There are few more exciting developing markets than those in the Asia Pacific region.
Industries as diverse as energy, infrastructure and telecommunications are flourishing and the region offers vast opportunities for international companies – and for their lawyers. Law firms have cemented their ties in the region over the last two decades and are always hunting for young lawyers with the skills to grow Asian Pacific business. We talked to lawyers at four firms working in the region to learn more…
When did firms first begin to operate in the Asia Pacific region?
Huw Jenkins, partner, Clifford Chance: During the 1980s and 1990s, firms established offshore centres to follow their clients. They essentially followed the transactions abroad.
Stephen Kon, senior partner, King & Wood Mallesons: Many markets in Asia were growing robustly, compared to the majority of markets in Europe and the US. When clients began moving into Asia at a significant pace, in order to take advantage of this growth, we saw what we have always seen, which is consistent with global law firm development in the past: law firms followed their clients. For firms with global aspirations, it really was essential for them to be on the ground in these markets to be able to service work coming into and flowing from them.
How has the situation changed since then?
Jenkins: What changed in Asia, particularly in China, in the mid-1990s was that the economic force of the clients changed. There were a lot of growing Asian companies which had international aspirations. More and more, those clients were requiring full-service support and increasingly those clients’ central operations were in Asia, and not a bank in London.
Conversely, a lot of our own international clients have become much more local. If you look at Citibank over the course of the last 40 years, it is now very big in a lot of Asian countries and it drives a lot of their profits from those places. That is true of many of our big clients. You are not going to develop a relationship with those people unless you reflect them.
Roddy Martin, partner, Hebert Smith Freehills: Asian markets first started changing in obvious places like Hong Kong and Singapore, the more sophisticated locations. Then we saw some big growth in Asia Pacific. In the 1980s and 1990s you had companies which were just starting out; now you have some very large potential clients indeed, whether that be Japanese trading houses, Samsung in Korea, the big PRC oil majors, the sovereign wealth funds in Singapore, national oil companies in Thailand – those companies are credible internationally. The 1990s was the real period of growth. We saw firms opening in places like Thailand and Vietnam in the 1990s to try and catch some of that transaction flow.
What makes Asia Pacific so attractive right now?
Kon: While growth in Asian markets may have slowed, the growth is still many times faster than current growth levels in Europe and Asia and current indications place economic growth at around 7 per cent. China has 13 cities with more than 10 million people each, 32 cities with more than seven million people and over 135 cities with more than three million people. Coupled with the country’s growing middle class and large and active private sector, there are huge opportunities there.
Bryant Edwards, partner, Latham & Watkins: The region continues to grow and develop at impressive rates. That strong economic growth generates deal flow and opportunities for transactional and disputes lawyers – it’s a very dynamic place to work and a great place for young lawyers, particularly those with language capabilities or other ties to the region.
China is a huge economic power: what are the primary opportunities and challenges of doing business there?
Edwards: China continues to lead change in Asia, with its enormous population and strong economic growth and I think it will continue to evolve over the next few years, as it moves from a manufacturing and export-driven economy to a consumer-driven economy that will welcome and encourage foreign investment. These changes will create excellent new opportunities for lawyers, both international and domestic, who will be able to advise Chinese companies and foreign investors.
Martin: China is still by far the largest market in Asia Pacific but there has been a slowdown in the Chinese economy and it does face challenges.
One challenge of doing business there is that the big state-owned enterprises are very successful but are awash with cheap money and are politically driven so they are not competitive organisations, nor the most nimble, nor the best employers. As they make their overseas acquisitions, they will have trouble attracting the best management or staff.
China had this huge boost from its low-cost abundant labour force and now the price of that labour has risen – so people are going to Bangladesh, Vietnam and India instead. Furthermore, the demographic profile has changed as a result of the one-child policy, meaning that there will be fewer people coming into the labour force. As a result, there will not be vast growth – but the hope is to have 7 per cent sustainable growth.
What about other fast-growing markets such as Indonesia and Myanmar? Which sectors are driving growth there, and how are firms and their clients taking advantage of this?
Edwards: In Indonesia, the fourth most populous country in the world, it’s definitely infrastructure that is driving growth. It has just elected a new leader, and observers are optimistic that it will continue on its current strong growth path.
Law firms that specialise in projects have for years done enormous amounts of work assisting Indonesia in developing the highways, railways, airports and other infrastructure needed to move to the country to the next level, and the view is that this will continue to be an area of opportunity.
Myanmar, Cambodia and Laos will require even more infrastructure investment to achieve the level of prosperity enjoyed by their neighbours. A number of law firms are focusing attention on these countries now, betting that, as they grow and develop, they will provide opportunities for lawyers.
Japan’s economy is facing stagnation but is still an important market for firms. What are the opportunities and challenges of doing business there?
Jenkins: Japan is fundamentally different from most other Asian economies because it is fully developed. We have been in Tokyo from 1987 and have been seconding people there from the 1970s. We tapped into relationships with trading companies and Japan was well ahead of the curve when it came to companies that were looking to expand and of interest to international markets.
The overall business that firms like Clifford Chance do for Japanese clients has remained strong but if you look at where the work is being done it is global, rather than domestic. The job within Tokyo is to maintain head office and general counsel relationships, not to build a client base.
How easy is it to do business and break the market in Asia Pacific compared to other emerging markets?
Kon: Asia Pacific has its own particular challenges depending on where you are. China especially can be very demanding because of its geographical and cultural diversity and its legal and regulatory complexity.
Martin: There are limitations to our ability to practice in many Asia Pacific markets because of regulation and association rules but those rules are now fairly sophisticated and so as long as you comply with them it is relatively easy to practice. You do not have endemic corruption concerns, as you might have in certain parts of Africa.
