Global economic recovery means more tender opportunities for private sector: Vector Scorecard

By Patrick Chong

The global economic recovery has been better than expected. The forecast is for the world economy to grow low single digits for 2010 and 2011 . Although the rate of recovery differs from country to country, as a whole, there is a distinct trend that the recovery is much stronger compared to 2009.

Asia is leading the recovery among emerging and developing economies. Among the advanced and developed countries, United States is ahead of the pack that includes Europe and Japan. The laggards in the recovery are the emerging European economies and Commonwealth of Independent States.

The positive recovery coupled with low interest rates translates into millions of tenders that can be expected from institutions like the World Bank, International Monetary Fund and Asian Development Bank, to mention only a few. The two giant economies of China and India are expecting GDP growth of 9.6% and 8.8% respectively.

Vector expects the coming months will see increased tenders for major areas like infrastructure and construction tenders, information and communication technology and services tenders in financial and economic consultancy.

SMEs and Innovation: Top 10 List

Government agencies around Asia are citing innovation as a key driver of growth of SMEs. To this end, several schemes and initiatives are being formulated and launched to encourage SMEs to embrace and adopt innovation for their business. As a start, we put together a list of steps for SMEs to kick off innovation effectively. Here is the list:

Step 1: Know what innovation means

First and foremost, be sure you know what innovation is. Innovation is the implementation of creative ideas in order to add value to the firm, usually through increased income, reduced operational costs or both.

Step 2: Innovation is best embraced in groups
Understand that innovation is not an individual but a group thing. Do remember that an idea is not an innovation. It is only the beginning. In business, ideas need to be evaluated for viability, developed into concepts and turned into reality. A new product idea, for example, will likely involve developing prototypes, seeking feedback, testing functionality, setting up production facilities, seeking suppliers and much more. Each of these steps requires the participation of numerous different people, all of whom contribute to the overall innovation process.

Ideally, new creative thinking will go into the product concept at every step of this process, making it more and more creative all the time!

We must recognise that Risk adverse committees or individuals tend to remove creative elements of new product ideas at every step of the production process, thereby reducing innovation potential. If you company is like this, you either need to get rid of those committees or start with incredibly creative ideas so that by the time the committees finish with the ideas, they still have lots of innovation potential.

Step 3: Define your innovation goals and link to bottomline
You need to have clear innovation goals to aim for. Fortunately, these goals tend to be rather similar to strategy and business goals. So, it is usually a simple matter of reformulating these. Typical innovation goals might be to ensure that 25% of your product line is replaced annually; or to improve process efficiency by 5% per year; or that your firm is the technology leader in your sector; or that your company achieves a billion dollar turnover by 2012.

Step 4: Put your money where your mouth is
You need to set up an innovation process, put a team in charge, invest in innovation tools and invest in training. That all requires money. Moreover, you need to make a pot of money available for implementing highly risky yet potentially highly innovative ideas. After all, the ideas with the greatest innovation potential are by necessity radically different to business as usual. This means they are also risky. If you are going to aim for breakthrough innovation, then you need to provide budget for developing and implementing breakthrough ideas.

Finally, bear in mind that if your innovation budget is zero or has ambiguous commercial direction, the attention your managers will give to innovation will also be zero! On the other hand, if there is budget for innovation or potential for high commercial success, you can be sure your managers will be scrambling to participate in the process!

Step 5: Promote an innovation culture
For creativity and innovation to thrive, you need to have a corporate culture that nurtures creative thinking, sees mistakes as on the job training and embraces every step of the innovation process. Sadly, very few firms actually do this.

For instance, what is the typical response to an intern who announces a wild and crazy idea during a unit meeting? Is it (a) to laugh knowingly and explain that there is no budget, the CEO would never like it and that the intern clearly does not know how things work in your company? Or is it (b) to congratulate her on a clever idea, discuss the challenges that would be faced in implementing that idea and asking her to work out how she could improve the idea so that it can overcome the challenges?

Step 6: Establish diverse teams
Diversity is not only politically correct, it is also innovatively correct! Diversity of membership brings a broader range of knowledge, experience, thinking and creativity to any team. You should therefore ensure that project teams, problem solving teams and all teams that are expected to contribute to your innovation process are as diverse as possible.

