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Mobilising Asia Skills Conference, March, 2000

FINANCE/BANKING

by Mr Bimal Bilasingham,
Strategic Projects Manager - Group Strategy, AXA Asia Pacific

Mr Rober Taylor
Partner, Deloitte Touche Tohmatsu and former Country Manager, Thailand

Good morning ladies and gentlemen. Today I'd like to tell you a little bit about AXA, our work in Asia and the skills we see as necessary to succeed in Asia. AXA is a global group; it's focus is on insurance, asset management and related financial services. We have more than a hundred and thirty thousand men and women working in over sixty countries. It's the world's largest insurer with over a hundred billion dollars in premiums and the world's third largest asset manager with over a trillion dollars in assets from management.

If you look at Asia from Pakistan in the west down to Japan in the east, we have over thirty companies in that region. There is life insurance, property and casual insurance, insuring motorcars and homes, re-insurance, investment managers and assistance companies. Assistance companies are, for example if you are stranded in Vietnam, hit down by a car or some illness, you'll get repatriated and a helicopter will fly in and fly you around. We are also involved in e-commerce, particularly in Japan through DLT Direct, which is an Internet, stockbroker.

Asia continues to be attractive for AXA because of a number of reasons. Firstly, there are excellent economic prospects; growth continues to be good despite the crisis. There is an emerging middle-class and that middle-class has wealth earnings to accumulate. Insurance and investment coverage is still very low and there are high growth rates in savings and in insurance streams. There is also a relatively price-sensitive market. The sales in life insurance in particular, depend more on relationships than on the pricing of the product.

I'd like to focus a little bit on life insurance to illustrate the benefits and challenges of working in Asia. AXA entered the Asian life insurance market through National Mutual in 1986. We made a $60 million investment in Hong Kong. Today our life insurance operations cover 10 Asian countries, 4 million customers, 6000 staff and 14,000 agents and that makes us the biggest insurer in Asia. And that shows you just our life insurance operations in Asia. We have a particular investment philosophy when we invest in Asia. The first thing is we like to get in early. We have identified this early entry status as the key success factor in all the major Asian markets. The foreign companies that have entered the life insurance sector first have been and continue to dominate the marketplace. The second this is that we are a long-term player. We go into Asia and expect to stay for ten to fifteen, or twenty, thirty, forty or fifty years.

We invest in Asia on a portfolio basis. That means we want to have businesses that cover a range of maturities - start-up corporations, growth corporations and mature operations. If you look at the chart, in Philippines and Indonesia, these are pretty much emerging markets for life insurance. Japan on the other hand is a very mature business. We recently acquired the thirteenth largest life insurance in Japan. This will give us about US$14 billion of assets while on the other hand, our operations in Thailand is a total start-up so we try to have a portfolio of assets in Asia ranging from small right up to the big mature businesses.

Wherever possible, we try to create partnerships and wherever appropriate. A good story would be our partnership in Philippines. We are linked with the number one bank in the Philippines called Metro Bank. Warren Lee who was an international business manager for us told us a story of how six years ago, he knocked on the door of Metro Bank and was kept waiting for forty-five minutes and dismissed after a brief two-minute discussion. Six years later last year, he signed the agreement to form a partnership. The relationship built over six years is actually an incredibly strong one and that was the persistence of our people to work together with Metro Bank from a position where we didn't know them, they didn't know us. Six years later, as we signed the agreement they said, "In the Philippines, like marriage, a merger is for life."

We like to have management control. We are investing in a business and we are bringing expertise to the business and therefore it's a prerequisite for any investment we make. Equity holding is also another key factor for us. We like to have majority of holding wherever possible. Other key investment philosophies, the investment philosophy of AXA, which is to think global, act local. A lot of the day-to-day operations are decentralized except for a few key issues of capital and human resources. Everything else is left to the local manager to handle.

The key to success in life insurance is people. Life insurance is intangible, it is a product, and it is easily copied. We have no means to protect us and what we need is the right people to do the right job. If you look at our Hong Kong operation, I told you that we initially invested $60 million, last year it was well over $2.5 billion so over fifteen years, that growth has been tremendous. Why has it been successful? One of the reasons is the partnership that was created, strong leadership over a financially tough Australian CEO and a charismatic Hong Kong born director of sales. If you look at our Indonesian operations, we grew 300 percent last year. Again, there is a partnership there between an Indonesian Senior Officer, incredibly influential, from a strong sales background and a key CFO. These partnerships are crucial, we believe for successfully dealing with myriad of challenges facing our businesses in Asia that concern political, regulatory, economic, religious and cultural issues. You may start with a business plan but you're not going to end up with what the business plan said you'd do and it's a matter of being flexible to change and get back on track.

