Say Goodbye to the Expat Deal

Cushy contracts for Western CFOs are disappearing in Asia. So, too, are prejudices about hiring local finance talent.

A major U.S. or European company decides to plunge into Asia. It rents offices, sends out its best people, hires a relocation company to settle them into new homes, starts marketing its services, and sends the whole board over to admire the results. Trouble is, within a few years the business makes no money. The expatriates, who went overseas on three-year contracts, are back home. The most able members of the local staff have moved on to better jobs. The least employable remain.

Today, that scenario is history. While multinational corporations (MNCs) may still be sending out expatriates to head up their Asian operations, Asia’s top finance jobs are going local. “If companies have a choice between an Asian CFO with global exposure or a Western expat,” says Kwan Chee Wei, Singapore-based director at Watson Wyatt’s Human Capital Group, “all else being equal, they’ll tend to go for the Asian. [He or she] is more likely to understand local markets and people and therefore add greater value to the bottom line.”

The reason for this about-face is not hard to find. In the last few years, talented Asians with overseas degrees have increasingly found opportunities for advancement and growth back home just as appealing as those in the West. The supply of quality Asian finance executives has increased. Meanwhile, head offices are getting tougher about the returns they expect from their far-flung operations. With an increased emphasis on profitability, the number of companies willing to offer plush Western-style compensation packages has decreased markedly.

In fact, MNCs have been cutting back on expatriate perks and benefits since 1997. The current economic downturn has accelerated the trend. That’s why traditional expatriate remuneration packages are dead or dying, according to this year’s CFO Asia Compensation Survey, undertaken with consulting firm Watson Wyatt. In Singapore, for example, only 18 percent of the companies surveyed offered expat packages. In Hong Kong, the classic expat deal has almost vanished.

Their demise is understandable. Expat terms traditionally include housing and cost-of-living benefits, but can extend to private school fees, business-class travel home annually, a car and even a driver, amounting to an additional 10 to 20 percent over local pay levels. “Most companies here no longer pay a premium for expats,” says Watson Wyatt’s Hong Kong-based managing director Paula DeLisle. “Those who wish to remain in the job market here have accepted that the days of special preference are gone,” she says.

Meanwhile, compensation levels have not dropped to the lowest common denominator. Premium compensation and benefit packages for a favored few Westerners may no longer be the norm, but the demand for quality finance executives willing to work on local terms has produced rising salaries. In Hong Kong, regional finance directors received, on average, US$191,667 in 2000, up 11.5 percent from US$170,000 in 1999. In Singapore, salaries rose 12.1 percent, from US$146,000 in 1999 to US$166,107 in 2000 for the same position.

Even in the Philippines compensation was up from US$50,000 in 1999, to US$64,504, a 22.5 percent jump up. Compensation packages in Korea, Malaysia, and Taiwan remained stable. Perhaps the best location for the ambitious CFO is China. “As the country’s entry to the World Trade Organization nears, it’s drawing the best CFOs with increasingly competitive pay,” says Watson Wyatt’s DeLisle. Indeed, a senior finance manager based in China now earns US$97,000 compared with US$20,071 in Indonesia or US$65,504 in the Philippines, and is not far from closing the gap with Taiwan at US$109,384. Those salaries, increasingly, are going to Asians.


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