what asia pacific business leaders think 2012

PwC’s 2012 APEC CEO Survey

www.pwc.com

Addressing challengesExpanding possibilities

NY-13-0036 APEC Survey v8.indd 1 8/21/2012 12:52:03 PM

Events over the past few years have been deeply challenging for businesses not only in Europe and North America, but also across the Asia Pacific region. Many of us are now focused on how we can make our own organizations respond with a new kind of resilience—injecting innovation and flexibility—to succeed through disruptions taking place across our markets.

Yet, we are also reminded of how interdependent our businesses have become. We know that choosing between commercial integration and regional isolation from the rest of the world is really no longer an option for businesses and governments alike. And, fundamentally, I believe most of us understand our responsibility to contribute to ensure effective cooperation.

When we think of how many technological advances and societal shifts have taken place in our lifetimes that allow businesses to better connect—and that today, we’re real-time, all-the-time around the globe—we can be forgiven for assuming that the trend toward productive interactions will roll ahead on its own momentum.

It won’t. The future of regional growth needs to be shepherded by a common sense of purpose. That is why organizations like APEC are so important. The APEC CEO Summits are a proven forum for state and business leaders to find solutions through open dialogue. PwC’s report, building on a survey of more than 370 business leaders and interviews from across the region, confirms the necessity of regional cooperation for our companies’ futures.

As APEC’s host economy in 2012, we are delighted to welcome you to Russia, and I look forward to meeting with you.

WelcomeAndrey Kostin Chairman APEC CEO Summit 2012


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Over the years, PwC has been fortunate to survey business leaders from across the APEC economies to capture their insights into the forces changing our world and their business growth strategies.

Clearly, the opportunities across this dynamic region are many. CEOs are growing more comfortable with how massive computing power in the hands of anyone with a smartphone and an idea is creating new ways of doing business. And just as emerging technologies challenge traditional business models, so too are CEOs facing a new world of risk—each with a scenario potentially disrupting long-standing supply chain configurations.

In fact, among the more striking findings this year is that one in four businesses are adopting forms of renewable energy to generate their own power over the next 3–5 years. But perhaps the biggest impediment to expanding in this increasingly complex environment is the talent shortage. We asked CEOs about the solutions they are pursuing to find and retain the skilled people needed to drive their ambitious growth agenda.

This year PwC surveyed more than 370 business leaders, representing all 21 APEC economies. We grouped their overall responses into the following ten questions:• How confident are CEOs in prospects for their companies?• What are the top-tier risks to business growth?• What are CEO investment priorities?• What are CEO solutions to intensifying skills shortages?• What new actions are CEOs taking for a new world of risk?• Where are the bottlenecks in infrastructures?• How are CEOs responding to resource constraints?• Where are the critical technology and innovation gaps?• How has the Eurozone crisis impacted integration trends

in APEC?• What are CEO priorities for APEC to work on?

I want to thank all who participated in the Survey, particularly the business leaders who took the time from their busy schedules to sit down with us. Their insights greatly informed our report. You can find the report on www.pwc.com, along with video interviews. I hope this report will advance productive dialogue between the business and government participants in APEC—and beyond.

About this reportDennis Nally Chairman PricewaterhouseCoopers International Limited


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1How confident are CEOs in prospects for their companies?

CEOs are telling us they are coming through a tough year. A series of natural disasters and evaporating demand in Asia’s traditional export markets are taking a toll. Only a third of CEOs are ‘very confident’ in revenue growth in the next 12 months. Yet confidence in the long term (3–5 years) rises—54% of respondents say they are confident over this horizon. The confidence gap underlines the challenges for busi-nesses with operating today versus the promise of growth tomorrow in Asia Pacific.

APEC economies are not moving at the same speed: 15 of a total of 21 APEC economies are projected to outpace average global GDP growth over the next decade. And some of the fastest growers from 2001 to 2011 (Peru and Singapore, for example) are

estimated to land in the middle of the pack over the next 10 years. But the overall trend of rising incomes and economic opportunities for millions more in the region overwhelmingly trumps near-term headwinds in trade flows. Consider that consumer spending power among APEC econo-mies is projected to nearly double through 2021.

As we’ll see in this report, it is this promise that is fueling business investment across a spread of econo-mies in the region. And to address today’s uncertainties, business leaders are taking actions to diversify their operations. They are striving to become more resilient to manage the cross-currents created by shifting sources of growth.

The sky’s the limit as we look forward 10, 20, 50 years, in terms of infrastructure development in Southeast Asia and elsewhere, so we’ll have lots of opportunity. We should have a much bigger footprint based on the population base and what the standard of living will be 20 or 30 years from now compared to today.

Doug Oberhelman, Chairman and CEO, Caterpillar Inc.

Hong Kong has already become an offshore renminbi settlement center. Singapore and the UK are competing to become the next. CCB plans to actively promote the development of renminbi offshore markets and is currently considering the possibility of issuing bonds in these markets.

Wang Hongzhang, Chairman, China Construction Bank Corporation

There are many more consumers today, 3 billion of which are in Asia. OK, you might say not everyone is capable of buying something, but 300 million will definitely consume something, which is basically the size of the US of today.

Enrique M. Gubbins, Chairman, Sudamericana de Fibras S.A.


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Next 12 months

Next 3–5 years

Percent responding Percent respondingNot very confident Very confident

54%57%

36%

3%

Next 3–5 years(2011 survey) 3%

15%

Base: 355–356

Upbeat over long-term revenue prospects—but near-term, a challenge

How confident are you about your organization’s prospects for revenue growth?

APEC’s output cools, but stays strong through next decade

Annual GDP growth, in compound annual growth rate (CAGR)

Fifteen APEC economies projected to outpace average global GDP growth over next decade

Mature APEC

Malaysia

Korea

Russia

Chinese Taipei

Brunei

Japan

Mexico

Peru

Chile

Hong Kong

Canada

United States

New Zealand

Australia

China

Vietnam

Indonesia

Thailand

Papua New Guinea

Philippines

Singapore

0% 12%10%8%6%4%2%

2011–20212001–2011

Fast-growing APEC

Source: PwC analysis based on various historical and forecast sources, including Oxford Economics

World


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2What are the top-tier risks to business growth?

One emerging risk that CEOs identi-fied involves a slowdown in China—considering that many commentators have hitched hopes that a robust Chinese economy can power global business. So what happens to corporate growth outlooks if China’s growth decelerates? We asked busi-ness leaders just that—to what extent would a change in China’s GDP to below 7.5% for the year affect their organization.

Their views put the reliance on China to shoulder global growth in context. While 43% of CEOs—including one out of three CEOs not headquartered in China—rank China as the most important growth driver for their company, greater threats to their organization lie with a US reces-sion. To compare, 20% of all CEOs say the No. 1 revenue driver for their company is the US.

A spike in oil prices above US$150/barrel would also impact heavily. This should not surprise: A US$10 increase in the price of oil potentially reduces global growth by 0.5 percentage points, according to the International Energy Agency. But the intense sensi-tivity to oil price movements does underpin the importance of changes underway with the development of unconventional sources of natural gas, like shale-derived gas. By 2015, Asia is expected to be the world’s largest natural gas market.

Our industry directly benefits from China’s ongoing urbanization policy, which leads to what we call ‘rigid demand.’ When the rural population moves to the city at a consistent pace each year, government housing is not the answer for satisfying this type of demand creation. Property developers like us have an important role to play.

Li Sze Lim, Chairman, Guangzhou R&F Properties Co., Ltd.

Regional inconsistencies in regulations, lack of electronic document flow and single window services in customs remain serious obstacles for business. We estimate that up to 5% of EU-Asia trade can be transited via Russian rail and integrated multimodal operators. However, these inefficiencies undermine both Russia’s and our company’s global competitiveness.

Ziyavudin Magomedov, Chairman, Summa Group


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US taking the lead… In 2012, shale-derived natural gas makes up nearly 30% of all US natural gas production. By 2035, this is forecast to grow to 49% of all production.

…but Asia Pacific close behind By 2020, China could produce up to 112 billion cubic meters of shale gas, or 45% of total natural gas production—up from 12% in 2010.

By 2015, Asia is expected to be the world’s largest natural gas market.Natural gas APEC exporters include:

Papua New Guinea

Russia

Australia

Canada

United States

Indonesia

Malaysia

49% 45%

Sources: Eurasia Group, PwC, Eurasia Group Global Trends Quarterly, Third Quarter 2012; IEA, Golden Rules for a Golden Age of Gas, 2012

China’s GDP falling below 7.5% 12%56%32%

Natural disaster disrupting a major APEC trading/manufacturing hub 16%56%28%

Military tensions affecting access to natural resources 26%50%24%

Event causing further decline in nuclear energy 50%38%12%

Eurozone breakup (e.g., exit of one or more economy) 13%53%34%

Global food safety crisis (e.g., E. Coli outbreak) 28%51%21%

US recession 9%52%39%

Oil price spike beyond US$150/barrel 11%45%44%

Pandemic 14%45%41%

Major disruption of Internet or cyber attack 14%42%44%

Not at allTo some extent

To a great extent

1–20% 21–40% 41–60%

Base range: 335–366

The great shale play—a boom for natural gas

Putting threats in perspective: Oil spike, US recession among possible, high-impact events

In your opinion, if the following economic scenarios happened in the next 12 months, to what extent would your organization be affected?


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3What are CEO investment priorities?

Not surprisingly, China and the US are the dominant investment targets for CEOs over the next 3–5 years. Yet beyond markets in the US and China, the investment story evolves.

