European Investors in Taiwan

European investments in Taiwan have been steadily increasing over the past two decades and the dramatic rise has been in parallel with the founding and rapid expansion of the European Chamber of Commerce Taipei (ECCT). The ECCT started with just 50 founding members in 1988. Since then it has expanded to approximately 400 companies and organizations and 700 individual members. As noted by Mr. Freddie Hoeglund, CEO of ECCT, today, European investors account for approximately 30% of all foreign direct investment in Taiwan, making them the largest group of foreign investors in Taiwan, well ahead of the next largest investors, the United States and Japan. “EU investment in Taiwan has exceeded $30 billion, far exceeding investments from the United States of $22.01 billion and Japan of $16.64 billion. The steady increase in investments over the past two decades indicates that Europeans remain confident in Taiwan’s economic prospects. Also, Taiwan rose five places on the list of the EU’s trading partners to 14th place, up from 19th place in 2009,” he said. Taiwan is of interest to European investors for a number of reasons, notably because of Taiwan’s important and dynamic role in the global economy, especially in global information and communication technology production chains. The country also has many other advantages such as a good transport and communications infrastructure, a relatively consistent legal system, a highly skilled and stable workforce, a functioning and affordable universal healthcare system and a good quality of life. These have been made possible thanks to sensible and progressive policies and programs made and implemented by the Taiwan government, although more needs to be done. Mr. Hoeglund noted that through a network of 28 industry and support committees, the Chamber has been successful in addressing specific concerns and providing concrete recommendations to all levels of government to facilitate improving the business environment. The ECCT annually publishes a series of position papers that comprise issues identified by its committees as hindering the further development of their respective industries and provide recommendations to the government of Taiwan for improvement of the business environment on general issues as well as industry-specific problems. They also serve to keep the European Commission, the European Parliament as well as the governments of individual European Union member states informed about Taiwan’s business environment. “Through lobbying government and formulating Position Papers, the ECCT ensures that the European agenda remains on the list of priorities of the Taiwan government. The government has taken our opinions seriously and taken action to improve the investment environment based on our recommendations. Since we began publishing position papers, we have seen progress made on an average of 20-30% of issues raised by its industry and support committees every year,” he said. The Chamber has a successful track record in promoting the business interests of European companies through communicating with all levels of the Taiwan government on a wide variety of business issues such as tax reform, labor standards laws, improved harbor administration and entry-exit regulations. Through regular committee activities, meetings with government officials and the formulation of Position Papers, the Chamber works with Taiwan's political and business leaders to ensure that conditions for European businesses in Taiwan continue to improve. “The ECCT's lobbying initiatives bring issues, which have an impact not only on European interests in Taiwan, but also Taiwan's economy and society, to the attention of the Taiwan government. Annually, we meet the government officials at least 70 to 80 times. We also frequently provide opportunities for members to meet with government officials, NGOs and the European Commission.” He also noted that recently the Chamber launched the Low Carbon Initiative (LCI). The objective of the LCI is to showcase and promote the best European low carbon solutions and practices in order to help Taiwan to meet its goals to reduce carbon emissions in Taiwan. The LCI will be structured based on its three main objectives arranged in three platforms: Advocacy with the Taiwan government on the best policies to reduce emissions; Best Practices - Showcasing European low carbon solutions ; and, CSR and Education - Raising awareness about low carbon solutions. Fourteen European firms from the Chamber have already signed up as founding members and have begun planning activities. This will include launching a website and holding seminars, workshops and a major exhibition and conference in June this year. European companies already contribute a lot in various fields towards energy saving, efficiency and consequently sustainability but, in order to reduce emissions, more effort is needed to increase Taiwan’s renewable energy installations and improve energy efficiency, especially in buildings, which account for up to 40% of Taiwan’s energy use. The chamber is also involved in the EU’s satellite development program. It has been granted funding by the European Commission as part of a consortium, called GNSS.Asia, of five European chambers (from China, South Korea, Japan, India and Taiwan) under the European Business Organisations (EBO) World Wide Network. The global navigation satellite system (GNSS) Asia project falls under the EU’s FP7 program and is linked to promoting technology development related to the Galileo satellite project. The GNSS.Asia consortium’s objective is to develop potential research and industrial partnerships between EU and Asian organisations, including Taiwan. Among the other recent initiatives, Mr. Hoeglund said that the Chamber recently commissioned Copenhagen Economics to conduct a follow up to its 2008 Trade Enhancement Measures (TEM) agreement study, which analyzed the case for a free trade agreement between the EU and Taiwan. The new study, to be conducted in the first half of 2012, will update the original study, taking into account important developments that have occurred over the past four years, including the Economic Cooperation Framework Agreement (ECFA) between Taiwan and mainland China and Korea’s FTAs with the European Union and USA. The original study made a clear case for a TEM agreement. The report on the study’s findings concluded that a trade deal would boost Taiwanese exports to Europe by €9.84 billion, in particular benefiting Taiwanese manufacturers of electronics and machinery and it would boost Taiwan’s annual GDP by €3.8 billion. The study also concluded that a trade deal would increase annual EU GDP by €2 billion while European exports to Taiwan would increase by €11.8 billion. Such a deal would therefore increase jobs and wealth in both Taiwan and the EU. Since the release of the original study report, the ECCT has been actively supporting a TEM by calling on the governments of both the EU and Taiwan to begin conducting studies and engaging in preliminary negotiations on a potential TEM, he said. In this context, he noted that his visit to Seoul from April 25th to 27th, along with an ECCT delegation was a good opportunity to learn about the FTA negotiations. The agreement was implemented in July last year, and the EUCCK played a very important role in assisting the European Commission. “The visit was part of the ECCT’s ongoing interactions with other chambers in the Worldwide Network of European Business Organisations (EBO). We visited Beijing in 2011 and Shanghai in 2010. During this trip, the delegation was briefed by experts from EUCCK and the EU’s representative in Seoul on details of Korea’s recent free trade deals with the EU and the United States. The delegation also had the opportunity to meet and exchange ideas with their industry counterparts to talk about business developments in their respective industries and regulatory issues in Korea and Taiwan.” He observed that many of the problems that EU investors face in Taiwain are similar to the issues faced in Korea prior to the FTA. For instance Taiwan has double-testing requirements and Taiwan-only standards, which have hindered imports of European electronics products, automobiles, pharma, cosmetics and other goods. Decisive action to harmonize Taiwan’s regulatory environment with international standards would go a long way towards improving Taiwan’s competitiveness and attractiveness as an investment destination, he noted. Speaking on the ECFA, he said that it is a preferential trade agreement between the governments of China and Taiwan that aims to reduce tariffs and commercial barriers between the two sides. The pact, signed on June 29, 2010, in Chongqing, was seen as the most significant agreement since the two sides split after the Chinese Civil War in 1949. The ECFA has been compared with the Closer Economic Partnership Arrangements mainland China signed with the Special Administrative Regions: Hong Kong and Macau. The deal is thought to be structured to benefit Taiwan far more than mainland China. The advantage to Taiwan would amount to $13.8 billion, while mainland China would receive benefits estimated at $2.86 billion. It is too soon to measure the full impact of the ECFA on European business but ECCT members have benefited from efforts so far taken to normalize cross-Strait business relations. The two sides signed off on an initial early harvest list of 539 products from Taiwan and 268 items from China to be exempted from tariffs starting on June 1st, 2011 and have since removed around 600 items from the list of products banned from import into Taiwan from China. This leaves another 2,126 items still subject to negotiation. Many of the items banned or restricted are manufactured by European corporations in China. The ECCT supports the move towards greater cross-Strait business normalization but the benefits of the opening up are being countered by the import ban or restrictions on the import of some 2,100 products manufactured in China. While the number of items on the list has fallen from over 2,700 last year, most of the items regarded as priority items manufactured by European companies in China remain banned or restricted. The ban fosters protectionism, hurts Taiwan’s own industry and consumers and works against the promotion of Taiwan as a regional hub. The ban on numerous models of cars and trucks manufactured by European automakers in China means that local consumers and businesses are deprived of superior quality vehicles at reasonable prices. “The ban on various motors and other electrical engineering equipment forces our member companies to source these products from alternative, more expensive production locations. This directly leads to a cost disadvantage when selling these products in Taiwan.” Lifting the ban and other restrictions would benefit businesses and consumers in Taiwan and make Taiwan more attractive to international investors. In turn this would boost Taiwan’s competitiveness. Tariffs currently in place are already low and the main benefits the EU would gain from a TEM would be in addressing non-tariff barriers (NTBs), just as the recent EU-Korea FTA has done. An EU-Taiwan TEM will be able to tap into the additional trade flows between Taiwan and Mainland China. Gains from an FTA will increase with the ECFA in place and subsequent agreements that would eliminate many of the remaining trade and investment barriers across the Taiwan Strait. Direct beneficiaries will be Taiwan-owned companies and JVs with European partners but ultimately all players will benefit from a more open business environment, he said.

