The news cycle has been as rapid as ever over the last 12 months, but not always giving us what we expect. Who would have predicted that the cost of oil would go even lower, commodity prices would continue to decline, and after so much economic turmoil in the Eurozone, the euro would strengthen?
Whether it’s economic movements or political and social change, there are always consequences for global mobility professionals. The correlation between world economic growth and global mobility activity has been well documented before, so what signals do the last 12 months give about what we can expect in the future?
Over the past year, global GDP has continued its slowdown, with the World Trade Monitor putting world trade growth at a 6-year low of 2.5%. Despite this, world trade is still growing and estimates for 2016 are somewhat more optimistic.
This is good news for international assignments, as companies continue to exploit opportunities to grow their businesses around the world. Findings from our upcoming Managing Mobility Survey 2016 (results to be published in July) suggest that 44% of participating companies expected their expatriate populations to increase over the next three years. However, many companies continue to focus on cost, investigating different types of assignments and putting their assignment and remuneration policies under constant review.
Findings from our upcoming Managing Mobility Survey 2016 suggest that 44% of participating companies expected their expatriate populations to increase over the next three years.
The big question in Europe is the future of Europe itself. Although the Greek financial crisis has temporarily moved off the front pages, Greece remains one of the hot spots for the largest movement of people since the Second World War, and has created human challenges for which the continent has yet to find a solution.
In parallel, an existential crisis is looming for Europe as Britons go to the polls on 23 June to determine whether or not to remain part of the European Union. The debate is highly emotive, with one side claiming the UK would be better cutting itself off from the constraints of EU membership and standing free in the world. Others argue that in an increasingly interconnected and interdependent world, a leap into the unknown would be catastrophic for the UK economy.
Should the former argument prevail, it will undoubtedly lead to several years of uncertainty as the UK re-negotiates its own trade agreements with Europe and beyond. It may also precipitate another Scottish referendum and ultimately the break-up of the United Kingdom.
Whatever happens in the UK referendum, recent terrorist attacks around the world have meant that numerous countries are taking a much closer look at how people move across their borders. More stringent checks are being made on those requiring visas. Governments are generally getting smarter at connecting up their immigration and tax systems to ensure taxes are collected efficiently.
For global mobility professionals, we can expect the challenges of moving people to become more complex, and immigration and tax compliance will remain an important area on which to focus.
Over in Asia, the agreement of the Trans Pacific Partnership will provide a welcome boost to Asia-Pacific trade. The initial 12 country signatories, including Australia, Japan, Singapore and the United States represent 40% of the global economy. They will undoubtedly be joined by others either directly, or by larger countries like China forging their own agreements with the pact.
China's declining growth rate has led to a reassessment of global economic growth, with many stating that India may benefit from its neighbour’s slowdown. India's economy is far less vulnerable to a Chinese downturn than other Asian economies, as Indian firms are less integrated with companies in China and have limited exports. Its increasing domestic demand could be a strong hook for growth-hungry companies and foreign investors. India currently has one of the highest rates of citizen expatriation in the world and this growth, spurred by foreign investment, could see a further surge.
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Many of our clients have experienced challenges when sending expatriates from low income countries into locations with higher salaries for similar job roles. Although a significant COL adjustment may apply, to take into consideration the higher living costs, the total assignment salary still may not be sufficient to provide the assignee with a suitable standard of living.
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The threat posed to China by India’s potential resurgence combined with the opportunities presented by the Trans Pacific Partnership could see China’s integration with the rest of the global economy improving. There are signs of growing numbers of Western and Japanese experts in a broad range of industries being employed by Chinese companies and/or setting themselves up in China to advise the locals. The Chinese government has loosened restrictions on foreign investment into China, as well as Chinese investment abroad, aiding the recent development of these trends.
The acceleration of Asia-Pacific trade will also put pressure on the EU and the US to redefine their own trade agreements although this, no doubt, will have to wait until after the US presidential election in November. The US economy continues to remain in a relatively strong position, although this could be threatened if the rest of the world doesn’t pick up more of the slack soon.
The rest of the Americas have seen more significant change, with left-leaning governments having fallen in Argentina and Brazil, and new leaders already re-engaging with international markets and introducing more ‘conventional’ economic policies. If successful and allowed to develop, this should attract substantial foreign investment and could rekindle Latin America’s stalled growth trends.
If so, expatriation to Latin America should pick up, especially if commodity prices rise and/or the Pacific Alliance (Chile, Mexico, Peru, Colombia, and Costa Rica) can forge better economic ties with Argentina and Brazil.
The Urban Population
Irrespective of geographic region, the trend towards urbanisation continues apace. While many of the advanced economies in the Western Hemisphere are already highly urbanised, the trend is still in its ‘development stage’ in Asia and the Indian sub-continent. India and China both have relatively low urban populations at present. If they were to increase their respective proportions of 29% and 42% urban dwellers closer to the US’s 80%, the consequences would be significant.
Given the large numbers of people in these countries, the requirement for infrastructure improvement is acute. New roads, housing, schools, hospitals – and the people to build and run them – will all be required and are likely to create opportunities for many international companies and their staff. But for all the economic growth that urbanisation can bring, there is a downside too. Air quality is already an issue in many of these parts of the world, as reflected in ECA’s Location Ratings analyses. These countries are going to need to invest in green technologies and improve public transportation in an attempt to mitigate the impact.
ECA's unique Location Ratings methodology takes into consideration both the home and host locations of the expatriate, creating a fair and equitable system for calculating location allowances.
Location Ratings Reports, including recommended allowances on a choice of regional base, come as part of a subscription. ECA also offers a Location Allowance Calculator which provides more detail and more flexibility.
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All of these factors are likely to drive the need for expatriation in Asia. In the current climate of tight labour markets, Asia may need to import managerial, technical and professional talent from abroad to compensate for domestic skill shortages.
The world remains politically and economically uncertain, with low global growth and inflation still being the norm. Will the lucrative opportunities presented by the Trans Pacific Partnership, combined with the threat from India, be enough to influence China to integrate further with the rest of the global economy? Could an increase in foreign investment into Latin America and India spark a growing need for non-local talent?
Despite this uncertainty, globalisation continues, and it’s plain to see that global mobility - and the professionals who work in that discipline - will continue to play a critical role in a world that’s constantly moving.
|Managing Mobility Survey 2016
Later this year we will also be writing a report on the main findings from our Managing Mobility Survey 2016. This will provide new insights into some of the issues and trends mentioned in this article.
Please look out in the Events section of our website for upcoming presentations and webinars on the Managing Mobility Survey 2016.
Global mobility and the world context