CEOs are spreading investments widely. Resource-rich countries, such as Russia, Indonesia and Australia and services capitals in Asia, including Hong Kong and Japan, rank as significant investment draws. And, when looking at investment among just APEC’s fast-growing economies, the money flows reveal an interesting intra-APEC subtrend. CEOs head-quartered in faster-growing APEC economies are prioritizing investing in Indonesia, Peru and Malaysia, for example.

CEOs’ plans in their priority markets reveal how APEC members are extending their presence well beyond their home markets and creating intricate trade networks. Consider, for example, Russia, which is ranked fifth for CEO investment targets. Looking to the next decade, Russia’s trade network is estimated to deepen extensively with its APEC partners [Exhibit page 11].

Strategies are markedly similar. Thus for those CEOs who ranked the US as top, second or third destination for their company’s investments, a majority intend to expand R&D and services capacity. For those investing in Indonesia or Peru, for example, accessing local talent and reaching more domestic customers are leading priorities. And in each of these econo-mies, at least one in five CEOs expect to expand manufacturing capacity.

CEOs share similarities in investment plans for priority markets

Will your new investments where you are making largest investments be increasing, decreasing or staying the same over the next 3–5 years in the following areas?

Note: Results below highlight US, Indonesia and Peru as examples.

Growing your customer base

Acquiring and retaining local talent

Building internal service delivery capability

Building R&D/innovation capacity or acquiring intellectual property

Accessing raw materials or components

Building manufacturing capacity excluding assembly

Building manufacturing capacity assembly only

83%

71

67

64

32

26

20

92%

84

65

40

50

39

36

83%

71

57

57

52

39

42

17%

29

33

36

68

74

80

8%

16

35

60

50

61

64

17%

29

43

43

48

62

58

United States

IncreasingDecreasing or staying the same

Indonesia Peru

Base ranges: US: 95–101; Indonesia: 45–51; Peru: 26–29


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Base range: 222–319; overall rank achieved by applying a score to respondents’ largest revenue growth drivers

Note: An overall rank order was produced for questions where respondents were asked to provide a ranked response in order from high to low. The overall rank was achieved by applying a score to each response.

Mean rank score Mean rank score

Papua New Guinea

Brunei

Peru

Chile

Chinese Taipei

Philippines

Korea

New Zealand

Thailand

Malaysia

Vietnam

Canada

Mexico

Japan

Indonesia

Singapore

Russia

Hong Kong

Australia

United States

China

Brunei

New Zealand

Papua New Guinea

Philippines

Canada

Korea

Japan

Australia

Chinese Taipei

Mexico

Thailand

Chile

Vietnam

Malaysia

Peru

Singapore

Russia

Indonesia

United States

Hong Kong

China

0 20 40 600 20 40 60

Where companies headquartered in fast-growing economies

are making largest investments in the next 3–5 years

Where companies headquartered in mature economies

are making largest investments in the next 3–5 years

China, US lead as APEC growth drivers

Please record the top 5 APEC economies where your organization is making its largest investments over the next 3–5 years.

Suning’s move toward internationalization isn’t just for the sake of internationalization. We hope that by venturing out into the international market, we’ll be able to adopt better planning for our product lines, move to an improved business model, and bring about an increase in operational efficiency and market competitiveness.

Zhang Jindong, Chairman, Suning Appliance Group

We are encouraging firms to move up the value chain, to go into processing of natural resources instead of just exporting raw materials. Despite global economic uncertainties, hopefully by the end of the year or next year at the latest, Indonesia will join the club of US$1 trillion economies.

John A. Prasetio, Chairman, CBA Consulting


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What are CEO solutions to intensifying skills shortages?

4

Hiring pace in APEC region looks to accelerate

What happened to headcount in yourorganization globally over the past 12 months?Did it...

What do you expect to happen toheadcount in your organization globallyover the next 3–5 years?Do you expect it to...

Increase by more than 8%

Increase by 5–8%

Increase byless than 5%

Stay the sameDecrease

22% 15%16%30%17%

14%7% 40% 13%27%


We actually have an employment issue, not an unemployment issue. We currently have 600,000 [manufacturing] job openings today but cannot find the skilled workforce to perform these jobs. Unfortunately, the perception of manufacturing is not the reality... It takes a very highly skilled, highly qualified mathematical person, who is willing to do a lot of problem solving. It involves a lot of teamwork, and that base knowledge skill is not being taught at our schools today.

Darlene M. Miller, President and CEO, Permac Industries, Inc.

They’re working on many fronts to attract and keep talented people with their organization. The perceived skills shortages are a real threat to expansion: 42% of CEOs expect the pressure will intensify. This shortage, however, exists at the same time that 40% believe they’ll add at least 5% to their workforce each year for the next 3–5 years.

High turnover rates are a factor, too. Companies are recruiting to replace almost as much as to expand. Analysis of employment trends in the region shows one in five hires in Asia Pacific leaves in the first year.1 Talent is as much an operational challenge as it is strategic.

CEOs recognize that technology alone will not solve the problem. There are solutions in the short term for closing the skills gap, but over the long term, this issue is linked to how businesses are incentivized to grow the top line and create opportunities. Thus CEOs are adding benefits and adopting strategies to tap reserves of talent in

older and younger workers, as well as women. This is across the board: 29% of CEOs headquartered in APEC’s fast-growing economies are specifi-cally considering ways to retain more women.

Some businesses are partnering with educational institutions to improve programs that in many cases are no longer adequate to satisfy business or employee development needs.

Policy relief is not expected. Only a third of CEOs think restrictions on labor mobility will ease. But CEOs are moving ahead. As an example of the strategic importance of talent to their business, CEOs say they would like APEC to work on skills mapping in the region. This is their third top priority for APEC.

1 Breaking out of the talent spiral, Key human capital trends in Asia-Pacific, PwC, 2012.


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Companies raise the bar to recruit and retain top talent

Thinking of your operations in the APEC region, to what extent is your organization implementing the following in its people strategy?

Making salaries market competitive

Providing staff with more non-financialrewards (e.g.,

healthcare, education)

Offering talent mobility programs(e.g., international

assignments)

Enhancing apprenticeship/

internshipprograms

Participating on education initiatives with government,

industry or academia

Customizing employee

incentives/benefitsto economies

Currently (over the next 12 months) In the next 3–5 years

73% 57%

55% 51% 46%

56%21%

26%

28% 31% 34%

31%


Setting goals to attract and

retain more women, including

leadership roles

Increasing recruitment/retention

of older workers (55+ years)

Creating incentives specifically for

younger workers (16–30 years)

38% 31%50%

24%32%

27%

As skills premiums rise, as shortages of skilled workers become more apparent in the US and other countries, I think there will be some effective counter pressure to liberalize access. I would not be as pessimistic as the CEOs. Once we get past the global slowdown and lingering recessions from the financial crisis, this might be a major area of expanding international activity over the next 5–10 years.

C. Fred Bergsten, Director, Peterson Institute for International Economics


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5What new actions are CEOs taking for a new world of risk?

New supply chain strategies in a new world of risk

Which of the following actions is your organization taking to mitigate the effects [of disruptive economic scenarios]?

Strategic actions

Crisis management actions

Stress-testing those scenarios

Reducing exposure to high-risk areas (geographic or product/service markets)

Partnering more closely on crisis response with government and non-government groups

Responding to disruptive events faster

Revising business continuity plans

Substituting domestic supplies for foreign supplies

Building redundancies into operations or supply chain

Increased demand planning with suppliers

Reducing geographic concentration of operations or supply chain

Using technology for real-time visibility of operations and supply chain

Diversifying suppliers or partners/alliances

Supply chain actions

0% 100%20 40 60 80

Base: 375 for responses ‘to a great extent’ and/or ‘to some extent’ on impact of economic scenarios in the next 12 months

As business leaders grasp how quickly the effects of distant events can spread both financial and inventory risk, they are taking a series of steps to become more resilient to shocks. Over half of CEOs (57%) are diversi-fying suppliers and partners, and a third are reducing geographic concen-tration of their supply chains where they can. Yet global configurations are

largely intact: Just one in five CEOs say they are substituting domestic supplies for foreign supplies.

In a sign of how things are changing, one of four is building redundan-cies into operations or the supply chain. Ten years ago, those moves would have been inefficiencies targeted for elimination under ‘Lean manufacturing disciplines.’ Now they are important risk manage-ment responses to an integrated environment.

Businesses are focused on internally controlling what they can to adapt more quickly. Two-thirds are revising continuity planning. However, fewer are partnering more closely with government or non-government groups on their crisis-management

planning. It is a surprising omission considering the scale of natural disas-ters striking businesses in 2011—the costliest on record, with damages from major disasters in the APEC region estimated at US$346.7 billion and less than 30% of global economic losses insured.2

Governments cannot be expected to step in and solve the many challenges that arise in sourcing when a supply chain breaks down during a disaster, but they can be a good source of infor-mation to help companies determine probabilities of disruptive events. Likewise, a better corporate under-standing of how governments plan to manage certain events can inform contingency planning.

2 APEC Economic Trends Analysis, APEC Policy Support Unit, May 2012.


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Every region, every business, every facility within Caterpillar is expected to have a plan for what might happen to them. A tornado is probably the best example. What do you do if you lose production? How do you recover? Where do you go? How do you make sure your people are safe? How do you get back in the swing of production after damage or whatever it may be?

Doug Oberhelman, Chairman and CEO, Caterpillar Inc.

Russia deepens, widens APEC trade network

Russia

Singapore

Chinese Taipei

Thailand

US

APEC

57

4,021

7,9493,647

69

5,944

28,597

49,860

2,438

842

7,735

17,279

719

604

2,357

5,545

3,639

5,940

16,430

27,517

15,487

99,244

206,777

Russia’s exports to APEC and selected economies in US$ millions

1,863

29,490

2,700

79,359

Canada

China

Japan

Korea

2021

2021 2021

2011

20112011

2001

20012001



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Where are the bottlenecks in infrastructures?

