in China

Overseas Network China (5 locations mainly in Fujian and Zhejiang provinces)

URL

1. Evaluation of East Asia The company A has the top market share in bamboo skewer sales in Japan, and is using Chinese

subcontractors. This is due to the availability of cheap labor in China, bolstered by labor dispatch

services even inviting regional workers to coastal provinces for placement. The cost of Chinese labor

is still decreasing, although this does not apply to wages of managerial level workers.

2. Operations in East Asia Established in 1940, we started off manufacturing bamboo-made handbags and exporting them to the

United States. Faced with the intensifying competition with products from Chinese Taipei in the U.S.

market, and in response to the boom of Yakitori (grilled chicken pieces on skewer) in Japan, we

switched the main line of product to bamboo skewers. We began importing semi-finished products

from Chinese Taipei in 1964, and established a factory there in 1983 to produce finished goods and

export them to Japan.

In a bid to enhance cost competitiveness, starting the 1970s, 15 years of time was spent to select

subcontractors in China, where labor cost is even lower. The company president himself traveled

across China for the selection. Subcontracted production in China began in 1988, and five Chinese

factories (in Fujian, Zhejiang, etc.) are now listed as partner plants, producing most of the finished

goods (bamboo skewers, bamboo chopsticks, toothpicks, etc.) marketed in Japan (Chinese Taipei

operation was withdrawn in 1999). Factory seconds that cannot be sold in Japan are sold to local

Chinese factories. Such products are sold on the basis of availability, and there is no plan of

expanding such sales in the future.

Almost no production activities take place at the Japanese head office, where eight people are

employed. Their main duties include taking orders, packing and shipping products.

21

3. Benefits/Risks in East Asia Our factor for success was how we worked together with the Chinese Taipei company to select two

Chinese subcontractors. People of Chinese Taipei understand their language and culture, and excel in

controlling Chinese workers. Another factor is our competitive edge in "prices, quality and swift

delivery".

On the other hand, the Chinese operation has the risk / problem of future unpredictability, including

natural disasters. We have ensuring risk distribution through dispersing production bases, trading

ports, distribution warehouses both in China and Japan.

4. Competitiveness Issues There is no particular challenge for A. However, in doing business in China, it is important to (1)

distribute risks (already addressed), (2) introduce factory automation at Chinese plants to cut costs

(already addressed) and (3) send a Japanese person fluent in Chinese (in the case of the company A,

the president's son) to constantly provide guidance and checks on local operations.

5. Outlook While China remains our primary production base for bamboo skewers, etc., we are exploring new

subcontractors in economies other than China. Another project under consideration is having a

Chinese subcontractor produce construction-related products and marketing them in Japan.

22

China

Name Hangzhou Initial Development Co., Ltd.

Business Apparel (ties, women’s clothes, bedding)

Employees 300

Overseas Network

URL http://initial.en.alibaba.com

1. Evaluation of East Asia Even though the Japanese economy has remained stagnant for almost ten years, Japan is the second

largest market in the world and the biggest market for our company. Although we are cooperating to

some extent with East Asian companies in upstream fields (raw materials and fabrics), downstream

companies are rivals. Purchasing power in East Asian markets other than Japan is about the same

level as that of China, so the market potential has yet to be developed.

2. Operations in East Asia We are developing new, private-brand products. We launched an original brand of women’s clothes

in 2002. The products are sold in department stores in 42 locations across China. We participate in

exhibitions and fairs in Japan to get new customers. We plan to find a distributor or agency to

specialize in selling our brands. We are also setting up a new production facility outfitted with new

tooling and equipment to handle work that had been outsourced.

3. Benefits/Risks in East Asia Several years ago we did business with an East Asian company. Since business practices in Japan

differ so greatly from ours, it has been difficult for us to find business partners there.

4. Competitiveness Issues We want to find new customers without using intermediaries or agents. Also, we want to retire

obsolete equipment, as the production facility will use new tooling.

5. Outlook We hope to set up a sales office in Tokyo to attract more customers no later than 2005.

23

China

Name Shanghai JT-Omron Software Co., Ltd.

Business Software

Employees 240

Overseas Network Japan

URL http:www.jtomron.com

1. Evaluation of East Asia Japan is our main market, so we specialize in foreign-oriented software development targeting

Japan.

2. Operations in East Asia Since the software market in China is still small, we continue to focus on the Japanese market, while

keeping an eye on the future growth of the Chinese market. Almost all new employees are

encouraged to improve their Japanese proficiency through six months of Japanese lessons.

3. Benefits/Risks in East Asia We encounter difficulties in collecting receivables from local Chinese companies, but we do not

have that problem with Japanese companies and can trade with them without any such concern.

4. Competitiveness Issues We want to obtain steady repeat customers, to enable use to further stabilize our business, improve

employee skills and increase both sales and staff size.

5. Outlook We intend to continue tailoring our business for Japanese companies.

24

Hong Kong, China

Name Hong Kong Small and Medium Enterprises Association

Business Manufacturers’ association

Members Around 800 SMEs operating in China

Overseas Network

URL http://hksmea.asiansources.com

1. Evaluation of East Asia At present, there is no advantage for SMEs to invest in China. However, the Chinese market has

great potential for future development. Many SMEs regard investment in China as a long-term goal.

2. Operations in East Asia We help members negotiate with Chinese customs and trade inspection authorities if problems occur.

We also provide assistance in preparing documents and applications under the Closer Economic

Partnership Agreement (CEPA) and negotiating with Chinese authorities if problems occur

thereafter.

3. Markets Where Members Are Active

Brun

ei

Chin

a

Hong

Kong

China

Indonesi

a Japan

South

Korea

Malaysi

a

Philippi

nes

Singapor

e Thailand

Vietna

m

0 800 0 0 0 0 0 0 0 0 0

4. Benefits/Risks in East Asia Collecting payments from customers in China is difficult. If a customer is reluctant to make payment,

the legal proceedings are complicated. The interpretation and implementation of laws can vary from

one local government to the next. New market development in China is also difficult. Although

China is a big market, there is a huge number of small enterprises, so extra effort is necessary for

sales. For example, if you want to introduce a new product to the U.S. market, you only need to sell

it to one or two large national department stores, which then distribute the product throughout the

economy. However, the same thing cannot happen in China. The problem of piracy is also extremely

serious. According to our members, once new products are brought into the market, they are copied

by local companies right away. In the past, about 400 members went under due to the loss of profits

caused by piracy.

25

5. Competitiveness Issues

Piracy is a serious problem. People buy counterfeits since they are priced lower. This inhibits foreign

investment. This problem cannot be solved by SMEs alone. Remedying this situation is a major

issue.

6. Outlook The CEPA mostly benefits hi-tech brand products, but not mass-produced items. SME light

manufacturers supplying low-end products in China and Southeast Asia seldom benefit from

preferential policies. It is impossible for enterprises to move their production operations back to

Hong Kong China under the CEPA. After becoming a member of WTO, China is expected to

establish a reliable and fair legal system.

26

Hong Kong, China

Name Federation of Hong Kong Industries

Business Manufacturing and service industries

Members About 3,000

Overseas Network

URL http://www.fhki.org.hk

1. Evaluation of East Asia East Asia is recognized as a production base for Europe and the U.S. rather than as a market.

2. Operations in East Asia We are providing the following services for our affiliated companies:

・Quality control consulting services

・Quality verification services

・Discussion, induction and training courses

・Consultation on intellectual property rights

・Research into government policies and law related to trade

・Reporting to the government as a representative of affiliated companies

・Producing publications introducing industrial development and new industrial technology

3. Benefits/Risks in East Asia Administrative procedures are complicated in East Asia. In the case of China, investors will

encounter tangled bureaucratic application procedures including those for customs and the business

license. The standards for product inspection are also overly strict. Some companies have been

bankrupted due to failure of the inspection.

4. Competitiveness Issues

We are having discussions with the Chinese Government to put the issues related to investment and

customs in order, and to ask for modifications to problematic systems and the rules concerning the

application of laws.

We also introduce the updated government policies and regulations to affiliated companies through

symposiums and exchange meetings where Chinese customs officers instruct at our request. This is

an opportunity for companies to get their thoughts and dissatisfaction across to Chinese officers

directly.

27

5. Outlook The CEPA (Closer Economic Partnership Agreement) of Hong Kong China and China is not really

helpful to small and medium sized companies and low-end industries. However, the CEPA is

advantageous to high-end industries including those dealing in jewels and watches. For low-end

industries, the production costs in Hong Kong China are too high.

Now that China has become a member of the WTO, the barriers to trade and investment between

China, Europe and the U.S. will be cleared away and the importance of Zhu Jiang Delta as a

production base will be enhanced. This may also increase investment in the area.

We hope that the Chinese market will become more open because currently there are too many

regulations. For example, domestic manufacturers can sell their products freely while foreign

manufacturers can’t sell their products easily. We expect that the CEPA will provide a better

investment environment for our affiliated companies and we believe that the number of affiliated

companies which develop their businesses in Zhu Jiang Delta will increase.

28

Hong Kong, China

Name Silicone Zone International Limited

Business Manufacture of plastic house ware

Employees

Overseas Network U.S., Japan

URL http://www.siliconezone.com

1. Evaluation of East Asia Real estate and labor costs are inexpensive.

2. Operations in East Asia Although we currently have one factory in Shenzhen, we have not begun sales in China. Our main

export markets are Japan, the U.S. and Europe. The consumption patterns in China are different from

those of other economies. Chinese consumers mainly focus on the price – the cheaper the better –

regardless of design or quality. This makes our products unsuitable for the Chinese market.

The Japanese market is mature. We have one production base in Seki, Gifu Prefecture. We chose

this location because we already had a business partner there. The production center there was also

fully equipped, making the manufacturing process smoother. We hope to eventually cater more to

the local market in Gifu.

3. Benefits/Risks in East Asia The economic and educational levels in China differ from those in Hong Kong China and other

economies. This makes it difficult to develop business in China. When problems occur, how officials

respond varies depending on the locality. This further contributes to the difficulty of doing business

there.

4. Competitiveness Issues Our strongest rival is Europe. In order to strengthen our competitiveness, we must introduce

innovative and fresh designs. Our other rival is ourselves. We stress product development. The belief

that the quality of products made in mainland China is poor is inaccurate. China offers inexpensive

land and labor. We take advantage of this and are able to invest the savings on improved production

technology. This would be impossible to do in the U.S. or Europe.

29

5. Outlook We have been exporting all of our products but we plan to start sales in China and Hong Kong China

in two years. Discrepancies between the consumption patterns in mainland China and other

economies have begun to narrow. We will target China’s main cities along coastal areas such as

Beijing, Shanghai and Wenzhou. We also plan to expand our product line to include furniture.

The Closer Economic Partnership Agreement (CEPA) does not help Hong Kong China SMEs with

factories on the mainland. CEPA assists enterprises with 90% of their manufacturing process in

Hong Kong China. We are hoping for similar agreements that will benefit SMEs.

30

South Korea

Name Small Business Corporation

Business Governmental organization supporting smaller enterprises

Members

Overseas Network Japan, China, U.S., Germany

URL http://www.sbc.or.kr

1. Evaluation of East Asia. We believe that the ASEAN and Chinese markets will become closely integrated. SARS briefly

interrupted this process, but ASEAN esonomies are already recovering from the negative impact.

