For European and U.S. companies, investing in Asia can be a tricky proposition, with risk identification difficult and numerous ethical issues to consider alongside the usual investment criteria.
     Any perusal of figures from Transparency International or the World Bank’s Ease of Doing Business survey quickly illustrates the challenges. Legislation and regulations are often opaque and subject to unexpected modifications at little notice, government can lack openness, and democracy is either very new, barely functions or, like in China, is non-existent. Corruption is another major issue, not least with Western executives potentially facing jail time at home if they are found to have broken the law abroad. Market access, and permitting and licensing requirements can change rapidly, especially if operations are deemed a threat to companies linked to the state or powerful political or business leaders. All of this hugely increases risk for overseas investors looking to tap into fast-growing markets.
     For those in the transport sector where the rapid movement of freight is often critical and delays can be hugely expensive, the risks are magnified, not least because in many jurisdictions customs authorities are renowned for being ‘difficult,’ or they are simply rampantly corrupt. This creates huge corporate social responsibility, and personal and financial risks in places where graft is often the only way to smooth cargo flows and is, in fact, viewed as a fact of daily life rather than a serious crime.
     When FlyingTypers asked some leading executives to comment on the difficulties of investing in Asian airport-linked businesses, most refused to respond, or at least not on the record. One consultant said entering a tender process in many South East Asian countries in competition with companies owned by nationals was often pointless. He added,
   “It’s like playing a game but you’re the only one that doesn’t know the rules and you’re wearing a blindfold. Forget it.”
     Another said the terms and conditions of tenders were often almost deliberately vague. “Even if you win, there is often no way of enforcing contracts—it’s fraught with risk,” he said.
     But amid the Asian gloom on airport investment, a more positive view was given by Barry Nassberg, the affable Chief Operating Officer of Worldwide Flight Services, the global airport services giant which now handles more than 4.0 million tons of cargo globally each year for over 300 airlines. Unlike many of its peers, WFS has a good record of investing successfully in Asia.
     The company has had a strong presence at Hong Kong International Airport since its 1998 opening and recently won a contract to operate the new passenger cruise terminal in the city to add to its wide-ranging transport portfolio. 2004 saw WFS enter cargo and ground handling services in Bangkok in a joint venture called Bangkok Flight Services. And in 2009 WFS India started offering ramp and passenger handling services in Delhi and Cochin in India. The company also has premium services, lounge and VIP handling operations at Changi in Singapore.
     Clearly, WFS is not afraid of taking on a challenge. Nassberg explained that WFS looks at a combination of factors when deciding whether a market opportunity is viable or not. Chief among them is the competitive environment—whether the country is protectionist about its state-owned companies such as its national carrier or airline, and how that translates into market-limiting policies such as exclusive rights for those national champions. “In general, though, more markets are opening up, and that’s what we look for,” he added. “We normally do this in partnership with a local company. The partner is important. It needs to be a viable company we can work with.

     “After that we need the right infrastructure, or infrastructure we can improve.”
     He said WFS was continuing to eye a number of cargo specific opportunities in Asia. “Asia is very attractive to us and we view it as one of our core cargo markets.
     “We’ve also been very successful in Asia and the Middle East offering premium services to passengers, effectively offering a private terminal to users or meet and greet. These small opportunities are often good ways of getting a foothold in a new location.”
     The pitfalls, though, are many. “At the top of the list are markets where there isn’t transparency when you enter the market,” he said. “There are lots of countries where entering the market requires business practices we don’t subscribe to. That would be at the top of the list in terms of a no-no.”
     Turning to specific markets, he said WFS had looked at opportunities in Vietnam and concluded it was not viable in the short term but could be in the medium-term.
     “We do have an interest in Indonesia and we have had talks on the cargo side,” he said. “This is still being discussed. We’re waiting for a clearer picture of what the infrastructure is going to look like at Jakarta, for example.”
     He said the opening up of ASEAN markets with the launch of the ASEAN Economic Community next year would not specifically change WFS’ approach. “The issues we take into account are fairly basic,” he said. “We look at markets where there is a change of mindset and a willingness to open up infrastructure opportunities to outside players. Countries reach this conclusion at their own stage of development.”
     India, where WFS already has two footholds, remains a challenging market. “There are opportunities there for outside players but the bureaucracy and legislative environment are issues,” he said. “Our objective is to be a significant player there on the cargo side and we would be prepared to invest in infrastructure, but so far we’re only active in a small way. But it is changing. Airline ownership is changing so there can be minority foreign ownership of Indian carriers, which is a giant leap.
     “I think that now there’s no turning back if you look at how quickly investment is moving in. Airports are open to foreign investment and outside provision of services.
     “I think in India there is more opportunity for overseas investors than in any other single country.”
SkyKing

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