6

Cross-border infrastructures such as railway, electricity and gas pipelines could help Russia assume a greater leadership role in APEC.

B.J. Yang, President and CEO, Hyundai Energy & Resources Co., Ltd.

We are most concerned about the regulatory environment and human resources. The regulatory environment is among the toughest issues that banks must face upon entry into overseas markets due to the strict controls over the finance and banking sector.

Le Cong, CEO, Military Bank

The results of reducing tariffs on manufacturing goods across the APEC countries have been impressive. But there’s still plenty of room to improve free trade. Clearly, services, capital markets and some of the new areas for growth, particularly in environmental goods and services, are still places where there can be room for significant improvement.

Stuart Dean, CEO, GE ASEAN

Traffic-snarled commutes persist across many Asia Pacific capitals while logistical complexities continue to clog supply chains. Yet the main infrastructure developments are bearing fruit. A majority of APEC CEOs (73%) think infrastructures will continue to improve.

Improvements to underdeveloped infrastructures are critical for business expansion. When asked how inadequacies directly impact growth of their companies in APEC economies, concern clearly ran deep. Bottlenecks in transport networks are significantly impacting operations for close to 40% of all CEOs, for example. The pain is not equally shared in other instances. Weak water treatment systems are bedeviling prospects and operations significantly for three times as many CEOs headquartered in faster-growing APEC economies.

APEC has identified eight supply-chain ‘chokepoints’ as top priorities. The main objective is to improve supply chain performance (in terms of time, costs and uncertainty) by 10% by the end of 2015.

Opening these chokepoints will be a long-term—and expensive—endeavor. According to the Asian Development Bank, infrastructure needs—in new capacity and replace-ment of old infrastructure—are projected to require investments of about US$8 trillion from 2010 to 2020 in Asia Pacific alone.

Yet today, the most intransigent infra-structure issue for more CEOs is not related to physical (or virtual) struc-tures, but rather concerns the paper variety: 56% cite a ‘significant impact’ on their business arising from regula-tory and legal barriers to smooth trade and transactions.


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How infrastructure bottlenecks impact APEC companies’ operations and growth

To what degree are bottlenecks in the following infrastructure categories directly impacting the operation and growth of your organization in APEC economies?

About US$8 trillion is needed in Asia Pacific infrastructure investment through 2020— roads, mobile telecoms top list (in US$ billions)

38%

44%

60%

43%

45%

45%

15%

29%

21%

40%

38%

43%

56%40%

47%

28%

20%

17%

17%

12%

4%

Water and water treatment

Energy (power generation and transmission)

Social infrastructures (e.g., healthcare, education)

Trade infrastructure (customs, etc.)

Transport (sea/air ports, rail and road)

Information and communication technologies

Regulatory and legal infrastructure

No impact at all Moderate impact Significant impactBase range: 333–361

New capacity Replacement Total

Energy $3,176 $912 $4,089

Telecoms 325 730 1,056

Mobile phones 182 509 691

Landlines 144 221 365

Transport 1,762 704 2,466

Airports, ports, railways 60 66 126

Roads 1,702 638 2,341

Water and sanitation 155 226 381

Total $5,419 $2,573 $7,992

Source: Asian Development Bank and Asian Development Bank Institute, 2009.Note: Figures rounded to the nearest US$ billion.


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How are CEOs responding to resource constraints?

7

The bottom line: sustainability plan-ning is becoming strategic for many companies surveyed. CEOs today are more able to recognize a single orga-nization’s vulnerability to resource supply shocks. These can involve shortages or supply constraints in water, fossil fuels, rare earth metals and arable land for farming. As a result, CEOs are changing strate-gies to manage scarcity issues. For example, 37% of respondents

say they’re building water costs into strategy planning, while 58% are adopting water conservation technologies.

Strikingly, one in four are taking direct control where they can and are plan-ning to make use of solar, geothermal and other alternative solutions to generate their own supply of power.

Resource restraints continue to concentrate efforts on an array of ‘green growth’ measures across APEC economies. Take, for instance, APEC’s goals to achieve a 45% reduction in APEC-wide energy intensity by 2035. Promoting greater trade of environ-mental goods throughout the region to help hit that goal is also in APEC’s sights, with member economies in 2011 announcing plans to reduce applied tariff rates on environmental goods to 5% or less by 2015.

The drive toward sustainability has also helped spur M&A activity in clean energy sectors. The value of deals involving Asia Pacific clean-energy acquisition targets, for instance, rose to US$4.6 billion in 2011 from US$4.0 billion in 2010.3

CEOs are also in agreement on what APEC economies need to do to loosen resource constraints. For example, a majority believe that APEC econo-mies need to mitigate resource nation-alism to promote access to scarce resources—and 74% of CEOs agreed that policies are needed to address negative impacts of energy and water use.

3 Renewables Deals—2012 outlook and 2011 review, PwC, 2012.

The engine room of the world’s economy is shifting eastward. Asian economies continue to grow while Europe is in a difficult economic situation. The key question for Russia now is how to rebalance its economic growth model—to reduce dependency on Europe in this uncertain time and to find new ways to take advantage of the opportunities which are unfolding in Asia Pacific.

Artem Volynets, CEO, En+ Group

The Hai Phong facility in Vietnam gave us a second wind turbine generator factory, serving a very fast growing segment in the renewable energy business, in wind energy. And that also gave us back-up production facility in the unlikely event that we ever need it. So, as we continue to grow globally, it also enables us to be more resilient to some of the disruptions in the supply chain going forward.

Stuart Dean, CEO, GE ASEAN


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Actions APEC CEOs are taking to tackle sustainability challenges

Considering resource security and sustainability globally, to what extent do you agree or disagree with the following statements regarding your organization?

Where CEOs stand on resource security and sustainability policies

Considering resource security and sustainability globally, to what extent do you agree or disagree with the following statements?

29% 28%

23% 37%

16% 58%

Disagree Agree

My organization is using environmentally friendly technologies to increase operational efficiency

My organization is adopting water conservation technologies

My organization is building rising water costs into growth strategy plan

My organization is working with local regions to manage food security risks

My organization is applying contingency programs to absorb food price spikes in economies where we operate

My organization is planning to generate our own energy sources in 3-5 years (e.g., roof-top solar, geothermal, etc.)

7%

35%

28%

76%

27%

27%


Disagree Agree

State-owned corporations that are intensive users of energy and water should engage the private sector to become more efficient

APEC governments need to mitigate resource nationalism to promote access to scarce resources

Market mechanisms are the best path to ensure efficient distribution of resources

Policies (e.g., carbon tax) are necessary to address negative impacts of energy and water use

3%

5%

9%

15%

89%

83%

81%

74%



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Where are the critical technology and innovation gaps?

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Satisfaction gap: Where innovation conditions fall short of expectations

Thinking about the APEC economy in which you have the largest investment in innovation, how important are the following factors to the success of your organization?

Thinking of the APEC economy in which you have the largest investment in innovation, how satisfied are you in the following areas?

Tax incentives for R&D 32% 8%

Government assistance to small- and medium-sized enterprises 29% 6%

Availability of private capital (e.g., venture capital) to commercialize innovation 27% 10%

Bankruptcy laws 14%

Presence of strong arts and cultural institutions 9% 10%

9%

Proximity to a hub of research institutions 20% 11%

Proximity to a hub of innovative companies 20% 10%

Patent laws 36% 9%

Proximity to ancillary services (e.g., business services, legal services) 26% 13%

Universal broadband access 40% 13%

Strong legal protection of intellectual property 51% 9%

Depth of talent pool 56% 9%

Ease of setting up businesses 41% 13%

1–20%

Very important to company success

Very satisifed with current status

21–40% 41–60%

Base range: 255–343, responses ‘very important’ and/or ‘important’ to specific innovation factors

If ‘getting closer to the customer’ has long been good business practice, technology is redefining how the engagement is being done. And busi-ness leaders are pressing for the right monitoring and engagement tools to actively participate in the global information flow.

A majority (58%) say they face a ‘critical’ need to improve their use of technology to relate with customers. They’re also seeking the skills to manage this new dynamic. Talent that can navigate the exploding amount of customer and operations data is rare.

As more businesses try to differentiate with product and services, and as more governments seek to compete on innovation, understanding what CEOs view as important is also critical. Two factors stand out: Strong legal protec-tions for intellectual property and access to a pool of talented people. Survey responses show that these are the two areas where most CEOs are least satisfied that they have what they need.

Breakthroughs will still come from R&D centers, but innovation now encompasses the continuous need to improve and reinvent products, processes, services and even brands. That task involves a lot more people—inside and outside the organization.

Thus a majority of CEOs recognize that a vibrant entrepreneurial envi-ronment—measured in part by how easy it is for start-ups to operate and shut down in bankruptcy—contrib-utes to their company’s innova-tion. Businesses today are working far more closely with suppliers, customers and a wide network of external partners to extend compe-tencies. Access to start-ups and research hubs is important.


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For technology, we must acknowledge that we have to look to America, which has much more sophisticated technology and, on the other hand to China, which creates simple technology that can be implemented immediately. These are what we will combine. Whichever is best for Indonesia.

Garibaldi Thohir, President Director, PT Adaro Energy Tbk

It’s increasingly important that we work in a cooperative way, particularly with companies in the semiconductor field, in order to foster a coming revolution where everybody is building systems on a chip, and all of the attendant software requirements that brings with it.

Craig Mundie, Chief Research and Strategy Officer, Microsoft Corporation

CEOs identify where technology is most needed—talent and customer management are critical

How great is the need to significantly improve the following areas within your organization through technology and innovation?