The ASEAN markets are smaller than China’s, but the potential of the ASEAN esonomies must be

considered as seriously as that of the Chinese market. The ASEAN region encompasses a population

of 500 million and contains rich, natural resources. We expect Vietnam to aggressively seek foreign

investment by emphasizing political stability. The economies of Thailand and Malaysia are

recovering rapidly and Indonesia’s abundant natural resources are attractive, despite the economy’s

current social unrest.

2. Operations in East Asia We encourage foreign direct investment in ASEAN esonomies by small South Korean enterprises to

expand the transfer of technical skills and to secure new markets. We hope to achieve this through

the dispatch of experts specialized in market development and industrial cooperation.

3. Markets Where Members Are Active

Sri

Lank

a

China

Hong

Kong

China

Indonesi

a Japan India

Malaysi

a

Philippi

nes

Singapo

re

Chinese

Taipei

Thaila

nd

Vietna

m

FY1998 7 210 6 9 12 4 12 6 1 5 4 6

FY1999 6 335 22 20 14 2 9 12 9 3 9 13

FY2000 3 654 62 42 100 4 16 15 12 10 14 24

FY2001 2 799 36 45 85 10 15 15 12 7 16 44

FY2002 2 1,035 48 40 59 7 11 29 7 7 23 88

FY2003 1 440 15 10 21 4 4 4 3 2 11 25

31

4. Benefits/Risks in East Asia Business activity is hindered by a lack of transparency, political and social unrest, competition

among esonomies, interference of governments and opportunism by public officials.

5. Competitiveness Issues We need well-organized technological innovation to develop competitive, value-added products.

Markets can be developed through strong marketing and business activities. Market strategies should

include the strengthening of local production systems.

6. Outlook We must expand local production systems and learn how to make business and manufacturing

activities more efficient. This will strengthen competitiveness and strategic partnerships among

enterprises. We predict that the ASEAN region and the rest of East Asia will grow into the largest

economic zone in the world, exceeding both the Americas and Europe.

32

Chinese Taipei

Name Taiwan Electrical and Electronic Manufacturers’ Association

Business Electronics and electrical industry association

Members 4,200 (SMEs: 3,000)

Overseas Network Japan

URL http://www.teema.org.tw

1. Evaluation of East Asia We view the ASEAN region as an export base . Our export markets are the U.S. and Europe.

Singapore functions as the base of product distribution and China is a “world factory” with low labor

costs and market potential.

2. Operations in East Asia We assist our members by:

• Dispatching missions to exhibitions and shows in 30 economies every year,

• Exploring trade opportunities with foreign enterprises through five exhibitions in Chinese

Taipei,

• Matching foreign enterprises and Chinese Taipei enterprises,

• Collaborating with SMEs to make investment capital available for joint R&D projects, and

• Providing market information.

3. Markets Where Members Are Active

Brun

ei China

Hong

Kong

China

Indonesi

a Japan

South

Korea

Malaysi

a

Philippi

nes

Singapor

e Thailand

Vietna

m

0 3,000 300 0 1-2 50-60 10 1-2 20

4. Benefits/Risks in East Asia The advantages are low labor costs, the availability of land for the construction of factories,

the Chinese government’s preferential tax policies and business infrastructure, and the ability of

industry to obtain necessary parts and equipment.

5. Competitiveness Issues We enjoy technical cooperation with Japanese enterprises. We are also building up relationships

with the economy’s seven electrical and electronics associations.

33

6. Outlook We have great expectations for the development of the Shanghai region as a market. Guangdong

province serves as a hub for SMEs that focus mainly on exports.

34

Chinese Taipei

Name Chin-Poon Industrial Co., Ltd.

Business Manufacture of electronic components (printed boards)

Employees 2,200 in Chinese Taipei, 1,200 in China and 500 in Thailand

Overseas Network China and Thailand

URL http://www.cppcb.com.tw

1. Evaluation of East Asia The challenge for us is to reduce production costs in labor-intensive industries.

2. Operations in East Asia Printed boards manufactured in Chinese Taipei, China and Thailand are not standardized. Advanced

multi-layered printed boards are produced in Chinese Taipei. Since the Chinese economy is

developing rapidly and competition is vigorous, returns on investment must be made within a short

period of time.

3. Benefits/Risks in East Asia Competitiveness has improved due to low labor costs. Capable human resources are available in

Shanghai. The availability of information and after-services is convenient. However, business in

China is difficult. Due to various charges and taxes, costs are higher than in Chinese Taipei. Also, an

additional 17% in allowances must be paid to workers. Compared with Thailand, this labor cost is

higher.

4. Competitiveness Issues Procuring cheap materials is an issue. Labor accounts for 12%-15% of the total cost of production.

5. Outlook The technological levels of SMEs in Japan and Chinese Taipei are almost the same, but the cost

competitiveness of SMEs in Chinese Taipei is stronger. Our main competitors are Taiwanese

enterprises and local enterprises in China.

35

Chinese Taipei

Name JyeTai Precision Industrial Co., Ltd.

Business Manufacture of electronic components (connectors, remote controls, etc.)

Employees 120 in Chinese Taipei, 400 in Malaysia and 1,450 in three Chinese factories

Overseas Network Manufacturing – Malaysia and China; Office – Hong Kong China

URL http://web.jyetai.com.tw

1. Evaluation of East Asia A good relationship with customers is important to get up to date and useful business information.

Labor costs are high in Chinese Taipei. More production needs to be moved to China where labor is

cheap and plentiful.

2. Operations in East Asia Singapore and Hong Kong China are established IPO hubs and Shanghai is also moving in this

direction.

Products for both export and the domestic market are being manufactured in Suzhou. Dongguan

serves as a center of consignment manufacturing.

We are a parts manufacturer. Materials such as molds are procured locally. Special components such

as end terminals and ports are produced in Chinese Taipei and then shipped to factories in China.

3. Benefits/Risks in East Asia Since making inroads into China and Malaysia, business in these markets has flourished. We are a

medium-sized firm in Chinese Taipei but we have a large presence in China and Malaysia, a status

that is unattainable in Chinese Taipei. We face cutthroat competition. Profits were initially high but

are gradually decreasing because our products have been copied by local companies with much

lower production costs. Losing the price war means our products will be displaced by local ones.

4. Competitiveness Issues Stable procurements of raw materials and low-cost land are important. Since land prices and taxes in

Shenzhen are expensive, we have moved to its neighbor city, Dongguan. Moving into manufacturing

sites at an early stage, when the infrastructure was neither fully in place nor fully utilized by other

manufacturers, has been important. We recently set up a third factory, this time in Wenzhou, China,

as part of our ongoing development of new products.

36

5. Outlook Fierce competition led to lower profits, but sales are now increasing and profits are returning. We

plan to enter related industries and expand our product lines. We are increasing investment in new

factories and facilities even though this will increase our risks. We will improve our parts

distribution system and move toward direct sales to broaden our market.

37

Singapore

Name Singapore Furniture Industries Council

Business Furniture manufacturing

Members 250 (SMEs: 99%)

Overseas Network

URL http://www.singaporefurniture.com

1. Evaluation of East Asia Singapore’s furniture industry was nurtured and developed as an export industry. When the cost of

production in Singapore rose 10 years ago, manufacturing operations began to be relocated outside

the economy. Companies set up factories in neighboring Malaysia or tied up with subcontractors. In

some cases, furniture is directly exported from the overseas factories. In other cases, products are

sent to Singapore for the domestic market or go through final processing in Singapore before being

exported. Major export markets are Japan, the U.S. and Europe.

Our member companies see China and ASEAN as separate markets. However, not many SMEs have

resources to set up manufacturing facilities both in ASEAN and China, so our member companies

are more interested in China than the ASEAN region.

Member companies are aware of the risk of concentrating assets in one economy. One member, a

manufacturer of teak furniture, started production in Myanmar because teak is abundant there, but

when exports from Myanmar were banned recently, the company was unable to export its furniture.

Many member companies are interested in China, but there are political and economic risks there,

too. But even if they want to avoid the risk of concentration, not many SMEs have sufficient

resources for multinational manufacturing bases.

Among the ASEAN economies, Vietnam draws the most attention. Vietnam is more politically

stable than China. However, the language barrier hinders business in Vietnam. Singaporeans can

speak Mandarin, so there is no language barrier in doing business in China, but not many

Singaporeans can speak Vietnamese.

2. Operations in East Asia We organize overseas missions and help members participate in overseas trade fairs. We also

organize the International Furniture Fair in Singapore. Last year, we sent missions to China and

38

Vietnam, and organized trade fair participation in Tokyo, Germany and Poland.

Despite a slowdown due to the SARS crisis in the first half of this year, missions were sent to the

U.S. and China and members participated in trade fairs in Tokyo and Germany.

More than ten members set up operations in the Singapore Furniture Industry Park in Kunshan,

China after we sent a mission there. Later, we facilitated negotiations with the Chinese government.

3. Markets Where Members Are Active

Brun

ei

Chin

a

Hong

Kong

China

Indonesi

a Japan

South

Korea

Malaysi

a

Philippi

nes

Chinese

Taipei Thailand

Vietna

m

N/A 14 N/A 6 N/A N/A 23 N/A 1 N/A 2

In addition to these, one company has set up a factory in Myanmar.

The above figures are for companies that have their own subsidiaries directly in the respective

economies (figures are taken from the membership directory). Many companies have subcontractors

overseas, but we have no data on these subcontractors. Including best estimates of these

subcontractors, more than 70% of our members have some sort of overseas production.

4. Benefits/Risks in East Asia Relocation of manufacturing overseas is unavoidable. However, it is true that there are political risks,

high infrastructure costs and problems with intellectual property rights. Infrastructure costs include

those for telecommunications. In China, infrastructure costs are not so high, but there are problems

with intellectual property.

5. Outlook Singapore has nurtured its furniture industry as an export industry. Though labor costs in Singapore

have risen and overseas production has increased, some companies continue to manufacture in

Singapore. The furniture industry is concentrated around the Sungei Kadut area. We are planning to

develop this area into a furniture industry hub.

Production will continue to be relocated overseas and Singapore’s role will shift to design and

marketing. Many companies are interested in China. China is not only a low-cost manufacturing

location, it is also expected to become a big market for furniture as the economy grows. Many

western manufacturers are already penetrating the Chinese market, so the competition will be severe.

The quality of Chinese furniture is not so high. Western manufacturers make high-quality,

39

high-priced furniture. Singaporean companies will target medium-range products.

The Singaporean furniture industry has a long relationship with Indonesia and its many

subcontractors. Indonesia’s domestic market, however, is not expected to grow.

Malaysia is the first place where many Singaporean furniture manufacturers started production. Most

Singaporean businesses are comfortable doing business in Malaysia and are not considering moving

their production operations to other economies.

40

Singapore

Name Singapore Manufacturers’ Federation(SMa)

Business Manufacturing trade association

Members 2,500 (SMEs: over 1,500)

Overseas Network No overseas office, but we collaborate with governments and chambers in

different economies

URL http://www.sci.org.sg/control.cfm

1. Evaluation of East Asia Many Singaporean SMEs begin as vendors to multinational companies and expand overseas as these

MNCs move into other East Asian markets. It is worthy to note that when they venture abroad, they

normally have secured business from an MNC whom they serve in Singapore. This is similar to

Japanese SMEs, who typically secure business from their Japanese customers when they venture

overseas. In industries where many MNCs are relocating, the SMEs have no choice but to follow

them.

Companies in the food manufacturing, electronics, precision parts, construction and textiles

industries have overseas operations. Companies with fewer overseas operations are in the chemicals

and pharmaceuticals industries. Singapore boasts a strong hub for petrochemicals at Jurong Island

where many large petrochemical plants are located, so many MNCs are still investing in this industry.

