Living and working in Hong Kong this comes as no surprise at all . If possible? LLN and associated business will look for any other choice than Chinese companies
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Here’s the report from the Outlaw site run by Pinsent Masons
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In its survey of legal representatives at over 1,500 manufacturers Pinsent Masons, the law firm behind Out-Law.com, found that China was the first choice for outsourcing for 50% of firms, compared with nearly two thirds of firms last year.
The survey found that planned wage increases and demographic changes affecting the factory workforce may account for the fall.
The report also said that there was no drop in concerns amongst businesses of the risks to intellectual property (IP) of outsourcing. The percentage of those questioned identifying IP infringement as a risk affecting their decision to look at offshoring remained constant it said. This indicated that “little has been done over the past year to build confidence in this area”, the report said.
Manufacturers were particularly concerned about copycat products, which the report suggested was a result of “a number of recent high-profile cases in the press which have highlighted the true scale of global counterfeiting” including the discovery of 22 fake Apple stores in China.
“Our concern in China is the erosion of barriers to enterprise. We have two major projects in China and Korea and there is a grave concern about the risk to cutting-edge technology. Innovation is capital-intensive and highly sought after,” one survey respondent said.
However some respondents said that the IP position in China was improving.
Cerys Wyn-Davies, an IP law specialist with Pinsent Masons, said that the IP risks had to be carefully balanced against the benefits of offshoring.
“Early due diligence, strong contractual protection, minimising knowledge transfer and regular reviews and audits can help to mitigate the risks,” she said.
The figures also indicate an increasing trend towards ‘near shore’ sourcing. This is the practice of choosing suppliers in a nearby country rather than the distantsupplier for the provision of goods or services.
One lawyer interviewed for the report who is a general counsel for a major engineering company said that sourcing 40-50% of supplies from lower-cost economies was “probably as far as we are going to go”.
“We seek to achieve a balance of risk and to avoid putting too many eggs in one basket. Global supply chains lead to longer lead times and longer transport times,” the respondent said.
The survey showed that natural disasters, such as the tsunami in Japan earlier this year, and political upheaval in developing countries including the Arab Spring had had “wide-ranging effects on global supply chains” related to a range of industries, and that even companies who had not been directly affected had reviewed their supply chain security procedures.
The report showed that 36% of manufacturers had experienced supply shortages, 32% had faced delivery delays and 11% were forced to change suppliers at short notice.
The trend towards near-shoring could also be the explanation for a “surprising” increase in Russia’s increasing popularity as a manufacturing location despite concerns over “corruption, fraud, intellectual property protection and the enforcement of contracts”.
“As the survey looks to a relatively long timescale [Russia’s] proximity to the UK compared with other developing economies may well account for its relative popularity,” the report said.
The report indicated that bribery and corruption was the most pressing issue for the manufacturing industry, with 75% of respondents citing it as a concern. Health and safety was a concern for 60% of respondents, which the firm said was a reflection on significant legal developments introduced this year.
The “surprise cut” in UK corporation tax, which was reduced to 26% in April 2011, was highlighted by 85% of manufacturers as most likely to assist businesses with future growth. Corporation tax will continue to decrease by 1% each year until 2014, when the rate will reach 23%.
However other “significant” tax incentives, such as the reintroduction of enterprise zones and changes to the rules around the taxation of foreign profits, had not attracted much interest.
“Drastic times call for drastic measures and changes that do not significantly impact the bottom line simply do not carry enough weight. Although the enterprise zones announced are rather different from the creatures of the ’80s or ’90s, the perception seems to be that reductions in business rates and planning relaxations are simply not enough to drive growth in the current climate,” said Kate Featherstone, a tax law expert with Pinsent Masons