Improving relationships with

existing/prospective customers

1%

41%

58%

Improving supply chain

logistics through real-time global

tracking and tracing

Increasing labor and industrial productivity

Creating a one-firm technology

platform

Adopting advances to

improve employee health and lower

healthcare costs

Finding and retaining talent

Accelerating R&D and

innovation developments

Critical and immediate need Some need No need at all

51%

19% 19%

45%

62%

6%

2%

7%

31%

42% 46%

18%

31%

48%

Gathering greater market

intelligence more quickly

3%

42%

55%

37%

67%

51%

20%

Increasing knowledge sharing and

training

50%

2% 48%

Base: 339–364


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How has the Eurozone crisis impacted integration trends in APEC?

9

In striving toward economic resilience and inclusive growth, APEC should come together as a community to reshape the priorities for the global economy and do so in a way that addresses the needs for both developing and developed economies. This will be our underlying focus at ABAC and the APEC CEO Summit in 2013.

Wishnu Wardhana, Group Co-CEO and Vice President Director, PT Indika Energy Tbk

The Trans-Pacific Partnership would engage the US in the region with a high-quality FTA that really meets the needs of businesses, which would be good. Similarly, my wish is that the other free trade arrangements between Asia and China, and with Japan and Korea—remain at a high standard because businesses need these kinds of 21st-century agreements.

Ho Meng Kit, CEO, Singapore Business Federation

By 2021, intra-APEC trade is set to nearly triple

2001 2011 2021

In US$ trillions Intra-APEC exports APEC’s exports to rest of world

$2.1

$5.7

$2.8

$14.6

$5.6

$0.8


While the Eurozone crisis reveals the risks that can arise from deeper economic integration, more CEOs believe the drive toward deeper commercial links across Asia Pacific is on track, and in some ways accelerating.

For example, more CEOs expect impediments resulting from overly complex customs rules or conflicting legal frameworks will fall, as opposed to those who believe the outlook for smoother trade is deteriorating. According to more CEOs, significant barriers to expansion today lie with ‘behind the border’ issues that can tie up investments and raise the costs of doing business.

This year, as in last year’s APEC CEO Survey, more CEOs believe harmo-nizing standards in the region will do more to promote business growth than many other measures policy-makers can take.

If anything, one major impact of the Eurozone crisis has been that the

resulting slower global growth has leaders contemplating what steps may be taken to accelerate growth in APEC. The agreement to begin nego-tiations on the FTA among China, Japan and South Korea is a sign that some regions might be starting to have new momentum to forge closer ties that has not been present before.

Some of the business leaders we interviewed expect some kind of centralized coordination in the region is needed to keep the momentum that started with the flowering of bilateral trade pacts going. They identify—as a weak link in the Eurozone—the insti-tutional incapability to keep pace with the growth of goods and investments flowing across the region.


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APEC has never really resolved the question of whether regionalism means ‘Asia-only regionalism’ or ‘Asia Pacific regionalism,’ and that’s now come to an acute point as both parts of that equation negotiate their own economic integration deals. At some point, they will either have to come together or they might wind up in conflict.

C. Fred Bergsten, Director, Peterson Institute for International Economics

Growth barriers: Talent shortages concerns run deep

Thinking of the following barriers to your organization’s growth within the APEC region, do you expect them to improve, get worse or stay the same over the next 3–5 years?

25% 21% 54%

Improve Get worse Stay the same Strong concern(from PwC’s 2011 APEC CEO Survey)

Corruption

33% 18% 49%Inconsistent regulations and standards

32% 42% 26%Talent shortages

32% 27% 41%Governments’ inability to manage macro risks

40% 16% 44%Complex customs procedures and tariffs

73% 9% 19%Underdeveloped infrastructures

51% 14% 35%Restrictions on cross-border investments

48% 16% 37%Lack of access to capital

36% 23% 42%Restrictions on labor mobility or immigration

44% 16% 40%Weak or restricted access to consumer credit

40% 21% 40%Inadequate or unreliable power/energy supplies

43% 10% 47%Lack of political and legal frameworks

40% 12% 48%Lack of transparent and efficient procurement processes

23% 27% 50%

32%

32%

29%

26%

23%

20%

17%

14%

12%

12%

12%

*

*

*Policies that favor state-owned companies over private companies

Note: Ordered by percentage of CEOs listing concerns that are barriers to their organization's growth to a ‘great extent’ in the 2011 APEC CEO Survey

*These topics are new in the 2012 survey.



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What are CEO priorities for APEC to work on?

10

We’ll face a new set of challenges as we deal with the cloud- connected computing environment. We have to get some integration in terms of the way we handle the free flow of information in that environment.

Craig Mundie, Chief Research and Strategy Officer, Microsoft Corporation

Investment magnets—APEC’s fast-growing economies

Trade pacts that reduce tariffs and improve access for goods still matter hugely—only a minority of CEOs believe successful Trans-Pacific Partnership or ASEAN+ talks won’t affect their companies’ prospects. Yet beyond promoting free trade, CEOs want APEC to continue to make the case for free-flowing investments and compatible standards and to work on skills mapping for the region.

Concerns today do not necessarily center on blunt protectionist instru-ments, but likely reflect changing industrial policies across the region as more policymakers pursue sustain-able development and move their economies away from consequences of unbridled growth. Thus measures are being introduced that impact domestic and foreign businesses alike, whether it’s setting caps on carbon emissions or requirements (often incentives) to source more R&D locally, for example, or changing benefits packages for employees.

Few will begrudge the goals; nonethe-less, the net effect from a business perspective is that the entry—and particularly the exit of capital—is becoming more challenging. And businesses based in fast-growing economies are also keen to have

equal access for assets outside of their economies for investment.

Does the cumulative weight of these issues play much of a role in the record levels of corporate cash? That must remain open for debate, but the uncertainty being created is a likely contributor to investor caution. Thus CEOs in 2012 are largely moving beyond defining advances in integra-tion solely through tariff and other trade barrier reductions (although these have been largely steadfast and the goals continue to stretch). Instead they are also looking for greater access for services, harmonized standards and more clarity on inter-national investment policymaking to fuel deeper economic integration.

Fast-growing APEC economies are capturing more foreign direct investment than mature economies

Inbound FDI in US$ billions Mature economiesFast-growing economiesAPEC

2001 2011 2021

$1,500

$1,000

$500

$0

$133.4

$490.6

$1,166.7

$208.9 $317.1

$486.1

$342.3

$807.8

$1,652.8



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CEOs prioritize what APEC ought to focus on

In addition to promoting free trade among APEC economies, please indicate the top 3 priorities that you would like APEC to work on:

What CEOs believe will promote greater economic integration within APEC—removing services trade barriers tops list

Please indicate the 3 most important factors for driving greater economic integration in APEC over the next 3–5 years:

Free flow of investments

Harmonization of regulations andstandards

Integration of small-and medium-sized enterprises into the formal economy

Labor mobility/skillsmapping

Energy securitySupply chainresilience

Food security Water security

49 47

0

100

270

100

180

100

17 170

100

90

100

50

100

Note: An overall rank order was produced for questions where respondents were asked to provide a ranked response in order from high to low. The overall rank was achieved by applying a score to each response.

(Mean rank scores) Base: 358; overall rank achieved by applying a score to responses on APEC priorities

0

100

0

100

0

100

0

100

0

100

0

100

Removing barriers to trade in services

Bilateral and regional trade agreements

Greater harmonization of standards

Participation of small-and medium-sized enterprises

More balanced integration of APEC economies and markets

Adequate protections to preserve intellectual property value

Reductions in trade transaction costs

APEC’s aim to reduce tariffs on environmentalgoods and services

Government procurement

More secure distribution systems

49%

30% 29% 17% 9% 8%

41% 36% 31%44%

0

100

0

100

Base: 375


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This is PwC’s 2012 APEC CEO Survey

We surveyed industry leaders from June 14 to August 2, 2012, for the 2012 APEC CEO Survey. We also conducted 17 follow-on, in-depth interviews with CEOs and other top corporate officers and business specialists.

We used an online and paper meth-odology to achieve valid responses from 376 CEOs and industry leaders across 40 nations, including all 21 APEC economies. This multilingual survey was translated from English into 5 languages: simplified Chinese, Japanese, Korean, Russian and Spanish.

The survey responses were conducted in confidence and on an unat-tributable basis. Interviews were mainly conducted face-to-face and on camera. The insights from the business leaders we interviewed are quoted in this report and video selec-tions are available on www.pwc.com, as is further information on the data and graphics.

Note: Not all figures add up to 100% due to rounding and to the exclu-sion of ‘neither/nor’ and ‘don’t know’ responses. An overall rank order was produced for questions where respondents were asked to provide a ranked response in order from high to low. The overall rank was achieved by applying a score to each response.

Research methodology and key contacts


23

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Acknowledgements

Our coverage of the trends shaping APEC economies and businesses would not have been possible without the insights shared by industry leaders we interviewed. We are most grateful and would like to acknowledge their contribution.

Li Sze LimChairman Guangzhou R&F

Properties Co., Ltd.

China

B.J. YangPresident and CEOHyundai Energy &

Resources Co., Ltd.

Korea

Zhang JindongChairmanSuning Appliance

Group

China

Doug OberhelmanChairman and CEOCaterpillar Inc.