The pharmaceutical industry is also strong and has attracted many large companies in recent years.

Although many companies decided not to base all of their operations in China after the SARS crisis,

the economy continues to attract MNCs and cannot be ignored.

2. Operations in East Asia The Singapore Manufacturers’ Federation frequently dispatches and receives overseas missions. It

also organizes seminars for overseas missions. When seminars are held in conjunction with a visit

from an overseas mission, attendance tends to be very high because of the opportunity to speak with

potential overseas partners. More than 50% of the trade missions are to/from China. The success of

these missions is enhanced by the fact we share a common language.

3. Benefits/Risks in East Asia Although many companies venture abroad, some fail and must close down their overseas operations

due to reasons such as confusing legal systems, corruption or unexpectedly high operational costs.

41

Since Singapore’s market is small and most local MNCs have operations abroad, Singaporean SMEs

often have no choice but to go overseas.

4. Competitiveness Issues Companies need to differentiate their products as the quality of Chinese-made products is rapidly

improving. Singaporean companies may not always be able to provide better quality products than

China. Nevertheless, Chinese manufacturers cannot overwhelm Singaporean manufacturers. Chinese

companies, for example, have been unable to produce successful Southeast Asian food products.

Singaporean food manufacturers can thus be a leader in this field. For parts and components,

Singaporean companies still have the competitive edge. Consumers will always want a variety of

products.

42

Singapore

Name Abitex Design (S) Pte Ltd

Business Furniture manufacturing

Employees Singapore – 45

Malaysia - 60

China - 25

Overseas Network Kuala Lumpur and Kuching, Malaysia; Brunei and Shanghai, China

URL http://www.abitex.com.sg

1. Evaluation of East Asia From our main factory in Kuala Lumpur, we export to Europe, Japan and other economies. Abitex

has fewer Japanese customers than previously and the remaining Japanese customers buy fewer and

less expensive products than before. The European market accounts for 60% of our exports from

Kuala Lumpur, but the rate of growth is higher in Asia than in Europe. Abitex has customers in

Bangladesh and Sri Lanka. It also exports to Thailand’s high-end furniture market. We also have

customers in Hong Kong China, despite the availability of low-priced furniture from Shenzhen.

Even though the upper class accounts roughly for just one percent of the population in each economy,

the markets are considerable.

China is very important both as a production base and a market. For companies to survive over the

next 10 years, they must have a presence in China, yet currently not many Singaporean furniture

makers are operating in the economy. This is due to the difficulties of setting up a company in China,

where 100% foreign ownership had not been permitted. But thanks to China’s entry into the WTO

and the resulting deregulation gradually taking place, 100% ownership became possible in 2002,

opening the way for Abitex to set up a wholly owned factory.

2. Operations in East Asia Abitex makes contemporary-style fabric sofas. We have factories in Singapore, China and Malaysia

and sell directly to consumers and hotels. The Singapore factory caters only to the domestic market,

while the Shanghai factory recently opened. We intend to venture into the Shanghai retail market,

which is why we chose a nearby manufacturing base. Some manufacturers have closed down their

factories in Singapore and relocated all manufacturing overseas. In order to respond quickly to

clients, especially for projects such as hotels, we try to locate production facilities close by. The

Kuala Lumpur factory caters to both the domestic and export markets. Currently, about 40% of the

factory’s production is for the domestic market.

43

Designs are created in Singapore, but the manufacturing facility in China has local designers to

create products tailored to the local market.

Abitex has two showrooms in Singapore, three in Kuala Lumpur, a franchise store in Kuching,

Malaysia and a new franchise store in Brunei. There is no showroom in China, where business is

focused on projects such as hotels. Foreign businesses in China require a local partner to go into

retail. The Shanghai factory is expected to eventually export 70% of its production.

Abitex buys most of its fabrics for the Singapore and Malaysia factories from the U.S. and Europe.

Foams are procured locally. The company started procuring in China only after starting business

there.

3. Benefits/Risks in East Asia The benefits of doing business in East Asia, especially in China, are the low cost of labor, space and

raw materials. In China, however, it is difficult to find potential partners and the banking system is

inadequate. It is easy to send money into China, but difficult to bring it out.

4. Competitiveness Issues The key is to target the niche market. Many high-end furniture manufacturers have already started

operations in China. Abitex intends to target a different segment of the market, so we will likely face

quality competition from local manufacturers within five years. If that happens, it is important that

Singaporean companies in China be accorded the same status as domestic companies.

5. Outlook Abitex plans to strengthen its Chinese operations although there are no plans for another production

facility. Vietnam was a popular location before China. Some say that India might be the next big

market. India, however, is also very difficult to penetrate. It may take another generation for India to

become a popular investment destination.

The company also intends to expand its sales outlets in Malaysia, perhaps opening a shop in Penang.

There are a few more promising regions in Malaysia, such as the state of Sabah. Wealthy Bruneians

are known to visit Malaysia for shopping. Malaysia is an attractive retail market but Abitex does not

have any shops in Johor Bahru since they might take some customers away from the Singapore

shops.

44

Singapore

Name Company B

Business Electronics manufacturing

Employees 150

Overseas Network Johor Bahru, Malaysia and Shanghai, China

URL

1. Evaluation of East Asia We view China and ASEAN as separate markets. Setting up a production base and sales channel in

China makes sense in view of the huge potential market. However, it is prudent for companies to

spread the risk by not concentrating entirely in China.

We set up a second manufacturing facility in China to help foreign, especially Japanese, clients

penetrate the Chinese market. Foreign firms selling directly to China are subject to additional

barriers, since businesspeople without Chinese backgrounds can find it more difficult to do business

here than ethnic Chinese from overseas. A local partner can help foreign manufacturers avoid such

barriers. The same is true in Europe, where localization of manufacturing helps a firm to penetrate

more effectively.

2. Operations in East Asia Our Singapore headquarters, which handles sales and marketing and procurement, runs the

manufacturing facility in Shanghai. Malaysia, our first satellite manufacturing operation, is headed

by one of our three founders, who now lives there. We continue to source materials solely through

our Singapore procurement office, but are shifting procurement functions to China.

Instead of using representative offices, we sell directly from Singapore to customers, mainly in

China. We have a good customer base among Japanese companies operating in China and ship

directly to them from our factory in Shanghai.

3. Benefits/Risks in East Asia China is rich with opportunities, considering the size of its market. Shanghai is marginally cheaper

than Malaysia, but China contains hidden costs. Wages and other benefits are 45% higher in China.

Corruption is a serious issue in China, even today. The best approach is to minimize contact with

government officials. Still, many areas, such as transportation/logistics and banking, are up to par.

45

Although Shanghai has problems, it is still the key first point of entry into the high-tech world in

China, since the Shanghai-Pudong area has a high concentration of high-tech companies.

We set up our first factory in Johor, Malaysia. Many Singaporean companies open their first

overseas plants in Johor due to its proximity, common language and culture, and other favorable

factors.

4. Competitiveness Issues The challenge in maintaining a competitive edge is to integrate and tighten the supply chain.

Customers avoid dealing with too many segments of the supply chain, since doing so could slow

down an increasingly fast moving industry. While wages and engineering skills are still competitive

in Malaysia, Shanghai lags in terms of the overall strong corporate culture compared to that in

Singapore.

5. Outlook Given sufficient time over the next 10 years, China will be able to raise its technical skills and

ownership of technology in relation to Western manufacturers. The outlook is positive for China,

given the low cost structure and its ability to attract foreign investment.

46

Singapore

Name Company C

Business Textile manufacturing

Employees 250

Overseas Network

URL

1. Evaluation of East Asia China will grow rapidly with its vast markets and import opportunities for chemicals and dyes.

Chinese Taipei offers potential but is at risk of slowing down due to rising costs. South Korea is a

good source of yarn used as a raw material for textiles and garments.

2. Operations in East Asia Our main markets are in Malaysia. We sell garments from our office and factory in Singapore to

Hong Kong China, the Philippines, Brunei, Indonesia, Malaysia, Chinese Taipei, Thailand, Vietnam

and, to a lesser extent, China.

Singapore’s textile industry is a sunset industry, so we are trying to expand into other regions. We are

also expanding value-added operations, such as textile design. We sell directly to garment

manufacturers as well as to distributors and purchasers from various economies in the region.

3. Benefits/Risks in East Asia There are more risks than benefits associated with business in East Asia. The first concern is

occupational safety and asset security. Corruptions and collections are also concerns. Because of this,

we use only letters of credit for collection. The language barrier is another issue, particularly in

economies such as Vietnam. Most Southeast Asian economies, such as Malaysia, Indonesia and the

Philippines pose few problems. Companies should establish networks of domestic sales offices in the

economies where they sell.

We take these risks into account and seek advice from experienced business people, trade

associations and government officials when going into a new market. Despite all the risks and

problems, China offers an excellent business opportunity.

4. Competitiveness Issues Costs of operation in Singapore are high. Utilities are expensive and skilled labor benefits from

47

Singapore’s minimum wage laws.

The challenge lies in raising the quality of Singapore-made garments above competitive regional

levels while keeping prices competitive. We are making new synthetic fabrics to adapt to changing

fashion trends and tastes. But profit margins remain low, because the downstream garment industry

commands the highest margins.

48

Indonesia

Name Compartment Indonesian SMEs, Indonesian Chamber of

Commerce(KUKMI)

Business SME department of business association

Members 11

Overseas Network

URL

1. Evaluation of East Asia China is viewed as a separate market from ASEAN since the Chinese consumer market is tied

closely to Chinese culture and tradition. However, further market research will help us learn more

about potentially marketable goods. ASEAN and China offer different attractions, so many

companies maintain a business presence in both. SARS had a negative impact on the tourism

industry only.

2. Operations in East Asia We assist members in overcoming trade and bureaucratic difficulties. We offer training in

management, marketing and value-added production technology. Lecturers are usually hired locally

in Indonesia.

3. Benefits/Risks in East Asia Business within East Asia is feasible because of cultural similarities.

Collecting payment in this region is a potential risk. The final payment on goods may be less than

that initially agreed upon. This occurs when the buyer thinks the quality of the shipped goods is less

than expected. Suppliers may also be negligent in guarding their shipped goods. Another risk is

instability due to increasing terrorism.

East Asia is a promising region with great prospects for growth, having overcome the economic

crisis of 1997, the war in Iraq and the SARS crisis.

4. Competitiveness Issues Trading firms are encouraging suppliers to improve their business skills. The education of human

resources is a key requirement to strengthen competitiveness.

49

5. Outlook Suppliers in the region will increasingly need to work together to enter markets in Europe, the U.S.

and the Middle East. The economies of East Asia must also identify their respective competitive

advantages and concentrate on such goods.

50

Indonesia

Name PT Maspion

Business Electronics and kitchenware manufacturers’ association

Members Over 25,000

Overseas Network Singapore, Japan, Chinese Taipei, Hong Kong China, Canada, China,

Thailand

URL http://www.maspion.com

1. Evaluation of East Asia We are exporting to many economies. We mainly export plastic tableware to the U.S., Europe, Japan,

Thailand and Australia. We also export aluminum-made sheets and foil to Australia and ASEAN

economies. The ASEAN market is promising and continuously developing.

We have a branch office in Tokyo but the operational costs are a burden. But the Japanese market is

promising, especially for metal kitchenware, so we are restructuring our operations there. Australia is

geographically closer but offers fewer prospects.

