The Leader - September/October 2008 - (Page 54) Y ou th IN k th eY’r e h ot, B u t the Y’ re No t: to p -10 o v e rrate D I Nv e s tme Nt De s tI NatI o Ns F IG. 5 e m e r G I N G a ttractIve maNufacturING DestINatIoNs belo horizonte, brazil chengdu, china costanza, romania dung quat, vietnam elmira, new york kosice, slovakia plovdiv, bulgaria porto alegre, brazil vung tau, vietnam wuhan, china While office rental rates in Sofia have been increasing lately – they currently average around €€19 (US$29.67)/sq. m./month – they are still low compared to other European cities, especially capitals. These low rental rates, coupled with the country’s highly skilled labor force and advantageous corporate income tax rates make Sofia one of the hottest up-and-coming IT/ KPO/BPO investment destinations. China has become an IT/KPO/ BPO hotspot over the last few years, attracting many of the world’s largest corporations. These companies are attracted to not only the cost advantages associated with locating an IT or BPO campus in China, but also the potential for mitigating risk by locating certain business functions there rather than concentrating all of them in India. Much of the IT and BPO investment — along with manufacturing investment — in China has gone to the overheated Coast: all of India’s “Big Four” outsourcing companies (Infosys, Satyam, Tata and Wipro) have operations in at least Beijing and Shanghai. Rising costs in these locations and others along China’s coast will drive service providers inland to places like Xi’an. None of the Big Four currently has a campus here, but with a population of 8 million, 100 universities graduating thousands of computer science students every year, and a government eager to attract business (the local government just injected US$1.5 billion into developing the infrastructure of two high-tech-focused economic development zones), Xi’an is poised for its time in the IT/BPO limelight. Moreover, while the presence of Intel, Siemens and Fujitsu attest to Xi’an’s viability, costs remain low. Wages for IT personnel average US$3/ hr, as compared to US$5.75 in Shanghai, while Class A office rental rates run around US$7.62/sq. m./month, or less than 1/8 of Shanghai’s rates. maNufacturING F IG. 6 c ost & c o ND I t I o N fac t o rs based on our experience, the following cost and conditions factors are the most essential to selecting emerging investment destinations worldwide: n n n total labor costs multilingual language skills infrastructure quality (i.e. roads, rail, ports, utilities) number and quality of tertiary educational institutions existing level of multinational investment real estate availability and costs n n n Wuhan, China is the capital of Hubei province and, with almost seven million people living in its urban center alone, the most populous city in central China. Straddling the Yangtze River and at the heart of China’s river, rail and highway routes, Wuhan is perfectly situated – approximately equidistant from Beijing, Shanghai and Hong Kong – for the distribution of manufactured goods. The city has begun to flex its manufacturing muscles in its three state-level development zones, particularly in the areas of automobiles, steel, advanced materials and pharmaceuticals. While the price of Grade A office space is on the rise, it remains remarkably low at around RMB 70 (US$10.24)/ m2/month. Wage rates are similarly low; average monthly loaded wage rates hover around RMB 840 (US$123) for unskilled laborers, RMB 1115 (US$163) for skilled laborers, and RMB 2620 (US$383.50) for management. Equally importantly, the city has a steady supply of new talent; Wuhan is home to thirty-five institutions of higher education, most notably Wuhan University and the Huazhong University of Science & Technology. With the establishment of the Dung Quat Economic Zone, located in Quang Ngai province halfway between Hanoi and Ho Chi Minh City, and the construction of Vietnam’s first oil refinery in this zone, the Vietnamese government has demonstrated its commitment to developing the country’s central region. A 70-year lease on industrial property in the zone costs between 2 0 0 8 th e le aDe r 54 septemBer / octoBer
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