US

Le CongCEOMilitary Bank

Vietnam

Artem VolynetsCEOEn+ Group

Russia

Ziyavudin Magomedov

Chairman of the Board of Directors

Summa Group2012 Chair, ABAC

Russia

Garibaldi ThohirPresident DirectorPT Adaro Energy

Tbk

Indonesia

C. Fred BergstenDirectorPeterson Institute

for International Economics

US

Stuart DeanCEOGE ASEAN

Malaysia

Craig MundieChief Research and

Strategy OfficerMicrosoft

Corporation

US

Wang HongzhangChairman China Construction

Bank Corporation

China

Wishnu Wardhana Group Co-CEO and

Vice President Director, PT Indika Energy Tbk

APEC CEO Summit 2013 Chair, ABAC Indonesia

Indonesia

John A. PrasetioChairmanCBA Consulting

Indonesia

Enrique M. GubbinsChairmanSudamericana de

Fibras S.A.

Peru

Ho Meng KitCEOSingapore Business

Federation

Singapore

Darlene M. MillerPresident and CEOPermac Industries,

Inc.

US

NY-12-0036 APEC Acknowledgements page 23 alternative.indd 1 8/21/2012 1:18:57 PM

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Acknowledgements

Advisory groupVladimir AndrosikChairman and Executive Director

National Business Center for APEC

Gautam BanerjeeExecutive Chairman, PwC Singapore

Karan BhatiaVice President and Senior Counsel,

Global Government Affairs & Policy, GE

Chairman, National Center for APEC

Tom CrarenPartner in Charge of Brand and

Thought Leadership, PwC US

Vadim KhrapounMarkets Leader, PwC Russia

Richard LavinGroup President, Caterpillar Inc.

Frank LynMarkets Leader, PwC China

Craig MundieChief Research and Strategy Officer,

Microsoft Corporation

D. Nick ReillyChairman, Asia Pacific, MSX

InternationalFormer President, GM Europe and GM

Executive Vice President Chairman-Emeritus, National Center

for APEC

Core editorial teamCristina AmpilEmily ChurchChristopher Sulavik

Project managementNatalie KontraAnna LaiAngela LangAnna NakonechnayaChristina SoonCynara TanDaniel Tan

Representing APEC Matthew DoeringPresident and Senior PartnerGlobal Gateway Advisors

Allen LaiDirectorAsia Inc. Forum

Robert ModarelliExecutive Vice PresidentNational Center for APEC

Monica Hardy WhaleyPresidentNational Center for APEC

Marina ZazharskayaDeputy Executive DirectorNational Business Center for APEC

DesignUS StudioJeffrey GinsburgAmy KunzChris PakSamantha PattersonTatiana PechenikIsabella PiestrzynskaLaura TuAdam West

The following individuals and groups in PwC and elsewhere contributed to the production of this report.


For further information

For media inquiries, please contact:

For inquiries about the research methodology, please contact:

For further information on PwC’s 2012 APEC CEO Survey content, please contact:

Cristina AmpilManaging Director,

Thought Leadership+1 646 471 [email protected]

Cynara TanHead of Marketing and

Communications, Asia Pacific+852 2289 [email protected]

Mike DaviesDirector of Global Communications+44 20 7804 [email protected]

Frances McVeighInternational Survey Unit+44 28 9041 [email protected]

We’d like to thank the following organizations for their generous logistical support in making PwC’s 2012 APEC CEO Survey a success.

China Council for the Promotion of International TradeThe Federation of Korean IndustriesHong Kong General Chamber of CommerceNational Center for APEC (USA)Pacific Basin Economic CouncilSingapore Business FederationSupport Council for ABAC-JAPAN


www.pwc.com

© 2012 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

PwC firms help organisations and individuals create the value they’re looking for. We’re a network of firms with 169,000 people in more than 158 countries who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com.

NY-13-0036


© 2012 PwC. All rights reserved. PwC refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firms professional judgment or bind another member firm or PwCIL in any way.

APEC’s 2012 Karzan declaration on food security

APEC’s food security priorities:

Increasing agricultural

production and productivity

Facilitating trade and developing

food markets

Enhancing food safety and quality

Ensuring sustainable

ecosystems based management

Source: APEC, “2012 APEC Ministerial Meeting on Food Security Kazan, Declaration on APEC Food Security,” May 2012

What PwC is asking CEOs about food security and safety in the 2012 APEC CEO Survey

Would your company be affected by a global food crisis in the next year?

Is your company working with local regions to manage food security risks, and have contingency programs for food price spikes?

Are water and food security top priorities for APEC to work on?

Mega food PPP: Sino-Singapore Jilin food zone

1,450 sq kmJilin, China

…and farm up to one million pigs

A planned commercial China-Singapore joint venture with advanced food industry methods and technologies in a disease-free zone twice the size of Singapore

Agriculture zone planned to: include food processing center, logistics center, transportation/distribution hub, to potentially employ 300,000

Sources: “Singapore Looks to China for Food Security,” The New York Times, September 27, 2010; “Govt optimistic about Sino-S’pore food zone,” The Straits Times, April 4, 2012

CEOs see food scarcity issues rising in importance to business over next decade

Note: PwC polled 141 CEOs of companies with revenues between $10m–$10bn+, April and May 2012Source: PwC, “Sustainability pulse poll: CEO insights,” June 2012

Percentage of CEOs agreeing that given issues are important to their business now and in a decade

2012 expected in 2022

Waterscarcity

Biodiversityloss

Foodsecurity

78%65%

64%58%

63%57%

Farmland per capita nearly halved

From 1961 to 2009, agricultural land per capita has shrunk almost by half

WorldEast Asia & Pacific

.11

.19 .20

.36

1961 2009

Main pressures on agricultural sector in Asia include:

Rising agriculture

costs

Water shortages

Urbanization Non-agricultural

land-use

Source: The World Bank database

Hectares of agricultural land per person

Three food price spikes in five years

Sources: FAO, “Food Outlook: Global Market Analysis,” May 2012; USDA Economic Research Service,“Why have food commodity prices risen again?” June 2011

A perfect storm for crop price volatility:

Short-term factors:

Adverse weather events affecting productionDeclining global food stocksTrade policies and practicesDeclining stock-to-use ratio

Long-term factors:

Rising global consumption demand in fast-growing economiesEconomic growthDepreciation of US dollarRising energy pricesBiofuels productionSlowing agriculture productivity

199.82008

214.82012

227.62011

Food price index, 2002–2004 = 100

Growing more with less: Crop yield rates plateau

Average cereal yield improvements have moderated after big gains in 1960s Green Revolution

World Fast-growing East Asia & Pacific

North America Indonesia

90%

1961–1985

Note: Real yield, measured as kilograms per hectare of harvested land, includes wheat, rice, maize, barley, oats, rye, millet, sorghum, buckwheat, and mixed grainsSources: FAO database, PwC analysis

1985–2010

162% 90% 128%32% 45% 52% 39%

Increase in average cereal yields (kg per hectare)

From farm to plate: Waste not, want not

One-third of the world’s needs, or 1.3 billion tons of food, is spoiled or discarded each year

By processing & packaging

% of wasted fresh fruits and vegetables

What’s needed to cut this waste?Wider adoption of advanced technologies and infrastructures to improve:

Harvesting Storing Cooling Packaging Transport & processing

facilities

Markets

Sources: FAO, “Towards the Future We Want,” May 2012; FAO, “Global Food Losses and Food Waste,” 2011

North America & OceaniaSouth & Southeast Asia

2%

25%

By end-user consumers

7%

28%

Agriculture’s share of GDP thinning in China, fast-growing APEC

Agricultural output as a percentage of GDP

Source: PwC analysis based on Oxford Economics data

205020201990

27.1%

14.4%

6.5% 5.4% 4.2% 4.2%

China Fast-growing APEC economies

What it takes to feed 9.3 billion people

By 2050…

Global agricultural production needs to grow 70% nearly 100% in

fast-growing economies

…And $209 billion will need to be invested annually to lift agriculture output to meet food needs in fast-growing economies alone

Source: FAO, “Global agriculture towards 2050,” How to feed the world 2050: high-level expert forum, Rome, October 2009

Global population to grow from 6.9 billion in 2010 to 9.3 billion in 2050

42% or 1 billion of that growth to come from Asia

Asia will drive the world’s population through 2050

There were 925 million hungry people in the world in 2010—578 million from Asia and the Pacific

Sources: United Nations Population Fund Database; Food and Agriculture Organization of the United Nations (FAO)

2012 APEC CEO Summit: PwC issues spotlight

Can APEC feed itself?Leading up to this year’s Asia-Pacific Economic Cooperation CEO Summit in Vladivostok, Russia on September 7–8, PwC is sharing a series of infographics highlighting key Summit issues. This series also provides a sneak preview to some questions PwC is putting to business leaders in PwC’s 2012 APEC CEO Survey which will be released at the Summit.


What PwC is asking CEOs about green growth in the 2012 APEC CEO Survey

Are inadequate or unreliable power or energy supplies posing a barrier to growth in the next 3–5 years?

Is your company using environmentally friendly technologies to increase operational efficiencies?

Would an oil price spike exceeding $150 impact your company?

Is your company planning to generate your own energy sources, such as solar, geothermal?

Is your company adopting water conservation technologies?

Is your company building rising water costs into your growth strategy plan?

Are energy bottlenecks impacting the growth and operation of your company in APEC economies?

How do water and energy security rank on your list of top priorities for what APEC needs to work on?

Do you think policies such as a carbon tax are needed?

Cypark is looking into converting as many as 18 other landfills in Malaysia into power-producing parks.

Eventually, the plant is expected to be the largest solar farm in Southeast Asia, with an annual 19GWh (Gigawatt hours) from over 50,000 solar panels and 17GWh from biogas.

Malaysia’s landfill turned solar/biogas power plant

A former 26-hectare (0.26 sq kilometers) landfill in Pajam, Malaysia has been converted into the country’s largest grid-connected solar farm. The landfill’s methane gas fires two gas engines to generate electricity which feeds into the power grid through a 21-year renewable energy power purchase agreement with Malaysian utility Tenaga Nasional Berhad. As the country’s biggest grid-connected solar plant, it currently has 8 megawatts in capacity.