2. Operations in East Asia Air conditioners, washing machines, refrigerators, fans, pumps and other household electronic

products have used Japanese parts for the past 15 years. But Japanese spare parts have become more

expensive, so they lost ground to South Korean and Taiwanese makers. But now the products of

makers are becoming expensive. Spare parts are being bought directly from China or Chinese

government trade mediators. The parts, such as compressors and switches, are usually obtained from

Japanese companies located in China.

We must search for the most reliable source when procuring from China, remembering that Chinese

provinces have differing policies concerning the transport of goods. One province may provide

export incentives that another does not.

3. Benefits/Risks in East Asia We have no factories abroad for producing electronic products such as air conditioners or washing

machines. Almost all production is for the domestic market. We do not have internationally

competitive brands. Japanese brands dominate the domestic market, followed by those from South

Korea (LG, Samsung, etc.) and China. There is upward potential for goods offering “South Korean

quality at Chinese prices.”

51

In the long run, the market in China will be developed. Prices, models, distribution networks,

after-sale service and the availability of spare parts will be the deciding factors of success. After-sale

service for products imported from China has not been guaranteed. Products smuggled from China

have been a problem. Consequently, our products are not price-competitive.

Promotion of products through international exhibitions, business negotiations and research on

competing companies will be increasingly crucial. Chinese companies have been able to achieve

competitive quality and pricing within a surprisingly short period of time. They will soon overcome

the problems of unreliable delivery and unstable pricing.

4. Competitiveness Issues Indonesia has gone from a seller’s market to a buyer’s market offering more product choice than

before. Therefore, cost-efficient production and value-added products are needed.

We have introduced independent strategic business units in each company to evaluate sales goals

and revenue. With this system, a subsidiary company is not required to obtain spare parts or raw

materials from another subsidiary company in the group. When product quality is similar, the price

becomes the determining factor. This allows for products to be procured from other companies or

even imported. This system is expected to lower costs and strengthen the competitiveness of each

subsidiary in the group.

5. Outlook Thanks to the implementation of AFTA, we can adopt the Common Effective Preferential Tariff

(CEPT) scheme for kitchenware, metal products and other export products, which makes us

optimistic. The CEPT scheme has also been implemented domestically and has not caused a loss in

our share, despite increased imports from other Southeast Asian economies.

Once smuggling is halted, we are sure that our products will be highly competitive. We are not

developing a new strategic business plan for the medium term. We are continuously improving

product competitiveness and focusing on domestic market expansion, in addition to pursuing

markets in Japan, Australia and elsewhere.

52

Malaysia

Name Malaysian Plastics Manufacturers Association(MPMA)

Business Trade association of plastics industry

Members 900 (plastics manufacturers: 700; SMEs: 500)

Overseas Network

URL http://www.mpma.org.my

1. Evaluation of East Asia Opportunities for trade with China include direct exports to China due to increasing domestic

demand, direct investment in China to develop business with major local companies or MNCs, and

FDI from China into the ASEAN market. Factors like SARS cause only a temporary setback and do

not jeopardize long-term confidence in the Chinese market. Development will more take the form of

China collaborating with individual economies, rather than the ASEAN region as a whole, due to the

wide spectrum of differences among the various ASEAN economies in terms of economic

development, political stability, cost of doing business and market size. It is also very likely that

Chinese companies will use one ASEAN economy as a stepping stone to other ASEAN markets.

2. Operations in East Asia We organize programs and activities to assist members with their expansion. We are currently

examining the possibility of establishing a plastics industry park in Qingdao, China. We also

organize training programs and seminars on upgrading technical skills, improving quality control,

enhancing design and R&D and improving productivity to enhance our members’ competitiveness.

Trade promotion at major trade fairs in the global plastics industry are organized to provide greater

exposure of the plastic products made in Malaysia.

3. Markets Where Members Are Active

Brunei China

Hong

Kong

China

Indone

sia Japan

South

KoreaMalaysia

Philipp

ines

Chinese

Taipei

Thailan

d

Vietna

m

0 About 10 0 1-2 0 0 1,300 0 0 1-2 0

4. Benefits/Risks in East Asia The benefits of China include its growing market and low labor costs. The risks include competition

with local industry, difficulty in obtaining financial support from banks and high investment risk.

53

5. Competitiveness Issues Labor is short, so we have to depend on foreign laborers, but they typically leave the economy once

they obtain skills after several years of service. Capabilities in R&D and design are low, because

local SMEs do not emphasize these areas much. The cost of doing business in China is increasing.

6. Outlook Member companies are showing increasing interest in expanding their business activities to East

Asia, especially China. Nevertheless, very few have the financial strength, management capability

and technical capability to succeed.

54

Thailand

Name The Board of Investment of Thailand

Business Governmental organization promoting investment

Members 300

Overseas Network 6 overseas offices

URL http://www.boi.go.th

1. Evaluation of East Asia The Board of Investment (BOI) arranges business trips for Thai SMEs to study foreign markets and

identify investment opportunities in East Asian economies such as China, Vietnam and Japan. The

activities are designed to build up business networks, encourage more joint ventures and motivate

overseas investors to invest in Thailand.

2.Benefits/Risks in East Asia There are great business opportunities in East Asia because of the size of the market, especially in

China. Besides China, Japan is still the main market in East Asia.

Competition, especially in pricing, is very strong. China enjoys price competitiveness, but Japan,

South Korea and Chinese Taipei offer the highest quality of production.

3. Competitiveness Issues Currently, competition in trade and investment is quite severe. It is important for Thai SMEs to

develop competitiveness to keep up with global competition.

4. Outlook Thai SMEs need to develop value-added business, use high technology in production, improve

management, lower production costs, increase their marketing skills and become more customer

oriented.

55

Philippines

Name Cebu Furniture Industries Foundation, Inc. (CFIF)

Business Manufacture and export of furniture

Members 170 (SMEs: 153)

Overseas Network

URL http://www.furniturecebu.com

1. Evaluation of East Asia Generally, East Asia is seen as a competitor, not as a market, because it already has big furniture

companies. In particular, Vietnam and Indonesia, as well as Malaysia and Thailand, are competitors.

China is the only East Asian economy seen as a good potential market. Since Philippine furniture is

known for its high-end, mixed media and indigenous materials, we see a good niche market in China.

Philippine furniture does not compete with cheap, low-quality Chinese furniture. Our furniture offers

better quality, design and prices.

2. Operations in East Asia We have a major product development program that focuses on designing new products with total

quality always in mind. The foundation has a full-time training center that offers executive and

technical training and a buyer-supplier matching program. Members are encouraged to join

international trade fairs and exhibits. Other services include a business information service,

supplemented with library resources, training manuals and trade journals.

3. Benefits/Risks in East Asia The benefits of doing business in East Asia include procuring raw and semi-processed materials. Our

logistics are favorable because of Cebu’s international infrastructure, including seaports, airports and

roads. Our market research, creativity and networking benefit from doing business in East Asia. The

main risk is the fear of counterfeiting, especially in China.

4. Competitiveness Issues The industry in general is experiencing a downturn. But, when business is slow, that’s the time to

gear up and invest more, especially in human resources.

56

Philippines

Name Raphael Legacy Designs, Inc.

Business Manufacture and export of furniture

Employees 200

Overseas Network

URL http://www.mosaicom.com

1. Evaluation of East Asia Asia is a good market for outdoor furniture. We supply raw and semi-processed materials like

tabletops and marble to East Asia, specifically China and Indonesia. Our strategy is to export raw

and semi-processed materials to East Asia rather than import like other companies are doing, since

the Philippines is a good source of raw and semi-processed materials.

2. Operations in East Asia We export raw and semi-processed materials to China and Indonesia. We spend a considerable

amount on marketing and participate in international shows. We constantly reinvent products and

believe that product uniqueness is very important. We are very active in marketing development.

3. Benefits/Risks in East Asia There is good potential in the outdoor products market. For indoor products, East Asia is seen more

as a competitor since products like rattan are cheaper in other economies. The risk is always on the

furniture company. Buyers only pay after the product has been delivered while payment for raw and

semi-processed materials must be made within 30~45 days. Thus, if a shipment is delayed or the

order is canceled, the furniture company has to bear the cost. Another risk of doing business with

East Asia is copying, specially in China, so we have patented some of our products.

4. Competitiveness Issues Most furniture companies are dependent on the U.S. and European markets, so when their

economies slow down, business also slows down. The challenge is to continue to create and design

new products.

57

Philippines

Name Nature's Legacy Eximport Inc.

Business Manufacture and export of furniture

Employees 78

Overseas Network

URL http://www.natureslegacy.com

1. Evaluation of East Asia In general, East Asia is seen as a competitor, but China is an attractive huge market, as well as as a

competitor.

2. Operations in East Asia Some agents in Hong Kong China are applying to us for distributorships in Asian economies. There

is a good chance we will tie up with some of these companies.

3. Benefits/Risks in East Asia China's infrastructure is very good. The market in China and Hong Kong China is large and

promising. The main risk is the fear of being copied, so we have patented some of our products.

4. Competitiveness Issues Quality and design have to be constantly improved and innovated to compete globally. Another

challenge is funding for new investment and expansion. Interest rates are rising, so the government

should lower work to lower rates and provide more funds to companies.

5. Outlook The outlook for East Asia is good. China is growing very fast and we have identified a big market

there. With new hotels, houses and buildings being built, the economy is growing fast. In the near

future, there will be a niche market in the growing high-end of the market.

58

Vietnam

Name Vietnam Chamber of Commerce and Industry

Business Non-governmental organization

Members 5,500 companies (SMEs: over 5,000)

Overseas Network Japan

URL http://www.vcci.com.vn

1. Evaluation of East Asia SARS has focused attention on the risk of concentrating business soley in China. Companies are

diversifying their business by operating in both ASEAN economies and China.

2. Operations in East Asia We provide training courses on marketing, sales skills, management, accounting and human resource

management, as well as information on markets, potential partners and obtaining credit.

3. Benefits/Risks in East Asia East Asia is a large, emerging market and increasingly attractive business investment. But it also has

a complicated mix of cultures, high political risk and loose, ineffective legal systems.

4. Competitiveness Issues East Asia is a complicated mix of cultures and traditions, legal systems and infrastructure. There is a

lack of skilled and experienced human resources.

59

Brunei Darussalam Name National Chamber of Commerce and Industry Brunei Darussalam

Business Trade association

Members 600 (SMEs: about 10%)

Overseas Network

URL http://www.nccibd.com

1. Evaluation of East Asia Over the long term, East Asia will become an attractive market to Bruneian SMEs. In the interim,

Bruneian SMEs are still restricted to the small domestic market. Most of our 600 members are SMEs.

Of that, only 10% conduct business overseas, mainly within the vicinity of the Philippines, Indonesia,

Malaysia and to a lesser extent in East Asia, such as numerous Chinese Bruneian businessmen who

have ventured into East Asia on their own. SARS has not dampened current and future trading or

business.

2. Operations in East Asia SMEs are important to the Brunei economy, so we support them with a variety of programs.

3. Benefits/Risks in East Asia Aside from SMEs run by Chinese Bruneian businessmen, the language barrier is a key challenge for

finding opportunities in East Asia. Second, Bruneian SMEs are not well exposed in international

trade, hence lack business contacts. SMEs need to rely upon intermediaries which add another layer

of business cost. Finally, as the Brunei domestic market is limited, Brunei SMEs are not keen to

import goods into the Brunei market.