In Melbourne, we try to infuse the best Australasia in Asia and the best of Asia in Australasia and we try and achieve this through a structure of opportunities. In Melbourne, we have a team of international business managers and their job is to support and liaise with the local businesses. Their job is to try and create NMA opportunities and their job is to look at the strategy and to monitor the performance of the businesses. In addition, we have the ability programs where we have staff exchanges; people working three to six months in Asia, twelve months secondments or even two to three year expatriations.

The key skills that we believe that are required for Asia are to understand the business environment, to have a cultural appreciation and exposure, to have professional qualifications, industry experience, lots of patience and understanding, flexibility, enthusiasm and energy. It's also beneficial but not essential to be bilingual. I did this straw poll and I emailed a number of people across the region that worked with us and the number one thing that they all said was required to work in Asia was this ability. Let me read what somebody emailed to me, "Get your superiority chip off your shoulder." That one means just what it says. There ain't no such thing anymore as the great one. Technology in Asia, education in Asia, skills in Asia are all just as good, maybe in some cases better than can be found in the West. True, the learning systems here may not enable people to come up with ideas as brashly or as loud as the Westerners do but that doesn't mean lesser ability, it may just imply "think before you leap'." And that's from an American who is based in Singapore.

I mentioned relationships and again I think Alistair mentioned it as well. The types of people we have in our jobs and international business managers across the region, we've got actuaries, accountants, people from agency backgrounds, sales backgrounds, we've got a diplomat and your investment bankers and MBA people as well. A few other interesting things from my straw poll, I shall read out, "You need to be slow to anger. Americans and Australians can be impatient and express frustration when they are not achieving their aims within our speed. Patient societies generally do not regard such open expressions of frustrations in a positive light. Letting off steam does not help matters." Another quote, "You've got to be able to stand in the shoes of an Asian counterpart. For example, Asian professionals such as actuaries are generally educated to respect authority. This means that they could perceive any question as a challenge to their professional competence. Australians do not have the same respect for authority."

The benefit for people working in Asia firstly is the exposure to high-level management. You meet your middle managers here in Australia or New Zealand but you do have the chance to go to smaller operations, maybe a start-up in Indonesia or Thailand and you immediately get high management exposure. You get the chance to be involved in key projects that are crucial to the success of the operation. You get broad-based competencies and here I have a quote from Carol who's recently moved to Indonesia. She says, "I'm not sure what you call it but you need the ability to work in an environment where your role will be all encompassing and you may have inadequate internal resourcing to help get the job done or see results quickly as you would like. Or have the ability to cope with the fact that you will always be an outsider and be treated differently·all the stuff I am experiencing now in other words." You will have a culturally diverse experience and you will also have culture shock. A CEO who took over the residence of someone who had just left tells a story of being woken up in at five in the morning when the Malaysians called all the faithful because he's just around the corner from a mosque. So you very quickly are shocked.

There are some issues that I think you need to face. Australians with an Asian heritage don't always have an edge going back to Asia. In Korea and Japan, you have perhaps some problems dealing with the fact that you've had Western experience. Vietnam is another issue. We had a situation where we had to give a presentation and we translated the material using Vietnamese in Melbourne. The problem was that some of the slang, some of the ways of wording to the Vietnamese people in Vietnam were reminiscent of the people who left from this area and there were some issues there. Obviously, there are issue of being a banana or an Oreo - one color on the outside and another color on the inside. Australians with Asian heritage all face issues coming back to work in Asia. Women obviously face sex cultural issues. In terms of danger, we have the story of the Chinese expatriate family waking up two in the morning, racing to the airport in Jakarta, passing mobs of people who are literally trying to stop them. You've got earthquakes in Manila, Tokyo and Taiwan. Having said all that, I think Asia's still a fantastic opportunity and a learning experience for all. I still think that too many people in Australia prefer London, New York or Paris rather than Seoul, Jakarta or Guangzhou but I'd exchange that any day of the week.

Ladies and Gentlemen, it gives me great pleasure to be here today to address you. I did spend four of the most fascinating years of my life working in Bangkok, Thailand. When I arrived there in 1995, my office had two hundred people, two cats, an elephant who used to live outside in the front garden and some children who used to play in the middle garden in our little shop house off the main road. It was a wonderful culture. The firm had been in existence there for over fifty years. It was a very strong local firm led by one of the doyens of the accounting profession in Thailand. I learnt very quickly that as an expatriate I had to learn, myself, how to operate in this very new and very different environment. I decided to spend my first year listening and learning and sharing some of my thoughts and expressing my ideas to see what the feedback was. And I also learnt very quickly that one of the most important things I could do was form relationships with some of the key movers that I had identified in that organization. We spent a lot of time together learning about each other's backgrounds and expectations for the future.