Source: Greenprospectsasia.com, “Cypark Integrated Energy Park in Malaysia starts suppling solar power to grid from March 28th,” 27 March 2012

APEC’s Khabarovsk statement on environment

2012 APEC focuses:

“…[The] environmental protection and the conservation and sustainable use of natural resources, ecosystems and biodiversity are essential foundations for achieving sustainable economic and social results for the APEC region.”—Issued on July 18, 2012 at the 2012 APEC Meeting of Ministers Responsible for the Environment

Conservation of biological

diversity

Sustainable use of natural resources

Sustainable water management & trans-boundary

watercourses

Address air pollution & climate change

Support for green growth

Source: APEC press release, 18 July 2012

Asia Pacific renewable energy M&A plays solid M&A renewables deals

Deal value | # of deals

Targets in Asia Pacific

Bidders based in Asia Pacific

2010 2011$4,017|78 $4,612|58

2010 2011$4,776|81 $9,415|75

Asia Pacific renewables deals by country, 2011In US$ millions

$1,716Philippines

$982China

$683Australia

$579Japan

$176Chinese Taipei

$58Malaysia

$42New Zealand

$17Korea

$357India

$3Thailand

Source: PwC, “2012 outlook and 2011 review,” Renewables Deals, 2012

In US$ millions

$123

$98 $97

$123$126

Following the money to clean energy

New financial investment in clean energy in APECIn US$ billions

Top 3 in APEC clean energy investment, 2010 vs. 2011

2007 2008 2009 2010 2011

United States

China

Japan

$33.7$48.0

$45.0 $45.5

$7.0 $8.6

In US$ billions

Sources: Bloomberg New Energy Finance (figures include asset finance, public markets and venture capital/private equity investments); Pew Charitable Trusts, “Who’s Winning the Clean Energy Race?” 2012

Russia, US to drive global natural gas

In billion cubic meters

Natural gas production in selected APEC economies

Years: 2008, 2015, 2020, 2025, 2030, 2035

United StatesRussia China Canada Australia Indonesia

Source: International Energy Agency, “Are We Entering a Golden Age of Gas?” World Energy Outlook Special Report, 2011

8812035842

20307792035

7092030

3032035264

20301922035

1892030 155

2035147

2030 1192035

1092030

The great shale play—a boom for natural gas

US taking the lead… In 2012, shale-derived natural gas makes up nearly 30% of all US natural gas production. By 2035, this is forecast to grow to 49% of all production.

…but Asia Pacific fast behind By 2020, China could produce up to 112 billion cubic meters of shale gas, or 45% of total natural gas production—up from 12% in 2010.

By 2015, Asia expected to be world’s largest natural gas marketAPEC exporters include:

Papua New Guinea

Russia

Australia

Canada

United States

Indonesia

Malaysia

49% 45%

Sources: Eurasia Group, PwC, Eurasia Group Global Trends Quarterly, Third Quarter 2012; IEA, Golden Rules for a Golden Age of Gas, 2012

The smart meter race

By 2015, China will have over 4× more smart meters than the US

United States

362011

652015

China

362011

286 millions of smart meters installed2015

In millions of smart meters

Sources: Institute for Electric Efficiency, Utility-Scale Smart Meter Deployments, Plans & Proposals, May 2012; Zpryme, China: State Grid Corporation of China Profile, 28 March 2012

APEC and the smart grid

Global distribution automation market is forecast to grow from $5.7 billion in 2012 to $33.9 billion in 2020

% of global market Asia Pacific North America

2012

$5.7 bln

25%

44%

2020

$33.9 bln

37%

28%

Source: Zpryme, The Optimized Grid, July 2012

China, US lead APEC clean energy in capacity

Renewable energy capacity in 2011

World

China

United States

Japan

Wind, biomass, solar, geothermal and other= 1 gigawatt

Source: REN21, Renewables Global Status Report, 2012

APEC’s green growth aspirations

Cut energy intensity levelsAPEC economies set a goal for achieving a 45% reduction in APEC-wide energy intensity by 2035

Limit tariffs on green goodsAPEC economies announced plans to reduce applied tariff rates on environmental goods to 5% or less by 2015

The global market for environmental goods totalled $782.4 billion in 2008, according to the US Commerce Department, with the U.S. market at $299.5 billion in 2009.

Key 2011 APEC energy-related deliverables

During 2012, the member economies plan to specify the list of environmental goods that will be affected. US officials have identified solar panels, wind turbines, air filters as examples of preferred items.—In a statement made in November 2011 at the APEC Ministerial Meeting in Honolulu, Hawaii.

Identified preferred green goods

Solar panels Air filtersWind turbines

Sources: APEC; “US hopeful on APEC green goods compact, despite China dispute,” Reuters, 21 July 2012; International Centre for Trade and Sustainable Development, Bridges Weekly Trade News Digest, 6 June 2012

mtoe=million tonnes of oil equivalent

Fast-growing Asia drives global energy consumption

World energy demand is forecast to expand 36% through 2035

Non-OECD Asia alone will account for 57% of the world’s growth in primary energy consumption from 2011 to 2035

China will consume 79% more energy from 2011 to 2035—25% of the world’s energy consumption in 2035, up from 20% in 2011

An estimated $1.5 trillion investment in electricity generation per year through 2035 is needed to meet current demand

57%

79%

2008 2035

12,271 mtoe

16,765 mtoe

Oil 33%

Coal 27%

Gas 21%

Biomass 10%

Nuclear 6%

Other 1%Hydro 2%

Oil 27%

Gas 25%

Coal 22%

Biomass 12%

Nuclear 7%

Other 4%

Hydro 3%

Sources: International Energy Agency, World Energy Outlook 2010, 2011; US Energy Information Administration, International Energy Outlook, 2011


APEC’s path to green growthLeading up to this year’s Asia-Pacific Economic Cooperation CEO Summit in Vladivostok, Russia on September 7–8, PwC is sharing a series of infographics highlighting key Summit issues. This series also provides a sneak preview to some questions PwC is putting to business leaders in PwC’s 2012 APEC CEO Survey which will be released at the Summit.


Key issues around APEC growth Go to the Summit point of regional trade integration website

Fast-growing APEC economies continue to integrate on trade and investment fronts, leading to greater plurality of trading partners, especially within APEC-Asia

A key part of attracting greater involvement of multinational companies (MNCs) in this growth is the lowering of non-tariff barriers (NTBs)

As APEC-Asia integration deepens and as its economies continue to mature, this will change how the rest of the world re-balances—both on governmental and boardroom levels

What PwC is asking CEOs about growth & integration in the 2012 APEC CEO Survey

Looking to the next 3–5 years…Which economies will drive your company’s revenue growth?

To what extent do you expect ASEAN+ and, potentially, the Transpacific Partnership arrangements to impact your growth within the APEC group of economies?

What are most important factors driving APEC economic integration?In which APEC economies is your organization making its largest investments?

APEC CEOs on growth & integration

Source: PwC’s 2011 APEC CEO Survey

APEC economies will drive my company’s growth more than non-APEC economies through 2020

Inconsistent regulations and standards create a barrier to my company’s growth

Free trade in Asia Pacific is “critical” to my company’s success

85% 89% 64%

What CEOs said in 2011

Asia Pacific’s burgeoning middle class

By 2030, Asia Pacific’s middle class will be almost 5× larger than Europe’s and 10× larger than North America’s

North America Asia PacificEuropeSource: “China’s Emerging Middle Class: BeyondEconomic Transformation,” Cheng Li, Editor (Chapter Two, “The New Global Middle Class: A Crossover from West to East” by Homi Kharas and Geoffrey Gertz), The Brookings Institution 2010

APEC’s output cools, but stays strong through next decade

Annual GDP growth, CAGR

In wake of Eurozone debt crisis and recession, 15 APEC economies projected to outpace average global GDP growth over next decade

Mature APEC

Malaysia

Korea

RussiaChinese Taipei

Brunei

Japan

Mexico

PeruChile

Hong Kong

Canada

United States

New ZealandAustralia

ChinaVietnam

IndonesiaThailand

Papua New GuineaPhilippinesSingapore

0% 12%10%8%6%4%2%

2011–20212001–2011

Fast-growing APEC


World

Wages in next decade: Some boats rising faster than others

% Growth rate, 2011–2021

Rapid growth of annual average earnings in some APEC economies help smooth out large wage imbalances with mature economies over the next decade

Annual average earnings per worker in current US$ 20212011

China

325%

$16,

303

Russia

100% $19,

366

Indonesia

94%

$3,5

54

South Korea

91%

$33,

550

$64,

132

Vietnam

73%

$4,0

74

Singapore

55%

$41,

276

$64,

005

Canada

36%

$53,

422

$72,

471

Japan

6%

$52,

754

$49,

818

$3,8

28 $9,6

76

$2,3

54

$1,8

34


APEC consumer spending power to nearly double through 2021

APEC’s top 10 consumer marketsPrivate consumption at current market exchange ratesIn US$ trillions 20212011 Compound annual growth rate (CAGR) 2011–2021

Mature APEC

3.20%

$16.20$23.60

Total APEC

$41.00

$22.60

5.50%

Fast-growing APEC

9.80%

$6.50

$17.40

United States

3.78%

$10.73

$17.14

China

14.54%

$2.36

$9.67

Japan

1.11%$3.55

$3.85

Russia

6.94%

$0.93$1.80

Canada

2.28%$0.99$1.36

Mexico

4.73%$0.75$1.32

Australia

2.65% $0.80$1.14

Indonesia

8.02%

$0.46$1.09

Korea

5.82%

$0.59$1.06

Chinese Taipei

5.99%

$0.28$0.51


Investment magnets: APEC’s fast-growing economies

Fast-growing APEC economies are capturing more foreign direct investment than mature economies