4. Competitiveness Issues The key challenge among SMEs is simply survival. Most of the SMEs run service-based businesses

such as restaurants, catering and trading and a handful are in tourism and hotels. These domestically

focused service industries tend to diversify into other operations which could overlap with existing

dedicated businesses. For example, certain hotels have begun participating in the food industry, thus

signaling direct competition with dedicated restaurants.

5. Outlook Bruneian SMEs should look outwards beyond the local markets and work closely with the

government in regionalizing their businesses. Areas that would help assist the SMEs include

60

financial support and leads for diversifying into complementary or new businesses. East Asia would

offer Bruneian SMEs higher revenue and margin opportunities and wider range of products.

61

Brunei Darussalam Name Company D

Business Trading of communication products

Employees Less than 50

Overseas Network

URL

1. Evaluation of East Asia As a subsidiary of the Bruneian telephone operator and with a headcount of about 50 people, we are

one of the more sizeable companies in Brunei. North Asia offers tremendous opportunities and it will

continue to evolve as a promising market.

2. Operations in East Asia We obtain most products through Singapore. We travel abroad to evaluate new products, compare

prices and gather information on suppliers and competitors.

3. Benefits/Risks in East Asia East Asia represents a huge portal for trade opportunities, in view of the increased availability of

products such as Chinese electronics. Although business risks exist everywhere, China presents an

even more complex market.

4. Competitiveness Issues Strengthening competitiveness remains a major issue for Bruneian SMEs.

5. Outlook SMEs in Brunei are simply too small to effectively venture overseas and their future is too

dependent on the whims of the local economy. While joint ventures appear to be an interesting

solution, Bruneian SMEs lack the international mindset of their more forward-looking Southeast

Asian neighbors.

62

Brunei Darussalam Name Company E

Business Silk clothing

Employees 5

Overseas Network

URL

1. Evaluation of East Asia The region, China in particular, is attractive as it provides multiple choices supply sources for silk.

Quality has improved and pricing is highly competitive in East Asia.

We purchase in sizeable quantities, a strategy that enables us to bypass bulk purchases in Southeast

Asia. Given our network in the region, we are able to redistribute East Asian silk in Southeast Asia.

Our store provides leading variety, including washable South Korean silk and silk from France,

China and Japan. We emphasize good customer service and low overhead, which is why we operate

only one store in Brunei.

2. Operations in East Asia We have neither manufacturing nor direct sales offices in the East Asia. We procure silk from South

Korea, Shenzhen, China and Japan. New designs from South Korean silk designers arrive every 3 - 4

months, which is the design cycle in silk fashion. Foreign designs complement in-house designs.

Despite the highly competitive nature of the silk retail business, we have been successful in

introducing contemporary fashions to customers not only in Brunei but also in Southeast Asia.

Although the cost of production in South Korea has increased significantly, textile manufacturers

have improved the quality of polyester, which gives nearly the same feel as silk. Japan is a critical

source of technology for the precision printing of silk.

3. Benefits/Risks in East Asia The emergence of new companies in China present both benefits and risks. It means a wider variety

of suppliers products may not meet specifications. SARS had a temporary impact on SMEs in Brunei

but business activity has resumed its normal pace.

4. Competitiveness Issues In order to improve our competitiveness, we introduce our own designs and those from artists in

South Korea every 3 to 4 months. The preferential tariffs now conferred to textile and garment

63

companies in Brunei offer both benefits and disadvantages. While the benefits to domestic textile

companies are obvious, Brunei’s preferential status has also attracted textile traders from Singapore

and Indonesia, who can export silk at very low prices.

5. Outlook Our business outlook depends largely on the domestic economy of Brunei. Brunei is overpopulated

with shops and businesses, creating a glut in our small consumer market.

64

Papua New Guinea

Name Papua New Guinea Forest Industries Association

Business Association of forestry product companies

Members 43

Overseas Network

URL

1. Evaluation of East Asia China is currently the largest importer of forest products from Papua New Guinea (PNG) and

represents 60 percent of all PNG’s exports to East Asia in round logs, panel products and veneers.

Most marketing efforts by the association are geared towards improving trade with China.

The second largest market for PNG timber products is Japan, though the demand for tropical timber

in this market is diminishing as the economy shifts to a preference for soft-wood plantation timber

suppliers. This situation is to a certain extent similar to what is happening in South Korea, PNG’s

third largest importer.

China levies import duties on suppliers of logs, veneers and panels. Should China be incorporated

into ASEAN, Malaysian and Indonesian exporters would gain an advantage over PNG. PNG holds a

special observer status in ASEAN, but has no immediate plan to apply for full membership.

PNG exports of timber products to Singapore and Thailand are negligible and therefore any free

trade agreement with Australia would have limited impact on PNG suppliers in the short to medium

terms in any of these markets.

2. Operations in East Asia While each timber company in Papua New Guinea undertakes its own promotional efforts in East

Asia, the PNG Forest Industries Association provides, among others, the following services:

• Information to members through newsletters and up-dates (most of this

information is obtained via membership in the Japan-based, International

Tropical Timber Organization and the PNG China Business Council),

• Representation before the government, including lobbying on export taxes,

quarantine and research and development, and

• Organizing of trade fair representation.

65

3. Markets Where Members Are Active

Brun

ei

Chin

a

Hong

Kong

China

Indone

sia

Japa

n

Sout

h

Kore

a

Malay

sia

Philippin

es

Singapo

re

Chines

e

Taipei

Thaila

nd

Vietna

m

0 15 5 2 12 10 0 3 0 2 0 0

4. Benefits/Risks in East Asia Worldwide trends and environmental concerns indicate that tropical timber (especially round logs) is

becoming increasingly sensitive to global markets. This is particularly true in Japan and South Korea,

both of which are increasingly favoring soft-wood timber products over tropical hardwood.

The market for PNG forest products in China was established in 1996 and has been growing

significantly since then. Certainly, sales to this market are sustainable in the medium term as demand

for hardwood construction timbers grows in concert with the growth of the Chinese economy. There

are a number of risks associated with China, including non-transparent banking and legal systems,

though the systems are becoming more reliable following China’s membership in the WTO. From

time to time, however, China has enforced inconsistent non-tariff barriers (including stringent

quarantine regulations) that must be negotiated.

5. Competitiveness Issues To maintain their presence in China, PNG exporters must continue to improve their reliability in

providing round logs and more aggressively market timber products in the form of panels and

veneers. The small number of forest products (panels and veneers) currently exported to this market,

however, face increasingly strong competition from other exporters, particularly from manufacturers

in ASEAN, the U.S. and Russia. Once China’s own supply of raw logs comes on stream, after

suffering relatively low capacity over recent years, existing PNG exporters will face significant

competition from local manufacturers.

6. Outlook The outlook for PNG companies in East Asia is uncertain. Once Chinese supplies of plantation round

logs are matured for harvesting and processing, a large percentage of exports of PNG forest products

could be lost to local Chinese suppliers.

66

Papua New Guinea

Name Arabicas Limited

Business Coffee roasting and packaging for domestic and export markets

Employees 10

Overseas Network Import agents in Australia, New Zealand, Fiji and Holland

URL

1. Evaluation of East Asia Arabicas regards the whole of East Asia as one market segregated into sub-markets, each with its

own peculiarities regarding the consumption of coffee. For example, after extensive market research,

the company does not regard China as a potentially large market in the short to medium term and is

concentrating its efforts in maintaining existing sales and seeking new buyers in Australia, Europe,

the U.S. and other Pacific island states.

Despite a recent order for about one ton of roasted ground coffee, the Chinese market for processed

coffee is at present undeveloped and in ASEAN economies, apart from Singapore, coffee drinking

remains secondary to tea and other beverages. Most coffee in ASEAN is supplied by low-cost

economies such as Vietnam, where the product is increasing in quality and where Arabicas cannot

compete in price or delivery.

A free trade agreement between ASEAN and China would erode any efforts Arabicas made into

these markets, as again, the low cost and improving quality of the Vietnamese product will compete

strongly against the PNG product. Similarly, should Vietnamese coffee be processed and packaged in

Singapore or Thailand, under a free trade agreement with Australia, these two economies could well

threaten Arabicas’ share of the Australian market for roasted ground coffee.

2. Operations in East Asia To date, the company has not dedicated any resources in Japan to the promotion of its packaged

coffee. Despite this, however, the style and appeal of the packaging suit the Japanese market and the

certified organic brand appeals to the increasing health conscious and discerning Japanese

consumers. Taking into account the difficulty in breaking into the Japanese market, the company

does not have the resources available or the appropriate marketing connections to establish

long-term exports to Japan, despite a few one-time sales through mail order. Sales to this market will,

therefore, continue to be based on demand generated through inquiries or at international trade fairs.

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The niche market opportunities in Singapore and possibly Malaysia and Thailand have been

explored to a certain extent, but not real sales have been realized. We will continue to focus on

servicing major buyers in Australia, Europe and other Pacific island states in the short to medium

term.

3. Benefits/Risks in East Asia The major benefits and risks of the East Asian markets include:

・ The large size of the total market and the growing number of discerning consumers for roasted

ground organically grown and processed coffee in some economies,

・ The close proximity of Papua New Guinea to East Asia,

・ Niche market opportunities,

・ For many economies in East Asia, coffee drinking is a new concept and involves extensive

exposure and expensive promotion,

・ Competition from low-cost suppliers, especially in Vietnam and Thailand,

・ Australia, once a net importer of raw coffee beans, is now growing and harvesting coffee and

producing roasted packaged coffee for export to East Asia, with some considerable success, and

・ Likely large order from an East Asian buyer that would exhaust the company’s production

capacity at the risk of losing lucrative markets in Europe, USA and/or Australia.

4. Competitiveness Issues In the short term, the company is concentrating its efforts on domestic sales and sales in Australia,

Europe and other Pacific economies. These customers are already being approached by new

suppliers from Vietnam while the Australian coffee processing industry is aggressively marketing

their roasted ground products in both ASEAN economies, Japan and China. The company is

currently diversifying its product range and has made initial but small export sales of vanilla,

cardamom and birds eye chilies.

5. Outlook In the short to medium term, we are focusing on maintaining and securing sales in Australia, Europe,

the U.S. and Fiji. We are keen to develop exports to East Asian economies, but understand that

extensive resources will be required to meet this challenge and to stave off likely strong competition

from low-cost producing economies such as Vietnam.

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Papua New Guinea

Name PNG Balsa Company

Business Processor and exporter of balsa wood for hobby and industrial markets

Employees 30 (supplied by more than 250 growers)

Overseas Network Buying agents in Australia and distribution agents and importers in Japan,

China, UK, Germany, Chinese Taipei and South Africa

URL

1. Evaluation of East Asia The company does not sell to any ASEAN economy and there are no immediate plans to penetrate

the market in ASEAN to any large extent. Most sales have been to European buyers in Germany and

the UK, but exports to China are increasing. These sales are made either directly to Chinese

manufacturers and agents or through Japanese importers and distributors.

The SARS epidemic in China had limited impact on exports and it is doubtful that a combined Asian

free trade area would impact adversely on the company’s exports to the region. Only limited balsa

wood is grown in Vietnam and it is doubtful that the quality of the product will ever compete

effectively with the high-grade balsa from Papua new Guinea (PNG).

Similarly, free trade agreements between Australia and Singapore or Thailand would possibly have a

positive impact on sales. Products exported to Australia under a free trade agreement could expand

sales of hobby or even industrial balsa products that are made in Australia for the Singaporean and

Thai markets. To this end, the company implements detailed product, pricing, selling and

promotional strategies to ensure on-going viability and returns.