Step 7: Collaborative tools
Collaborative tools can help support your innovation process. In smaller firms, Wikis, blogs and shared documents permit a lot of collaboration with little technological investment. In larger firms, innovation process management tools can help ensure cross enterprise collaboration, facilitate collaboration by predefined teams as well as ad hoc virtual teams and provide a detailed record of your innovation results. But be careful to choose tools and use them to achieve your innovation goals. Many tools might be great for generating and sharing ideas, but if those ideas are completely irrelevant to your goals, they will not help your firm become more innovative.

Step 8: Make mistakes and learn from them
Most great innovations are built upon mountains of mistakes. As long as you can identify ideas that will not work relatively early in their implementations, you can kill them before they eat up too much budget. You can then congratulate the team responsible for their efforts, evaluate what went wrong, learn lessons and try again. But as soon as mistakes cost people jobs, no one will dare to try anything very radical – and that will kill all but incremental innovation.

Step 9: Implement
Innovation is not about ideas or creativity or training programmes. It is about implementing creative ideas in order to add value. If your firm is reluctant to implement highly creative ideas, then your entire innovation process will be little more than a creative thinking exercise. Moreover, if employees note that highly creative ideas are routinely not implemented, they will not bother sharing or developing such ideas.

Step 10: Evaluate and improve
Your innovation process can also improve through innovation! That's why you need to review the process and the results on a regular basis. Moreover, use your innovation process for generating, developing and implementing ideas for improving that innovation process!

Cause2Care: Adopt-a-Song to help the Underpriveleged

As part of its corporate social responsibility, Vector Group is privileged to be part of a cause to help the disadvantaged. Working closely with established voluntary welfare organisation, AIN Society, Vector has launched the Adopt-a-Song campaign to help children cancer patients and breast cancer women patients from low income families.

This campaign was successfully launched by Senior Minister of State for Ministry of Foreign Affairs, Mr Zainul Abidin Rasheed. Melodic and melancholic piano pieces, originally-composed to be adopted by individuals and business owners. Comes with 3-track CD + Pictorial Book with inspirational books + Frame. Proceeds will go towards the setting up of a support centre to take care of welfare needs of the children.

For more details, please email carmen@vsapac.com.

Key Challenges for SMEs in 2011

Following the onslaught of the global economic crisis in 2009-10, we have now begun to experience some form of short-term recovery. It still remains unclear how SMEs can chart a sustainable path for the next economic cycle shock - which appears to be getting shorter in the last 20 years.

Here, we list you the top 3 challenges that SMEs are likely to face - and how correspondingly, they have to address more proactively in 2011:

1. price and margin pressure:  the economic recovery, in the short-term, is likely to drive competition up - and encourage the entry of new players due to improved sentiments. Such players would try to push prices down in order to get a slice of market share from incumbents. The existing players, would have to adjust their pricing mix across its product portfolios. Now the problem is, we estimated that at least 60% of SMEs does not have a diversified product mix - which means that any form of adjustments, is limited to a few products. The issue of product dependency and concentration thus becomes apparent. Overall margins for the incumbents - in industries such as retail, trading and services are most likely to be affected.

2. scalability of business model: any product offerings, pricing strategies, business positioning and clientele mix managed by a particular SME needs to be scalable. We estimated that around 77% of Asian SMEs have difficulty to scale up their business model into new markets and acquire new clientele base. This is a critical hurdle to overcome should they want to improve thier underlying profitability.

3. diversification and focus: in order to capture new opportunities, around half of Asian SMEs typically would want to diversify their business quickly. However, the lack of understanding of the supply and value chain positioning, including underestimating the level of resources vs overestimating returns that could be recouped, cause distraction and often, shift the focus away from their core competencies. This would either impede growth and if any growth is experienced, it would be ad hoc and moving in all directions. Any form of diversification strategy needs to be in line with the firm's a) resources b) core competencies c) short-long term goals d) systematic; failing which, revenue would always be volatile, and a high staff turnover is expected; or worse, management changes.

Consulting Opportunities in Vector Group

Vector Group provides advisory solutions to both public and private sectors in Asia-Pacific, through use of its proprietary scorecard methodology driven by expert systems and artificial intelligence (AI).
As part of our deliverables to undertake new, upcoming projects, we are currently looking for more than 20 Associate Consultants to work alongside with our project team in consulting jobs - both local and foreign -  covering a wide spectrum of specialisation:

1) Info comm and technology
2  Media and publication
3) Financial and risk management
4) Ornamental fish and aquaculture
5) Entrepreneurship and entrepreneurial development

6) Human Resource development

Details will only be shared when you have submitted your full CV, get invited for face-to-face interviews, sign a non-disclosure form and meet up with our senior advisory team. Attractive rewards and exposure await for the right candidates.