Inbound FDI in US$ billions Mature economiesFast-growing economiesAPEC

2001 2011 2021

$1,500

$1,000

$500

$0

$133.4

$490.6

$1,166.7

$208.9 $317.1

$486.1$342.3

$807.8

$1,652.8


China dependant? Export share to China

By 2021, 8 APEC economies will see at least 30% of their exports going to China—up from 1 in 2011

2011 20212001% Export share to China

Australia

6.227.4

39.6

Hong Kong

36.848.7

61.9

Chinese Taipei

3.927.2

36.7

Chile

5.520.6

38.3

Korea

12.023.9

33.5

Japan

7.719.6

30.6

Philippines

2.512.7

30.3

Peru

6.118.3

30.0

Indonesia

3.911.3

15.7

Malaysia

4.313.1

18.1

United States

2.67.0

11.4


By 2021, intra-APEC trade is set to nearly triple

2001 2011 2021

In US$ trillions Intra-APEC exports APEC’s exports to rest of world

$2.1$5.7

$2.8

$14.6

$5.6

$0.8


Fast-growing APEC trade with fast-growing APEC

Fast-growing APEC economies are steadily integratingIn US$ trillions

$0.6$1.4

$3.5

2001 2011 2021Source: PwC analysis based on various historical and forecast sources, including Oxford Economics

Fast-growing APEC economies power trade growth

Fast-growing APEC economies will account for about two-thirds of overall APEC trade, up from about half in 2001

Fast-growing APEC economies as a % of all APEC trade

2001

2011

2021

49%

63%

65%Source: PwC analysis based on various historical and forecast sources, including Oxford Economics


Asia Pacific growth & integrationLeading up to this year’s Asia-Pacific Economic Cooperation CEO Summit in Vladivostok, Russia on September 7–8, PwC is sharing a series of infographics highlighting key Summit issues. This series also provides a sneak preview to some questions PwC is putting to business leaders in PwC’s 2012 APEC CEO Survey which will be released at the Summit.


What PwC is asking CEOs about supply chains in the 2012 APEC CEO Survey

Should improving supply chain resilience rank as a highest priority for APEC to work on?

Is your company using environmentally friendly technologies to increase operational efficiencies?

Which supply chain actions are you taking?Reducing geographic concentration of operations or supply chainBuilding redundancies into operations or supply chain

How great a need do you see for improving supply chain logistics through real-time global tracking and tracing?

To what extent is the need to significantly improve the supply chain logistics of your organization through technology and innovation?

Using technology for real-time visibility of operations and supply chainSubstituting domestic supplies for foreign suppliesDiversifying suppliers or partners/alliancesIncreased demand planning with suppliers

2012 APEC CEO Summit issues spotlight: APEC’s evolving supply chain

From Changzhou, China to Kansas, US

Real-time tracking of an electronics partChina

United States

Chinese Taipei

Electronics part starts journey at supplier in Changzhou, China1

Transported to Pudong Int’l Airport in Shanghai by local freight forwarder2

RFID: Radio Frequency Identification

GNSS: Global Navigation Satellite System

GPRS: General Packet Radio Service

RFID

Flown to Taoyuan Int’l airport, Chinese Taipei3

RFIDGNSS

Delivered to manufacturer in Guishan, Taoyan, Chinese Taipei; part is used in assembly of an electronics product

4

GPRSGNSS

Electronics products trucked to air cargo terminal and shipped by air to Chicago airport, then trucked to Kansas

5

RFID

Source: APEC, “Enhancing Supply Chain Visibility and Security with GNSS in Chinese Taipei,” Jaching Chou, Institute of Transportation, Ministry of Transportation and Communications, Chinese Taipei, 4 October 2011


Innovating the supply chainChinese Taipei’s Ministry of Transportation and Communication is applying technologies in pilot projects across its supply chains both in-country and in other economies such as China and Malaysia. The pilots are aimed at improving underdeveloped air, maritime, and land transport logistics to improve the efficiency and security. Container traffic departures, arrivals, and other logistics status are logged and can be tracked online.

Technologies work together to track containers’ logistics status en route in real time

e-Seals, or RFIDs (Radio Frequency Identification) are attached to shipping containers…

…which links to a web of communications tools to track the product’s location…Global Navigation Satellite System (GNSS)

Global Positioning System (GPS)

Geographic Information Systems (GIS)

General Packet Radio Service (GPRS)

Wireless communications (3G, WiMax)

Web services

…informing and connecting logistics players:Shippers

Trucking services

Air cargo terminal personnel

Customs officials

Source: APEC, “Enhancing Supply Chain Visibility and Security with GNSS in Chinese Taipei,” Jaching Chou, Institute of Transportation, Ministry ofTransportation and Communications, Chinese Taipei, 4 October 2011


Offshoring and the expanding global supply chain

Percentage of companies surveyed globally who believed in offshoring these business functions, 2010–2012

61%69% 38% 37%50%

Strategic sourcing/supplier development

Product development/new product introduction

Final assembly/configuration

ManufacturingShared services (HR/finance/IT)

Source: PwC, The Global Supply Trends 2010–2012, 2010


Russia’s role as supplier to APEC economies widens through decade

50%Over 50% of the business functions or activities, such as product development and/or new product introduction, demand planning and/or forecasting, supply chain planning and sales and operations planning, strategic sourcing and/or supplier development are to be moved offshore by 2012.—The Global Supply Chain Trends 2010–2012 conducted by PRTM Management Consultants in 2010

JapanUnited States KoreaChina Thailand$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

Russian exports in US$ millions Percentage of Russia’s total exports2001 2011 2021

79,359

29,490

4,021

49,860

28,597

5,944

27,517

16,430

2,438

17,279

7,735

842 69

3,647

7,949

9.18%

6.02%

4.87%

5.77%

5.84%

7.20%

3.18%

3.35%

2.95%

2.00%

1.58%

1.02%

0.92%

0.74%

0.08%

Source: PwC analysis based on Oxford Economics data


APEC’s leaders—and laggards—in logistics efficiency

Singapore, Hong Kong top APEC and world in logistics ranking

Singapore Hong Kong Japan United States Canada

Australia Chinese Taipei Korea China Malaysia

New Zealand Thailand Chile Mexico Philippines

Vietnam Indonesia Peru Russia Papua New Guinea

1 2 8 9 14

18 19 21 26 29

31 38 39 47 52

53 59 9560 128

4.13 4.12 3.93 3.93 3.85

3.73 3.71 3.70 3.52 3.49

3.42 3.18 3.17 3.06 3.02

3.00 2.94 2.942.58 2.38

Global rank LPI score

Customs clearance charges for fast-growing economies are estimated to average $134—but in Korea, it averages just $30, due in part to simple, electronic documentation

2012 World Bank Logistics Performance Index (LPI) measured 155 countries’ logistics efficiency from 1 (worst) to 5 (best)

Source: The World Bank, “Connecting to Compete,” 2012


APEC’s supply chain challenges

Current barriers standing in the way of efficiencies

In mature economiesCustoms/port clearance speed, complex regulations/standards, and burdensome document requirements

In fast-growing economiesInfrastructure, transparency of procedures, variability of clearance times, efficiency/quality of customs services, availability of logistics services, connectivity of transport nodes, lack of online IT logistics systems, presence of corruption

Source: University of Southern California Marshall School of Business, ABAC, “APEC Supply Chains: Identifying Opportunities for Improvement,” 2011


Revenue increase

9%

13%15%

Supply chain cost reduction

Transportation cost reduction

Inventory reduction

Flexible supply chains: Where the costs savings are

Benefits of increased supply chain flexibilityRelative quality of a company’s supply chain Laggard Challenger Leader

-5%

-8%-10%

-4%

-9%

-12%

-8%

-12%

-15%

Source: PwC, “Achieving Operational Flexibility in a volatile world: Global Supply Chain Trends 2011,” 2011


Scattered success in lowering non-tariff trade barriers across APEC

The 8 economies that have improved non-tariff barrier mechanisms, 2005–2009

2005 2009

Hong Kong

8.60

8.89

Chile

7.68

8.80

Singapore

8.60

8.73

Peru

5.19

6.71

Mexico

6.15

6.25

China

5.14

6.01

Thailand

5.00

5.97

Vietnam

4.35

4.97

WEF non-tariff trade barriers index, 1–10, with 10 being lowest trade barrier rank

Note: Non-tariff barriers—taken from the World Economic Forum’s “Economic Freedom of the World Index.” 1=very high non-tariff trade barriers, 10=very low non-tariff trade barriersSource: PwC analysis based on Oxford Economics data


APEC’s supply chain progress, goals

5.8%

10%

Average applied tariffs in APEC economies have been reduced from 16.9% in 1989, when APEC was established, to around 5.8% in 2010.

APEC has set as a target to improve supply chain performance by 10% (i.e. improving the flow of goods and services within the APEC region in terms of reduced time, cost and uncertainty) by 2015.