2. Operations in East Asia In East Asia, PNG Balsa Company currently exports sheet and block balsa to customers in China,

Chinese Taipei and Japan. Chinese buyers currently purchase 50 percent of the company’s sheet and

block balsa. Aannual sales are rising.

PNG Balsa Company’s detailed marketing strategy concentrates on:

・ Product Quality – ensuring a consistent supply of raw material and manufacturing using Total

Quality Management (TQM) practices

・ Selling – annual or bi-annual personal visits to existing customers and identifying and personally

meeting with potential customers

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・ Pricing – on-going monitoring of competitors and negotiation of favorable payment terms

・ Promotion – supply of samples, development of brochures, and participation in trade exhibitions.

3. Benefits/Risks in East Asia Close proximity to the market allows the company to personally service buyers in these markets and

deliver quickly and on-time. The size of the Chinese market for sheet and block balsa wood products

for both hobby and industrial use is large and growing. We are also seeing an increase in discerning

buyers interested in quality, where we have an advantage.

4. Competitiveness Issues The major challenge in maintaining competitiveness is the ongoing threat of the two U.S.-owned and

integrated Ecuadorian balsa companies. While the quality of PNG Balsa is far superior to that of

these two suppliers, the company must maintain competitiveness in terms of price and customer

service to maintain its reputation.

PNG government support of the industry is vital to maintain competitiveness. Any imposition of an

export tax on processed products or governmental control of the supply of raw material would

impact adversely on the export pricing strategy. Also, any further devaluation of the PNG kina would

have an adverse impact.

5. Outlook PNG Balsa Company will continue to develop global sales. The company foresees that the bulk of

sales will be to East Asia, and increasingly to China over the medium term.

While the capacity of the company’s production will never top that of Ecuadorian suppliers, the

company will continue to export high-quality balsa products to buyers and service them reliably and

quickly. To this end, PNG Balsa Company will concentrate its efforts on maintaining quality and

reliable delivery to existing customers and aggressively market its products to new buyers.

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Australia

Name IDP

Business Non-profit education-export industry body

Members 39 Australian universities and over 300 members institutions (English

language, professional and vocational schools)

Overseas Network Operates in 50 economies with more than 90 offices (involving various

legal structures, including branches, subsidiaries, joint ventures and

associated licensing arrangements)

URL http://www.idp.com

1. Evaluation of East Asia IDP treats each economy as a separate market, offering a different mix of services depending on the

relevance of those services to each location. These might include inbound, fee-paying students,

English language short-term visits or English language proficiency tests and development services.

Even within economies, different regions have different market characteristics.

China, because of its large population and increasing demand for education, is seen as a key market

and likely to be the largest source of student recruitments by 2025. In 2002, IDP set up 21 offices

around China to support promotional activities. Efforts in Southeast Asia, including a new office in

Brunei set up in 2002, are also significant and growing. IDP plans to enter the Japanese market in

2004.

2. Operations in East Asia Most Australian universities and educational institutions are small. Although they usually have a

presence in a few economies, they are unable to fully market themselves on a global scale. IDP

offers services that allow educational intuitions to market themselves across the globe for limited

costs. IDP offers international student services, development services, assessment and evaluation

services, marketing, research and consultancies and graduate services.

3. Markets Where Members Are Active

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4. Benefits/Risks in East Asia The education industry is Australia’s third largest service export. Australia has built up a good

reputation for quality education in the region. Having foreign students living and experiencing

Australia increases internationalism. When the students return to their home economies and become

decision makers, they will have a positive view of Australia. Having postgraduate students in

Australia assists with knowledge exchange.

Differing government regulations between economies are a fact of life and economies legitimately

want to protect their own education industry. This can cause problems for companies such as IDP.

Economic, political and social upheaval, such as in Indonesia and the Philippines, have affected

IDP’s operations due to office closures and being unable to send staff from Australia. However, IDP

has found that the demand for its products does not necessarily diminish because of these issues. The

decision to study overseas is long-term and relatively unaffected by problems such as terrorism or

instability. There has been a large increase in students from Indonesia despite problems. In the area

of short term student visitors, such factors can lead to large changes in the number of students

entering Australia.

5. Competitiveness Issues Australia’s education institutions are smaller and unable to attract the attention that, for example, the

Ivy League in the United States can. However, Australia’s institutions provide high-level,

consistent-quality education at a good price. IDP’s web site will continue to be developed, enhanced

and marketed as the virtual entry point to the company’s services and expertise, as well as the

leading gateway to Australian education opportunities. It provides a very cost-effective way of

marketing products throughout the region.

IDP is moving away from mass marketing to differentiated marketing in a campaign titled IDP

Excellence. In 2003-04 it aims to continue to develop strategic differentiated marketing and brand

positioning for Australian education to profile areas of excellence, address market maturity, adopt

new marketing mediums, explore partnering opportunities, as well as market intelligently and in an

innovative way in an uncertain and changing global environment.

IDP manages or participates in a wide range of events across 35 economies. These promotional

events, central to the marketing of Australian education internationally, range from major exhibitions

that attract thousands of visitors and displays at key conferences to smaller seminar and interview

programs. IDP also sponsors many education-related events.

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IDP provides research and statistics on the education industry for use by clients. This includes

in-depth studies into future global demand for international education and the English language

testing industry.

6. Outlook There is an enormous demand for quality education in East Asia, whereas many students in the past

would have gone to the United States for their education. IDP will continue to look for opportunities

in the East Asian region, including increasing use of its examination services through IELTS and

increased use of internet based marketing.

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Australia

Name Macquarie University, Macquarie International

Business University

Employees About 40 (globally: 1,500)

Overseas Network Australia, China, France, Hong Kong China SAR, Japan, Singapore

URL http://www.international.mq.edu.au

1. Evaluation of East Asia There are risks in over-concentrating in any market. Over-concentration can lead to enormous

difficulties for business when events such as SARS and terrorist attacks occur. A combined

AFTA-China will not affect business, although Australian free trade agreements with and Singapore

and Thailand would increase opportunities.

2. Operations in East Asia We use different promotions in different markets, using a variety of techniques to maximize market

access. Macquarie University has arguably the best MBA and Master of Applied Finance degrees in

Australia. Other areas of strengths include linguistics and interpreting, business management,

information technology (being in the center of Australia’s silicon valley, North Ryde), spatial

sciences and English language training. It has revamped its international portal, providing a variety

of languages, brochure building and will even offer a Master of International Business degree over

the Internet in 2004. We have also banded together with other Australian universities to operate an

international call center, where prospective students can get information on courses in their own

languages.

3. Benefits/Risks in East Asia Despite the existence of some excellent universities in East Asia, there remains a large demand for

quality, well-priced education products. Macquarie University has been able to provide quality

products in Australia for in-bound students and in East Asia by linking up with first-rate institutions.

For instance, its prestigious Master of Applied Finance has been run out of Aoyama Gakuin

University for many years. Macquarie University has seen problems in doing business on an ad hoc

nature. In Indonesia, terrorism threats have meant that the University has been unable to send staff to

the economy. However, Macquarie University stills keeps its eyes open for opportunities

everywhere.

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4. Competitiveness Issues A university needs to be continually responsive to market demands, offer high-quality products,

through top-quality staff and excellent facilities, market efficiently and review marketing

performance at regular intervals. Macquarie University uses outsourced marketing experts to identify

opportunities, while conducting most of its marketing program in-house. It must also provide for

fee-paying undergraduate students also attracting top-quality researchers and specialists. Macquarie

University’s strengths include the areas of business/finance/management, linguistics and spatial

sciences. Maintaining a balance of students and economies so as not to over-concentrate in only one

economy is also important.

5. Outlook Macquarie is looking to expand into East Asia through the increasing inbound students and the

increasing courses and students at offshore campuses. Importantly, Macquarie University is also

offering products over the Internet and through distance learning through its One World Program.

Macquarie Universities’ international website not only offers information in a variety of languages,

but also provides for enrollment.

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Australia

Name UniAdvice, University of Wollongong

Business University

Employees 45, of which 20 are engaged in international recruitment

Overseas Network Within East Asia, offices in Tokyo and Bangkok. Offices also in India and

Bangladesh. Agents in China, South Korea, Singapore and Malaysia

URL http://www.uow.edu.au/discover/international

1. Evaluation of East Asia For the University of Wollongong, China and ASEAN are very much separate markets. One quarter

of the 4,000 international students at the university are from China. In ASEAN, the highly

competitive aspect of the market means that the university directs itself at a selected number of key

markets—Singapore, Malaysia and Thailand—at the expense of the rest of the region.

China and ASEAN also differ considerably in the types of students that come to the university from

each market and the types of degrees they pursue. The majority of students from China are

postgraduate students who enroll mainly in IT and commerce degree programs. Students from

Singapore and Malaysia are overwhelmingly undergraduate and are largely recruited directly from

polytechnics. The university also teaches locally in Singapore, Malaysia and Hong Kong China.

Although there is the potential for a significant impact on student numbers in the future if such an

outbreak were to happen again. The university is more vulnerable to changes in degree trends and

associated changes in the industries in which jobs are in high demand. This is the case for both

China and ASEAN markets and is not particular to China.

Wollongong University currently draws a large number of students from China. This market has

stabilized and is not recording growth. The strategy now is to build up existing markets in Singapore,

Malaysia and Thailand. It also plans to increase its presence in Japan, where despite currently being

underrepresented, it is experiencing success with health and arts degrees.

A number of Wollongong University degrees are already recognized in Singapore. For example, the

Singapore Engineers Board recognizes Wollongong University’s degrees in engineering, along with

those of another 14 universities. A free trade agreement with Thailand may have an impact, although

as details of the agreement are yet to be finalized the university has not come to a firm opinion.

Wollongong University already enjoys a strong relationship with Thailand, particularly in regards to

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postgraduate degrees. There are a number of agreements between the Thai government and

Australian universities to recognize particular degrees. These have been negotiated through the

Australian Vice Chancellor’s Committee.

2. Operations in East Asia As detailed above, the university has no broad strategy for East Asia as a whole. It targets individual

markets based on the type of students, the type of degrees and whether or not it teaches in-economy.

Onshore teaching occurs in Singapore, Malaysia and Hong Kong China. In all three cases this

involves University of Wollongong teaching staff and facilities rented through arrangements with

local institutions. In East Asia, the University of Wollongong has only two offices of its own, one in

Tokyo and one in Bangkok. In other markets it operates through agents who recruit students on the

university’s behalf. In ASEAN and China, the university operates partly through IDP, which it uses

to market Australian universities in general. It then competes with other Australian universities for

students who have decided to study in Australia. Because Wollongong University is a smaller

university it directs its export budget towards a number of key markets and to ignore other markets

that would not yield enough students to justify the cost. Therefore, it focuses on maintaining markets

in which it is already successful or building up markets in which its presence is growing, rather than

entering new markets.

3. Benefits/Risks in East Asia The benefits and risks of doing business in East Asia are strongly related. The current security

climate is something the university has not encountered before and it has meant, for example, that

the university has not sent a representative to Indonesia this year. However, in the current security

climate, Australia is still seen as a safe place to study and this works in the university’s favor as

Asian students turn away from traditional markets such as the United States. The associated risk is

that if Australia was no longer seen as a safe place to study, the drop in numbers would be both

significant and immediate.