One of the most fascinating things for me was the role of women, particularly in my organization. I had come from a sort of, footy based organization in Melbourne where the most important thing was who was going to win on the weekend. It used to be Saturdays but now it seems to be every night of the week. Suddenly I was in this environment where around ninety per cent of our firm leadership and management, were women. Most of them had been educated, often overseas. Most of them had MBAs; they were a lot more educated than me. And then when I started going around the community, I found more and more folk who had wonderful education and experiences internationally. Again, many women had important roles in the community. The head of the Civil Service, some of the leading people in the banking sector, were women. Thailand's Siam Commercial bank is led by a wonderful lady and all these things I found wonderfully refreshing.

My role in that firm was to try and help them become more a little bit more international in the way we operated. We had a wonderful client base of Thai clients, had an emerging client base of international clients who saw us as auditor or advisor. In that time, when I was there, Thailand was one of the fastest growing countries in the world. Thailand had experienced twenty years of double digit GDP growth. The World Bank in 1995 predicted that Thailand and other Asian nations would be amongst the tenth largest economies by the year 2010. And I could see it all around me. I had never seen so much construction of both infrastructure and property. All night long, all day long, there were buildings, roads and infrastructure going in. I remember the first weeks when I was trying to sleep in my apartment I kept on thinking there were helicopters flying all around me. It wasn't a dream. It was cranes spinning around, busily building. One of my American colleagues used to call it "Bangcrane" not Bangkok.

What was happening in the banking and finance sector was that the banks were family owned. Very large institutions run by very influential families lending primarily to related organizations or friends of the family or rather large Thai conglomerates. It was the utmost example I suppose, of relationship banking. You filled in the forms but the substance wasn't that important, perhaps. The firms and the banks were fueled by the construction and infrastructure projects and by a great desire of international organizations and banks to invest the booming Thai economy. Thailand was also seen as a safe place to invest because of its links with the ASEAN region. It did have a growing infrastructure of communication and networks; it was close with the eastern seaboard developments to the rest of Asia. And because Thailand had never been colonized, the workforce there was just wonderful. I'll come back again to that shortly. Citibank, Hong Kong Bank, National Bank, ANZ and Westpac all had offices there and Citibank was probably the most aggressive of the international banks that were there. What began to happen was the Thai banks started to look overseas for funds. They could easily get these funds in the nineties from American investors and others. Very little attention was paid internationally to accounting standards or ways of doing business in the Thai business world. So all these banks were being fueled by this incoming investment, everybody was enjoying themselves and all these projects were happening.

Then on the 2^nd of July 1997, we had this meltdown crash disaster starting in Thailand when the Government floated the Baht and it went from twenty-five in the U.S. to thirty-seven virtually overnight. At it's worse; it went to fifty-six and was devalued by fifty percent. Now this culture shock was unbelievable. Literally overnight, building projects stopped. There are still many, many buildings in Bangkok itself where nothing has happened on them for three years. There are now engineers going in to work out what to do with them. The traffic improved remarkably. What used to take me forty-five to an hour to do the four kilometers to work after the collapse, took me ten minutes. Very quickly the Thai Government, which at the time was undergoing a fairly rude political upheaval so there was a bit of isolation but eventually by December 1997, the new Thai Government did take action. They closed down fifty-six of the finance companies. That was nearly half the finance companies were closed down overnight.

This sent a shockwave through the Thai business community. Suddenly the international community, whether it was the World Bank or the IMF were looking at what was happening in Thailand and they expressed shock and horror about the accounting standards and things that they had never really understood themselves. I think that is more of a reflection of the people who were investing as opposed to the community in Bangkok. But the Thai people, just like the other speakers have said have done just some amazing things. 1999 was the year of "Amazing Thailand' in Thailand and it is just an amazing place.

The amount of change that has happened there (and this is why it is so exciting for you if you can go and work in countries like Thailand) in two years is more than we've seen in Australia from my experience, in the last fifteen. We do make major changes but we make them gradually. We freed up the banking sector in the eighties, we've freed up currency and the Australian Tax Office began to get more sophisticated some years ago. In Thailand, this has had to happen in two years. The banks have had a huge shakeout. They are suddenly under threat from international banks.

They've had to change their systems and procedures. The Thai Governor of the Bank of Thailand in 1999 made some fascinating comments. He was the new Governor of the Bank of Thailand and he said that there will be a fight, a fierce fight and like the Thai saying, "When the elephants fight, the grass will get trampled. The grass, being the remaining Thai banks will get trampled. But if they are awake and have been preparing themselves all this time for the fight, they may survive." He's come out with some very bold changes in his own organization. He's stripped out nearly two to three layers of management and they are a very responsive organization today.