Please email to mnaz@vsapac.com . We regret that only shortlisted candidates will be notified.

Background of securitisation and credit guarantee: APEC Report excerpts

by : Gyutaeg Oh and Jae-Ha Park

The development of the regional bond markets has long been seen by APEC economies as an important objective in the broader effort to promote greater openness, diversity and competitiveness in regional financial markets.

This position was reaffirmed most recently in the APEC Finance Ministers’ Joint Ministerial Statement of September 2002 and the APEC Leaders’ Declaration of October 2002 in Los Cabos, Mexico. The objectives of this initiative are to identify impediments to the development of securitisation and credit guarantee markets within the APEC economies and to propose appropriate solutions to remove them.

Securitisation coupled with credit enhancement offers significant benefits for developing markets to the extent that it helps reconcile credit and liquidity mismatches between issuers and investors and can also facilitate balance sheet restructuring.

This APEC initiative on the development of securitisation and credit guarantee markets is highly action-oriented, and it is co-chaired by Hong Kong SAR, Korea and Thailand. This initiative involves (i) holding policy dialogues for the APEC economies to exchange views on the use of securitisation and credit guarantees at the national and regional levels and (ii) sharing experience among APEC economies in identifying impediments and developing detailed action plans.

The first policy dialogue was held in April 2003 in Seoul. So far, nine APEC member economies have participated in the initiative, either by sponsoring experts or by seeking expert advice on how to remove impediments in their markets. They are Australia, China, Hong Kong, Japan, Korea, Mexico, the Philippines, Thailand and the United States.

Through collaboration among expert panels, domestic interdepartmental taskforces and private sector advisory groups, action plans at the economy level have been drafted to remove impediments to the development of securitisation and credit guarantee markets in individual APEC economies.

The Concept of the Credit Guarantee Scheme

A credit guarantee is a commitment by a Credit Guarantee Scheme (CGS) (the ‘guarantor’) regarding the repayment of a loan received by an enterprise (the ‘borrower’) from a commercial bank (the ‘lender’).

 Credit guarantees can facilitate access to finance only if they are accepted as a valid substitute for other forms of collateral by commercial banks.

In order to be recognized as a valid risk mitigating, a credit guarantee must display certain features, including adherence to Basel II conditions meted on banks.

In particular, a credit guarantee must be direct (i.e. represent a direct claim of the lender on the guarantor), explicit (i.e. address a specific exposure), unconditional (i.e. its payment is not submitted to conditions that are not under the control of the lender), irrevocable (i.e. cannot be cancelled by the guarantor unless the lender has failed to fulfill its obligations), explicitly documented and legally enforceable.

Although established precisely to alleviate commercial banks’ risks, credit guarantees typically do not cover the full value of loans, in order to avoid ‘moral hazard’ and opportunistic behavior.

A system based on credit guarantees requires reconciling different and equally legitimate interests, it is not about “imposing” anything on banks or granting a ‘free ride’.

New opportunities, new partnerships!

Hello everyone!

Welcome to the inaugural blogspot edition of the Asia Business Corridor (ABC).

ABC is as simple as it sounds but carries a meaningful focus. This is a platform for opportunities, knowledge, cultural exchange and philanthrophic activities.

ABC is a useful platform for government agencies, NGOs, SMEs and budding entrepreneurs - and is more than a blog or portal. We have an integrated suite of off-line advisory helpdesks, systems to assess market risks, business roadmapping for international plans and training courses for those who dare to venture abroad.

When you want to explore business opportunities in the region, you need to have a lot of information, contacts, guidance, toolkits and a good understanding of the foreign markets.

Most importantly, you need to have a good sense of your current situation and your business priorities - so that the information that you obtain can be customised to suit your circumstances.

For November's issue, we would like to cover the following key themes:

1) what credit guarantee means for government agencies
2) tender opportunities in the international market, particularly in the areas of infrastructure/construction, IT and services.
3) top issues for SMEs in the region and what it means for 2011
4) consulting opportunities for subject matter experts in the region
5) calling all business people to help the needy! Paying it forward...

So enjoy surfing - and power to the business people!


Regards
Editor-ABC