4. Competitiveness Issues The market for education is constantly changing, and strategies have to be revised annually. Because

Wollongong University is a smaller university, the decision has to be made to ignore some markets

altogether and focus only on markets where the university can offer a particular strength. This leaves

the university vulnerable to changes in trends in particular degrees. Some markets, particularly

Singapore, are hugely competitive. When trends change, the drop in numbers is noticed immediately.

Also important is ensuring that the University of Wollongong’s product remains of a high standard,

that the courses are still relevant and that the university can maintain its position in particular

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markets from which it attracts the largest proportion of students. Throughout China and ASEAN,

word of mouth is one of the university’s most successful marketing tools. If its products fail to live

up to expectation, the importance of word-of-mouth renders all other marketing strategies useless.

5. Outlook The future outlook for the University of Wollongong’s development in East Asia is quite promising.

IDP’s research indicates that all Asian markets will continue to grow until 2025. In this area, two of

the university’s key markets, China and Thailand, are ranked first and third respectively in terms of

growth.

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New Zealand

Name New Zealand Pine Manufacturers Association(NZPMA)

Business Industry association

Members 55 (SMEs: 50)

Overseas Network

URL http://www.nzpra.org.nz

1. Evaluation of East Asia Our members will continue to target Japan, rather than China, as their main market, since the latter

only buys commodities. Other companies, such as New Zealand forest owners and saw millers, will

target China as a growing market for logs and lumber, but our members view their best opportunities

as being in Japan.

2. Operations in East Asia We work with groups of companies within the association to promote trade opportunities in offshore

markets. In target markets, we work with domestic organizations like JETRO to promote trade.

3. Benefits/Risks in East Asia Customers are loyal. Once linkages and relationships are built, they remain strong. Asia generally is

no more difficult in which to transact business in than any other part of the world.

4. Competitiveness Issues Within New Zealand, the main requirement is for manufacturers to continue investing in technology

to remain price competitive.

5. Outlook There are still good prospects in the Japanese market for value-added products, especially in the DIY

business.

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New Zealand

Name New Zealand Sugar Company Limited

Business Blended food ingredient supply

Employees 180

Overseas Network

URL http://www.chelsea.co.nz

1. Evaluation of East Asia New Zealand Sugar Company has a long-term view of the East Asian market. Currently, we export

to the Japanese market, supplying only the tip of that economy’s food and beverage manufacturing

iceberg. We believe there are sufficient opportunities within this market to justify focusing solely on

Japan for the short term. Nevertheless, East Asia as a whole has good potential, considering its

proximity to New Zealand and its very large market.

2. Operations in East Asia We have a sales and distribution network throughout Japan, using three main import agents and

logistics companies.

3. Benefits/Risks in East Asia The key benefit in doing business with the Japanese market is its large, concentrated population and

proximity to New Zealand.

The key risk or drawback is Japan’s bureaucracy, particularly with regards to import regulations.

4. Competitiveness Issues We are a commodity (food ingredient) supplier, so our key challenges in maintaining and improving

competitiveness within the Japanese market are to invest in value-added product, simplify sales

channels and become the lowest-cost producer.

5. Outlook We have a positive outlook on future business development in the East Asian market. Long-term

goals include development of markets China, Chinese Taipei and South Korea.

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New Zealand

Name Vista Entertainment Solutions Ltd

Business Cinema software

Employees 10

Overseas Network Agents in Singapore and India

URL http://www.vista.co.nz (English and Japanese)

1. Evaluation of East Asia We look at Japan as the market with the most potential for our product in the short term due to its

large market and modern cinema industry. Our first Asian client was in Hong Kong China and we

view Hong Kong China as the future gateway to the Chinese cinema market, which may have huge

potential. We have already localized software for Chinese-speaking markets to prepare for the

gradual expansion of these markets.

2. Operations in East Asia We have sales agents in India and Singapore and customers in Hong Kong China, Chinese Taipei,

Malaysia, Brunei and Thailand.

3. Benefits/Risks in East Asia There are a variety of calculations, such as film rental, which have to be customized to each market.

Solving these problems led to overall improvements in our software and given us confidence to

introduce it to more Asian economies. Solving the problem of making a unicode version of the

software for Hong Kong China and Chinese Taipei has meant that Japanese and South Korean

versions can now be developed relatively easily.

4. Competitiveness Issues Vista is in the unique position of not having any specific competitors in the East Asian market. There

are companies that offer cinema ticket sales software, but not a total cinema management solution

package like Vista. The challenge we face is to constantly provide solutions for customers as

technology advances. Currently, we are working on software to enable people to purchase cinema

tickets by mobile phone.

5. Outlook Vista wants to establish an office in Japan and service the East Asian market from there. Japan has

the most modern hi-tech infrastructure in East Asia and is ideal as a base for a software company.

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There is still very good potential for expansion in Southeast Asia. We will look to develop a market

in China after establishing an office and customers in Japan.

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U.S.

Name Semiconductor Equipment and Materials Institute (SEMI)

Business Industry body

Members 2,500 member companies

Overseas Network

URL

1. Evaluation of East Asia SEMI has offices in every major semiconductor market: Singapore, Shanghai, Beijing, Taipei, Seoul

and Tokyo. SEMI supports its member companies primarily through trade expositions. It holds an

annual trade show entitled “SEMICON Singapore,” as well as other shows in the above-mentioned

areas. It also organizes technical programs and conferences, often in conjunction with trade shows.

SEMI serves as a conduit to companies looking to enter new markets, with its sponsored events

serving as the member’s initial point of contact in the new market. SEMI also publishes industry

standards for semiconductor equipment that are developed through regional committees. It is also in

the information-advocacy business and produces a variety of informational products that help

members conduct business. SEMI supports free trade and open markets, working with governments

and regulators to promote these principles.

2. Markets Where Members Are Active SEMI has about 2,500 company members. About half of its members are based in North America,

about 24% are in Japan and about 12% are in Europe. The remainder, 14%, are in East Asia (excl.

Japan). Many of the larger members are global companies that have offices in each region, so they

can also be counted as East Asian economies.

3. Benefits/Risks in East Asia One of the benefits is clearly that electronic manufacturing is being increasingly located in East Asia.

Many of the big electronic manufacturing companies are there and semiconductor chip makers are

moving there, so the entire industry supply chain is expected to follow.

4. Competitiveness Issues East Asia is increasingly attracting foreign business, as well as heightened competition. There are

different types of challenges for different companies. Many must deal with strict export control laws,

as they are competing with companies in other economies that do not have the same restrictions. So

one of the biggest obstacles is restrictive export regulations. Different taxation structures can be

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another obstacle, as tax rebates can unbalance the playing field. This really has to do with economies

and international tax laws. Some economies rebate taxes for local manufacturers, which creates

unfair, unequal pricing structures. IP issues, finding good business partnerships and reasonable

infrastructure and understanding regional customs and business practices are some of the risks of

doing business in the East Asian region.

5. Outlook Companies will increasingly conduct business in the growing East Asian regional market.

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U.S.

Name Semiconductor Industry Association (SIA)

Business Industry association

Members About 100

Overseas Network

URL http://www.semichips.org

1. Evaluation of East Asia The SIA supports its members as their advocate in policy issues. SIA does not organize trade

missions or facilitate business development.

2. Operations in East Asia Most SMEs do not have fabs; rather they sign fabs over to foundries, of which about 50% are in Chinese Taipei and a significant number are in Singapore. SIA does not keep records on how many of its members are doing business in each economy. 3. Benefits/Risks in East Asia The Asia Pacific market outside of Japan is the largest market in the world, and China is the fastest

growing market, so the benefits are obvious. One of the main risks is the official policies of China,

mostly concerning IP issues. This is one of the policy areas that SIA is currently working on.

4. Competitiveness Issues China gives value-added tax rebates for domestic production, but continues to tax imports. This is

another policy SIA is working on.

5. Outlook East Asia outside of Japan is the largest market in the world and one of the fastest growing. In 2000,

it made up only 7 percent of the world market, but this has already grown to about 15 percent. So

SIA’s member companies will continue to do business in East Asia, their key market.

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Canada

Name Automotive Parts Manufacturer’s Association

Business Industry association

Members Over 400

Overseas Network

URL http://www.apma.ca

1. Evaluation of East Asia Japan should be considered an exception. Other economies in the region have images such as

inexpensive labor, low costs, market for exports and improving quality. The quality of steel and

moldings is especially good and fairly cheap. Our member companies are looking at the Chinese

market and possible joint ventures with Chinese companies.

2. Operations in East Asia We are working closely with the Canadian government. It plans to send a trade mission to Japan and

to organize a tour to Japanese auto factories in Michigan. It also introduces Japanese companies to

opportunities for business in Canada.

3. Benefits/Risks in East Asia The key risks are regulations and restrictions. Especially in China, the government’s dominant role is

a hindrance. The investment environment in China is similar to the climate in Brazil from 1995 to

1998. Companies were looking for opportunities, but faced economic difficulties. The picture in

China will become much more clear in three to four years.

4. Competitiveness Issues Advanced economies such as Japan, the U.S. and Canada cannot compete with China's cheap labor.

The main challenge is how we can guarantee our supply chain systems while including China.

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Canada

Name Canadian Chamber of Commerce

Business Industry association

Members 170,000

Overseas Network

URL http://www.chamber.ca

1. Evaluation of East Asia The East Asian market is not homogeneous. Even ASEAN economies must be looked at economy by

economy. The key questions are, where are the best business prospects, where are the best deals,

where is the best partner, where are the best operating conditions, i.e. legal consistency, investment

and intellectual property protection, good labor force, stability, financial capabilities, etc.? These are

the factors that attract business to locations such as HK and Singapore, which are seen as launching

platforms for business in Asia. If companies do not want to locate directly in the target economies,

China's entry into the WTO is a big plus, as this presents a new range of opportunities.

2. Operations in East Asia We do not offer much direct business assistance. That is not our role. We concentrate on ensuring

that the business rules are the best they can be, via trade and investment negotiations, either

bilaterally or through the WTO.

3. Benefits/Risks in East Asia The benefits are a great market, dynamic growth potential and increasing disposable incomes among

consumers. The risks are currencies and legal frameworks. The problems are language and cultural

differences (which can be overcome), long time to realize returns, entry barriers in some economies,

and the difficulties for small companies to keep pace. Small companies find East Asia huge and are

not quite sure where to start.

4. Competitiveness Issues The currency situation will affect competitiveness. A stronger Canadian dollar is not the

answer. China's currency should be stronger.

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Mexico

Name Camara Nacional de la Industria de Transformacion(CANACINTRA) Business Private organization

Members

Overseas Network

URL http://www.canacintra.org.mx

1. Evaluation of East Asia China is seen as a threat for our members, since most of them are small or medium-size companies

without any experience in international competitiveness. Chinese companies are protected by their

government with financial support. On the other hand, economies such as Japan and South Korea are

seen as reliable economies that compete in international markets with good-quality products. It will

be a challenge for Mexican companies to compete in international markets.

2. Operations in East Asia At present, we are lobbying authorities to take a strong position against the unfair practices of

Chinese companies in Mexico. In this sense we are trying to protect our small and medium-size

members by asking the Mexican government to implement an industrial policy beneficial to

Mexican companies. We also conduct practical activities to help raise competitiveness.

3. Benefits/Risks in East Asia China is a risk for Mexico and will create problems if Chinese imports increase in the coming years

due trade triangulation. Trade relations between Mexico and other East Asian economies are very

limited. Only economies such as Japan, which is negotiating an FTA, and South Korea provide

mutually beneficial trade opportunities.