One of the key things that Thailand had to do was develop its bankruptcy laws. They hadn't changed for nearly sixty years and suddenly they were faced with all these non-performing loans. The recent figures for Thailand are that currently, there are two trillion Bahts worth or non-performing loans. That's roughly eighteen billion dollars roughly. It represents about thirty-eight percent of the total loans that are outstanding. The bank of Thailand predicts that over two thousand debtors will go bankrupt this year. They owe about a quarter of that non-performing amount. But the restructuring that is going on in Thailand and in the neighboring countries means that we in Australia have to look cautiously at what our neighbors are doing. They are going to have a very re-invigorated financial sector, their industries would have re-engineered to become more competitive and yes, there are more Australians and other foreign folk working in that part of the world so we cannot rest here. It was encouraging to hear Steve Bracks talk about the importance of Asia to Victoria and I wholeheartedly agree with him.

Deloitte in this part of the world, have over fifteen thousand people working throughout Asia. Our revenues are over a billion Australian dollars. We have over a hundred offices in twenty-five companies. My two hundred people that I had in Thailand when I first started; by the time I had left it had grown to over six hundred. Unfortunately the elephant wasn't with us when I left and indeed the elephants were one of the cultural experiences that I enjoyed most. They're the most wonderful beasts to ride.

My first experience was going along a one-way street seeing an elephant charging towards me in the heart of Bangkok. It was one I can't forget. I remember asking my Thai colleague why at night, we don't have lights on elephants so we can see them and he said, "Elephants are not allowed in Bangkok". And I grew to love the Thai way of thinking. When we unpacked our Thai spirit house when we returned last year, I suddenly wondered if I should have got a permit from my local council. We learnt a lot and I learnt more from my Thai colleagues than they possibly learnt from me and I think that's the most important things I've learnt - you do need to be humble in my opinion. There is too much of the Western cultural arrogance that I saw when I was working there with people coming in with the view that the West is the best and we know how to do things. We are still learning as we go these what we call emerging countries.

The history of Thailand is fascinating and goes well beyond Australia's history. The imagery that Hollywood and other portray of the culture is bad I think. When I was growing up in London, all the movies started off by showing fog and rain and people with umbrellas and the financial times and a bowler hat and that isn't U.K. "The Beach" - starring Leonardo Di Caprio - was an interesting film, did it in a sort of right way. It shows Bangkok, the busy streets and the hubble and bubble.

But that's only a small part of the country and for those of you who do get an opportunity to work in the region, if you do work in the capital city get out and see the real part of the country you are working in. The northern parts of Thailand are just wonderful. My wife was working with the hill tribes and I remember one morning we spent in a hut somewhere in the north of Thailand with a gentleman who was making rifles for the Burmese. He was smoking opium and we were having tea with him and its not the sort of thing you do everyday in Melbourne. The reality isn't really the Bangkok. The Bangkok is really just a bit of an aberration in some respects to Thailand. The family community way of life in the villages in Thailand is something that I think we have lost touch with in the West and I just really enjoy seeing my colleagues going to their homes and enjoying the experience of working there

What are the barriers? I think the barriers for us in term of working in Asia are: do we really understand the differences in culture, the religion and the ways of doing business? How much effort do we put in as an individual or as a company or in briefing our people before they go and choosing the right sort of people to work in Asia? Just as been said by others, too often people want secondments to London or New York. Really, that is not where the action is. I remember one of the folk who came to work with me in Thailand came from Idaho. His experience with his wife was remarkable; they ended up adopting a child and their whole life was changed by this experience of working in Thailand.

Another lady from Australia played a pivotal role in my firm there for four years. She's looking to move elsewhere in Asia and her experience has just been fantastic. What she'd do there on a daily basis doesn't really fill part of her job description. There were things that I did that I certainly didn't expect to do. We welcomed into our organization hundreds of people both Thai and foreigners, new clients from around the world whether they were the largest organization like General Motors to companies AXA who we worked with in setting up in Thailand. It really was fascinating experience and clearly we can all speak at great lengths about our time there.

How to find jobs? Coming to functions like this at Asialink. Join the Asia's society. Seek out organizations that clearly demonstrate a commitment to Asia via the Internet. Work experience opportunities in Asia, I think are bound but you often have to drive that yourself. Interestingly, when I reflect on my time in Thailand, I had three key decisions. The first one, which was the easiest one, which was to go to Thailand with my family. We were relatively young at the time. But the hardest decision was choosing to leave and we chose to leave mainly because of education and the perception that we could educate our kids much better here. The third and worst decision was making that decision to leave because we now realize that the experience we had there was something we can't replicate.

The education our children were getting in an international school had twenty-five percent Thai intake and in downtown Bangkok and it is a far more enriching experience than perhaps going to a school in Brighton. But you live and learn and we are working actively to see how we can continue our links with the Asian region.