Jenkins: It is easy enough to launch an office in a country. The challenge is to team up with the right people, keep standards high and make sure that what you are doing enhances your global brand and provide a good base for the future.
How is London staying competitive against US rivals when it comes to doing business in Asia?
Martin: Being in Asia is about developing relationships over the long term – they are not markets to make a quick buck in. There is a perception that UK firms have been there for the long term while US firms open and close depending on the economic environment, though there are exceptions, such as Latham & Watkins and Skadden, which have been in Asia for a long time. As clients become more developed they want specialists, not generalists. Firms have to have that offering and because some of the US firms are much, much smaller, they cannot offer that expertise.
Edwards: In many cases, London-based firms have been operating in Asia longer than US-based firms, and are larger and more established. In the finance markets, UK-qualified lawyers compete for business against US-qualified lawyers. While Asia continues to be a market dominated by loans and other finance products governed by UK law, the recent increase in US-based finance products – such as high yield bonds and Term Loan Bs – has recently given US firms an advantage in some deals over their UK rivals.
How can UK graduates stay ahead of the curve in an increasingly globalised legal jobs market?
Martin: Unless you are an absolute fluent speaker of the relevant language, and ideally a local yourself, then you cannot know the country as well as a local lawyer. There is no point pretending otherwise. But UK graduates have great quality training, which still turns out the best lawyers and the depth of experience that is gained through that training is superb.
Edwards: UK law graduates can stay ahead of the curve by adapting early to the increasingly globalised economy. Seize opportunities to work in non-UK offices of your firm. Learn how business has adapted to different legal structures in different regions.
Nicola Bridge, graduate recruitment partner, King & Wood Mallesons: Keeping up to speed with current events by reading the papers and watching the news is the easiest way to gain a broader understanding of global developments and this is something that we would encourage all graduates to do. Researching topical issues that are relevant to the legal market such as the Shanghai Free Trade Zone will serve as a good talking point for interviews and will demonstrate that you have a good understanding of the key issues facing law firms operating in that particular region.
What do you look for in candidates when seconding them to Asia Pacific?
Edwards: We look for hard-working and ambitious lawyers who enjoy the challenge of living and working in the emerging economies in Asia. Having the language skills to communicate with business executives in Asian countries definitely helps, but it’s not essential. Really, we want determined lawyers who have the cultural sensitivity to adapt to different ways of doing business.
Martin: They have to be able to maintain the same high standards while not being stuck in a City mindset of ‘this is how we work’. If you do that you will not get very far. You need to be prepared to adapt, roll up your sleeves and work. In general, because you are often working with translators and working harder just to get to meetings and observe social niceties, you are often working twice as hard as you might at home. Anyone who thinks it’s a bit of a holiday should think again.
Bridge: Enthusiasm and an open mind is a must. We want the secondment to be a rewarding experience so making the most of your time in another country is key – that goes for enjoying the culture as well as getting to know your colleagues and clients.
For associates and partners, we also consider how a secondment could help in terms of development. If a partner in London is regularly working on transactions with Chinese companies then they would benefit from spending time in China in order to gain a better understanding of the processes involved in deal making and transactions for example.
Jenkins: If you can speak Mandarin or Japanese or another Asian language you will be in a good position to be seconded. But not being able to will not limit your opportunities. Firms look for people who empathise and understand what clients want. To a large extent, they look for ‘get up and go’: there are no end of frontier jurisdictions out there to make a market from.
Sponsor’s statement: Mike Wang, corporate partner, King & Wood Mallesons
Having spent the past 16 years working as a lawyer in China, and the past eight months on a secondment to London, I’m inclined to agree with the points raised by the panel, and have witnessed firsthand the opportunities and challenges presented by doing business in a new market.
Firstly, it’s certainly true that Asia Pacific as a whole still presents a vast amount of reward for law firms – and this is despite the recent slowdown in growth. China remains the largest market in the region by far with many believing it will eventually become the biggest in the world.
The urbanization of Asia Pacific is an ongoing trend that is responsible for a large chunk of investment opportunities in the region. For China specifically, this is high on the government’s agenda. Besides the more obvious infrastructure construction projects, real estate deals and related business areas, you have to consider the other opportunities arising from urbanization: the need foreign investment, high tech products or services such as healthcare, consumer and education.
One of the biggest challenges for businesses moving into Asia Pacific – and something the panel addressed very well – are the cultural differences. Over the years law firms have learnt that success does not lie in continuing to operate in the same way as in their home market. They must learn to adapt, and developing local relationships and specialist market knowledge is a major part of this.
As China continues its outbound investment into Europe, the idea of relationships is one that we are seeing more and more. In the same manner that a law firm will need support on the ground in Asia, foreign investors looking towards Europe will require an advisor. Trusted law firms – especially ones with offices in cities where investors’ headquarters are located – will usually be the first option.
Colleagues have often asked me for advice on how best to approach a working relationship with clients from China and I have two key bits of advice:
- Chinese clients in particular value practical solutions, far more so than technical or black letter law responses. With that in mind it’s really crucial to try your best to understand your clients’ commercial needs first and then you can support them with your legal expertise.
- Contrary to what you might think, it’s not necessary to change everything about your style of working when dealing with overseas clients. More often than not, clients will fully understand discrepancies resulting from cultural or language differences.
For graduates thinking about spending time abroad I would highly recommend it. There is no better way to get to know a country than to experience for yourself – even a short term stay of around 2-4 months may be helpful in getting to understand more about a particular country.
As the panel point out, learning the local language does help however as I have mentioned above having an understanding of your clients’ business is the top priority for any budding lawyer.