4. Competitiveness Issues Once an FTA with Japan is signed, Japan will serve as a bridge to other East Asian economies. In

China’s case, Mexico should strengthen its trade and investment policy and establish strict standards

and regulations for products that compete unfairly in the Mexican market.

5. Outlook Our organization and members are able to resist competition from abroad, but Mexican companies

must also become more competitive and learn from others. This will be impossible if the government

does not develop an industrial policy favorable to Mexican small and medium-size companies.

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Mexican companies are very interested in establishing strategic alliances with Japanese companies.

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Mexico

Name Pescadores Nacionales de Abulon.,S.C. de R.L.

Business Export of abalone and lobster

Employees

Overseas Network

URL http://www.cedmex.com.mx/inicio.html

1. Evaluation of East Asia The company markets its products through trading companies in East Asia, notably to Singapore,

Japan, Hong Kong China and Chinese Taipei. Ninety percent of production is exported to East Asian

economies, the other 10% to Europe and the United States. The company sees East Asia as a

promising market because demand is greater than in other markets.

2. Operations in East Asia In 2002, the company exported 200 tons of lobster and 4,000 boxes of abalone (24 per box). Half of

all exports of abalone are exported by a seafood broker to Japan and other Asian economies. The

other 50% is exported to Singapore by Pescadores Nacionales de Abulon under the CEDMEX brand.

The company exports 70% of its lobster directly to Japan and 30% to Europe.

3. Benefits/Risks in East Asia Exporting to East Asia has been a big challenge. For many years the company focused on exports to

the Japanese market, with plans to spread out to other economies from there. Up to now the

company has not faced a serious problem doing business with East Asian companies.

4. Competitiveness Issues Quality is key to succeeding in international markets. Good prices in Japan are one reason why the

company exports there. We try to export directly to our customers and avoid brokers.

5. Outlook We plan to increase exports, find new markets, avoid brokers and improve customer relations by

providing them with competitive products and services.

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Chile

Name Asia Pacific Chamber of Commerce

Business Chamber of commerce

Members 600 companies (of which 500 are small and medium enterprises)

Overseas Network Partnership agreements with chambers of commerce and trade promotion

organizations in South Korea, Hong Kong China, China, Vietnam,

Malaysia, Thailand, Indonesia, Germany, Bolivia, Ecuador, Brazil, Peru,

Argentina and the United States

URL http://www.asiapacific.cl

1. Evaluation of East Asia For numerous reasons including SARS, it is dangerous to concentrate trading to only China. This is

why we recommend that members trade with the entire Asian region, not just with a specific

economy. Priority should be given to trading ties with a place which generates the greatest amount of

profit at the most favorable business conditions. Member companies have access to our cooperation

when expanding their operations in all markets of the Asian region. Our aim is to diversify members'

contacts across the region.

2. Operations in East Asia The following types of support are provided to member companies:

・Identifying business opportunities and facilitating communication between concerned parties

・Facilitating business between Asia and Latin America

・Using database to find potential business partners

・Organizing business missions, seminars, workshops and training

・Assisting in market research and strategic alliance for the distribution of goods and services

・Expanding the regional-level communication network

・Acting as an organization for alleviating lack of mutual knowledge between the Pan Pacific and

Latin American economic zones

3. Markets Where Members Are Active Member companies are involved in the Asian market to some extent. Some are currently looking into

the market, while others are already trading with the region. We do not have statistics on how many

companies are operating in which economies.

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4. Benefits/Risks in East Asia East Asia is a growing and expanding market. There is public and private sector support for

encouraging business operations in East Asia. Asian esonomies will be used for obtaining /

importing commodities and consumables, and selling / exporting raw materials, foods, forestry

products, mining products, fisheries products and interim materials. Chile is an APEC member, and

shares the borders with Pan Pacific esonomies. For this reason, trading with these economies will be

reinforced.

However, we have little knowledge on East Asia's languages, trading customs and markets, partly

because of the geographical distance, and the complexity of East Asian markets.

5. Competitiveness Issues We will be extending support to SMEs, and promoting joint ventures, cooperation accords and

strategic alliances with companies in this region. There is also a plan for sending a trade mission.

6. Outlook We have high hopes in business development in East Asia. It is our commitment to establish

business association in an orderly fashion with trade promotion organizations of various economies.

We are prepared to offer direct support to SMEs trying to find a suitable business partner in Japan.

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Chile

Name CESMEC Ltd.

Business Quality control and inspection

Employees 285

Overseas Network

URL http://www.cesmec.cl

1. Evaluation of East Asia Japan is an attractive business partner because it keeps its promises and has our full confidence in

business operations. Other benefits include being able to conduct business with other Asian

esonomies via Japanese trading houses, and Japan having a high level of national income. China is

attractive because of its large population, growing consumption and substantial potential for market

expansion. South Korea has FTA with Chile, and is set to expand the market.

2. Operations in East Asia Our business is providing quality control in exports, i.e. logistic support in trading procedures. In

other words, we provide support by certifying quality, quantities, weight and other information

required to complete trading procedures. Partnership was forged with testing organizations in Japan

and China, so as to establish a network of business agents across ASEAN esonomies, our key export

destination. We made 5 trips to Japan and 2 trips to China to publicize our presence, and visited key

marine product exporters at the same time.

3. Benefits/Risks in East Asia Our experiences in Japan and China were starkly different. In Japan, six major trading companies

dominate the purchase of fish meal and other marine products, making it easy for us to establish

contacts. We held meetings with all of these companies during our Japan visits before entering the

Japanese market. In contrast, things did not go as smoothly in China. We managed to contract with

major Chinese trading companies in Hong Kong China, but the Chinese mainland was too vast, with

final purchasers dispersed widely. The chance of finding English speakers was also low, making it

difficult to cover all areas in limited time.

4. Competitiveness Issues In order to maintain competitiveness in East Asia, it is necessary to find PR channels such as radio,

TV, fisheries periodicals (particularly magazines specializing in fish meal). We produced a CD

describing our business operations in Chinese. Also under consideration is participation in events

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gathering final buyers, and organizing trips covering many such buyers.

5. Outlook Our policy is to achieve quick growth. Chile exports massive amounts of mineral materials, cellulose,

fish meal and fruit to the important East Asian market. Significant exports are particularly directed to

emerging economies like China.

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Peru

Name COMEXPERU Sociedad de Comercio Exterior del Perú

Business Trade association

Members 120 (SMEs: 100)

Overseas Network

URL http://www.comexperu.org.pe

1. Evaluation of East Asia Some member companies trade in East Asia. Many companies would like to establish business links

with these economies, and those that already have would like to expanding exporting and enter new

markets in the region.

2. Operations in East Asia We provide information regarding exports to other economies and business opportunities available

upon request. We also lobby the Peruvian government.

3. Markets Where Members Are Active

Brun

ei

Chin

a

Hong

Kong

China

Indone

sia

Japa

n

Sout

h

Kore

a

Malay

sia

Philippin

es

Singapo

re

Chines

e

Taipei

Thaila

nd

Vietna

m

0 18 12 9 30 17 5 3 10 10 2 5

4. Competitiveness Issues Competition is fierce in these markets.

5. Outlook Member companies are looking more and more towards expanding their operations in Asia.

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Russia

Name National Software Development Association(RUSSOFT)

Business Software development

Members 55 (SMEs: 55)

Overseas Network

URL http://www.russoft.org

1. Evaluation of East Asia We offer outsourcing services for customers seeking high-tech IT solutions, engage in joint

development of software for high-end products, and search for partners to help with marketing, sales

and distribution in Japan, South Korea, China and ASEAN economies. The ASEAN market is an

integrated market. SARS is not considered an inevitable danger, but a factor in the decreasing?

competitiveness of the ASEAN market. Major markets for outsourcing are Japan and South Korea.

We consider the Chinese market more suitable for joint software-development projects and as a

consumer market for IT products.

2. Operations in East Asia We lobby the Russian government to get the financial and organizational support our member

companies need to participate in exhibitions and other events in ASEAN economies. We use the

services of our local marketing company to penetrate the Chinese market. We are a member of the

Asian ICT Organization (AICTO) and our president, Mr.Valentin Makarov, is the vice-president of

AICTO. We use that organization to promote opportunities for Russian software development.

3. Markets Where Members Are Active

Brun

ei

Chin

a1

Hong

Kong

China2

Indone

sia

Japa

n2

Sout

h

Kore

a2

Malay

sia

Philippin

es

Singapo

re

Chines

e

Taipei2

Thaila

nd

Vietna

m2

0 3 2 0 2 3 0 0 1 0 0 0 1 large increase expected 2 increase expected

4. Benefits/Risks in East Asia Benefits include Russia’s proximity to and historical links with the ASEAN region, as well to

potential demand in the region for Russian mineral resources. Risks include cultural differences and

the language barrier.

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5. Competitiveness Issues We need to maintain our lead in R&D and science, learn local languages and business culture and

understand and eliminate cultural barriers in order to use local partners in the region effectively.

6. Outlook We must adapt our products and services to local languages and business culture, make direct

contract with local manufacturers of hardware in China and Chinese Taipei, outsource software

development projects to Vietnam and establish strategic partnerships with local distribution networks

in China, Hong Kong China, Japan, South Korea, Singapore and elsewhere.

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Russia

Name Artezio, LLC

Business Software outsourcing

Employees 80

Overseas Network U.S.

URL http://www.artezio.com

1. Evaluation of East Asia We view this as a promising region for software outsourcing services, apart from North America and

Western Europe. Our 18-month experience in working with Japanese clients has taught us how to

establish long-term mutual business relationships. We have not encountered any great culture

differences or critical misunderstandings. Developing business in Japan is part of our strategic plans.

2. Operations in East Asia We outsource software and set up dedicated software-development centers in Russia for clients.

3. Benefits/Risks in East Asia In our opinion, attractive features of the Japanese market are the strong demand for our services,

trustworthiness of the clients and interest in establishing long-term relationships.

4. Competitiveness Issues The main challenge is competition with Indian companies.

5. Outlook We will continue to establish partnerships with Japanese IT companies. We will follow the client’s

practices, methodologies and culture to build a dedicated team offering the necessary technical skill

sets.

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Russia

Name SPIRIT

Business Communication software development

Employees 100

Overseas Network U.S., Japan, France

URL http://www.spiritdsp.com

1. Evaluation of East Asia The East Asian IT market is a fast-growing and innovative field. It is a hi-tech region with constantly

developing technologies. With an office in Tokyo and a number of successfully implemented

projects for Japanese corporations, Spirit’s strategy is to continue establishing long-term business

relationships with Japanese and other Asian companies.

2. Operations in East Asia Establishing an office in Tokyo in 1994 led to the formation of many contractual agreements.

3. Benefits/Risks in East Asia The East Asian market is very difficult for European companies to understand due to differences in

business traditions and practices. Foreign companies need local partners to penetrate and operate

comfortably in these markets. Business in these markets is based on personal relationships and

mutual understanding. As to the benefits, the most important is the strong interest in innovative,

high-tech products. Companies with both hi-tech products and business experience in the region

stand the best chance of success.

4. Competitiveness Issues Though reasonable pricing is important, innovative technologies are of the prime importance in East

Asia. It is much easier to stay competitive if a company can offer something new and outstanding.

Currently, product quality has far more weight than pricing in customers’ buying decisions.

5. Outlook We are going to develop and establish new partnerships with leading telecommunications companies.

A highly skilled “in-business” local partner, credible success stories and a favorable business

reputation are likely to become the driving forces in our business development.

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