APEC has made progress across its supply chains, but must improve to keep up with ballooning trade volumes

Source: APEC Committee on Trade and Investment website


APEC’s eight supply chain chokepoints

Removing key trade bottlenecks will facilitate smoother, faster, less expensive and more secure intra-APEC trade

TransparencyLack of transparency and awareness of the full scope of regulatory issues affecting logistics

Standards & regulationsVariations in cross-border standards and regulations for movement of goods, services and business travelers

InfrastructureInefficient or inadequate transport infrastructure and cross-border physical linkages (e.g., roads, bridges)

LogisticsLack of capacity of local and regional logistics sub-providers

Nodal connectivityUnderdeveloped multi-modal transport capabilities; inefficient air, land, and multimodal connectivity

ClearanceInefficient clearance of goods at customs and lack of coordination among border agencies

DocumentationBurdensome customs documentation and other procedures

TransitLack of regional cross-border customs-transit arrangements

Source: APEC, 23rd Electronic Commerce Steering Committee Group, “Supply Chain Connectivity Action Plans,” 2011


Weak link, strong link: APEC’s unbalanced supply chains

Trade in fast-growing economies is nearly twice as costly and half as speedy in mature economies

To mature economy (import)

From mature economy (export)

From fast-growing economy (export)

To fast-growing economy (import)

2.1days/shipment

4.1days/shipment

3.6days/shipment

5.6days/shipment

$617/container

$1,307/container $840

/container

$1,084/container

Source: University of Southern California Marshall School of Business ABAC Team 2011, APEC Business Advisory Council, “APEC Supply Chains: Identifying Opportunities for Improvement,” 2011



APEC’s evolving supply chainLeading up to this year’s Asia-Pacific Economic Cooperation CEO Summit in Vladivostok, Russia on September 7–8, PwC is sharing a series of infographics highlighting key Summit issues. This series also provides a sneak preview to some questions PwC is putting to business leaders in PwC’s 2012 APEC CEO Survey which will be released at the Summit.

Addressing Challenges, Expanding Possibilities. PwC’s 2012 APEC CEO Survey

1. You attended last year’s APEC CEO Summit in Honolulu. What were your impressions?The quality of the attendance at the event, particularly from world leaders, was outstanding. I was fortunate to be on the opening panel session of the Summit with Lee Hsien Loong, the Prime Minister of Singapore, and I felt there was a constructive debate on the issues facing the APEC region and real engagement with the audience. The real strength of APEC last year was the opportunity to bring business and political leaders together and to talk about key issues facing the APEC region, I am confident we will have a similar opportunity in Russia this year.

2. What do you think are the biggest issues shaping the dialogue about free trade and economic prosperity in APEC?There are a number of big issues on the agenda for the APEC region. These include the impact of the relatively weak economic recovery in the US, the Eurozone problems, and the slower growth that we are seeing in China. How will these developments affect prosperity and growth in the APEC region? Also I think the issues of talent shortages in certain markets and sectors, the uneven nature of regulation across the region and protectionism are things that business would like to see on the agenda for APEC.

3. Given the world’s current climate of economic instability, do you believe that forums like APEC can be effective in addressing global issues and crises?The world is facing a series of very complex and significant problems at the moment with no easy solutions. It is unrealistic to expect any one Summit or meeting to provide all the answers. However we also know that the problems that we face are global ones and that we will only make real progress through discussion and consensus. Any meeting that brings together business and political leaders at the highest

levels to put the key issues of financial stability, regulation and protectionism on the table is a good thing. If last year’s meeting is a guide, then I think that APEC can make a significant contribution to the debate.

4. Last year at the CEO Summit you met former Russian President Dmitry Medvedev. What do you think Russia can contribute to the APEC dialogue?I think it will be very interesting to see what role Russia will play in the debate at APEC this year. For many reasons I don’t think that Russia (rather like the US) has been viewed as a Pacific nation. However like the US, Russia is very conscious of the shift of economic power to the Pacific nations and the need to develop strong links both economically and politically with the key Pacific powers. It will be interesting to see how Russia positions itself at the APEC meeting and how it sets out its future plans for developing closer links with its Pacific neighbours. As the only APEC country will one foot in Europe and the other in the Pacific region, Russia has a unique perspective on some of the trade issues that we face around the world—particularly issues around the future of energy supply. It will be very interesting to listen to the Russian view on these key issues at the APEC meeting.

5. What is your favourite thing about Russia?I have visited Russia many times and I have always been impressed by the energy and dynamism of both Russian business and the Russian people. PwC has been very closely involved in the development of the Skolkovo innovation centre and the progress that has been made there over the last few years has been very impressive. This is my first visit to the Pacific region of Russia and I’m looking forward to it.

Dennis M. Nally is Chairman of PwC International Ltd.

Dennis Nally:

APEC to put the key issues of financial stability


During the session titled “Supply chains: ever more efficient, ever more vulnerable,” I will focus mainly on the specific steps that could be taken to make supply chains both more efficient and more reliable. During this discussion, I will also ask for participants’ views on the proper balance between optimising costs and ensuring that global supply chains are robust. How to find this balance is a very crucial question. Making commodities less costly and enhancing the reliability of their movement along the entire logistics chain, from producer to consumer, is a key factor in international trade. This involves a number of factors, including forming economically viable and secure commodity supply chains, coordinating various modes of transport, setting up transport hubs and corridors with state-of-the-art IT and satellite navigation systems, and harmonising transportation security standards. For sure, the session will also touch upon the overall benefits that the APEC region offers.

I will be pleased if we have and interesting discussion that is also right to the point and wraps up with a consensus on some concrete steps that should be taken concerning supply chains. I fully expect that participants will share their personal views with the audience as well as their experience in APEC and vision for the region’s future. All in all, I anticipate

that the panelists will touch upon a range of global issues, including how the APEC region can benefit leading global players as well as a detailed look at the main challenges now facing supply chains.

The 2012 APEC CEO Summit is definitely major event for all APEC member economies, and especially those whose main interest is in cooperation to promote economic modernisation. First of all, this involves initiating an exchange of advanced know-how on how to go about shaping a favorable institutional environment that can foster innovative development and help create region-wide mechanisms for working together in science, technology and innovation. PwC was the Knowledge Partner of the 2011 APEC CEO Summit, which took place on 10–12 November in Honolulu, Hawaii. And, once again, this year we will be publishing special APEC CEO Survey report. We’re confident that this unique publication will be of great interest for all participants. In general, we’re expecting the 2012 Summit to once again provide a unique forum for all participants to meet, network and lay the groundwork for further collaboration.

Donald V. Almeida is Vice Chairman, Clients and Markets of PwC International Ltd.

Donald Almeida:

During this discussion, I will also ask for participants’ views on the proper balance between optimising costs and ensuring that global supply chains are robust


You attended last year’s APEC CEO Summit in Honolulu. What are your impressions from that first visit?Last year PwC was, once again, the Knowledge Partner for the APEC Summit, and our Global Chairman Dennis Nally launched our CEO survey on the Asia Pacific. The Summit gathered a lot of businessmen and government officials from different countries who all contributed to a profound discussion of the most pressing issues that face China and the Asia Pacific region. This year, as the Summit takes place in Russia, I expect there will be a greater focus on Russia and economic integration in the region.

What are the key issues shaping the agenda in that area?We view economic integration as a priority issue on the Summit’s agenda. This year there will be a panel discussion about it immediately after the Russian President’s address. We know that APEC CEOs are planning to make significant investments in China, the United States, Russia, Singapore and elsewhere in region over the coming 3–5 years. The region is highly interconnected in terms of R&D, local talent pools, and the customer base. However, there are still a lot of obstacles along this road to integration, things APEC CEOs encounter on a regular basis, such as restrictions on cross-border investment, trade barriers, corruption etc. These and many other issues will be addressed at the Summit, to help make sure this deeper economic integration is on track.

You attended the Davos Forum and the St Petersburg International Economic Forum. What is APEC’s particular contribution to today’s global agenda?The intensifying interconnectedness within APEC-Asia is shifting the centre of gravity from the Americas and Europe to APEC-Asia. And business leaders believe these intraregional ties are set not only to continue, but to deepen. Many CEOs are convinced the rise in spending power in Asia, particularly in China, offers their companies their single biggest opportunity for growth. It is predicted that by 2030 two-thirds of the world’s middle class will reside in the Asia Pacific region. Taking all this into consideration, the 2012 APEC CEO Summit is sure to be a major event for all APEC member economies, and especially those whose main interest is in cooperation to promote economic modernisation. I anticipate that the 2012 APEC CEO Summit will create a unique platform for all participants to meet, network and to further collaborate in R&D, industrial, talent and other areas. I am sure that this year’s APEC CEO Summit in Vladivostok will be highly beneficial both in a broader, global, sense and for APEC participants.

How would you evaluate Russia’s role in the Asia-Pacific region?Russia’s Far East boasts a wealth of resources that could potentially service much of the demand in Asia over the coming decades, but a great deal of work remains to be done before this potential is fully unlocked. What

David Gray:

Economic integration as a priority issue on the APEC CEO Summit’s agenda


are the main issues and solutions for the further economic integration of East Siberia with the dynamic economies of Asia? These crucial questions have to be discussed at the upcoming Summit. Russia is already making good progress in terms of infrastructure development. PwC Russia is a Partner of the XXII Olympic Winter Games and XI Paralympic Winter Games that will be held in the city of Sochi in 2014, and these Games will be Russia’s chance to showcase itself to the world.

You have spent over 20 years in Russia, what strikes you most about this country and what was your most rewarding experience?Many people outside Russia still employ outdated, inherited, stereotypes that mask the very real progress that has been made in this country over these years. All those who have either visited Russia regularly over the last two decades, or who—like me—have moved here, see how far-reaching these changes have

been. I believe that the large domestic market, the high creativity of the Russian people and their natural taste for high quality and distinctive products is contributing to a revival in Russia’s brand globally. Russia will certainly always mean something very special to me, because this is where I found so many exciting professional opportunities, it is where I met my (Russian) wife, and importantly—it is a country where I still have so much to discover, where there is so much more to explore…

David Gray is the Country Managing Partner, PwC Russia since 1 July 2011.

Prior to this appointment, David was the leader of PwC’s Energy, Utilities and Mining practice in Central and Eastern Europe. David has been working in Russia for more than 17 years and has helped build a market-leading practice.

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