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Tips for Korean Companies Doing Business in India

It is now close to two and a half years since Korea and India implemented the Comprehensive Economic Partnership Agreement (type of FTA), but economic relations between both sides is growing slowly. Although bilateral trade has been growing on an average at 20% annually over the last five years, the investment figures are much more modest. Compared to $2.52 billion in 2001 total trade stood at $ 20.57 in 2011, with a target of $ 30 billion set for 2014. However, Indian investment in Korea is still a low figure of $1 billion, while Korea’s total investment in India is just $2.3 billion. Some of the Indian companies with a presence in Korea are Novelis Inc., Tata Motors Limited, Mahindra and Mahindra, Nakhoda Ltd., and M/s Creative Plastic. Major Korean companies active in India include Hyundai Motor, Samsung Electronics, LG Electronics, POSCO, Hyundai Mobis, Wia Corporate, Lotte Group, Doosan Heavy Industries and Hankook Tires. In addition some 150 others have smaller businesses in India. I would argue that if more Koreans companies do not explore the Indian market, they will be left behind their global competitors. Having emerged as a global center for services and outsourcing, India is also becoming an attractive destination for outsourcing industrial production, specifically for specialty manufacturing. In addition, the expanding Indian middle class is about the same size as the population of the US. It has seen a significant rise in its desire to buy high-quality consumer products, thereby providing a large domestic market for companies that choose to set up consumer manufacturing operations and sales centers in India. Further, it is expected that as India continues to grow, its need for development of its physical and human infrastructure will correspondingly increase. In this context, it is anticipated that India will require some $500 billion over the next five years in investments into the infrastructure sector. All in all, there is little doubt that Korean companies need to devise an appropriate India-strategy. The Indian business market is large and bubbling with newer opportunities in possibly every sector - financial services, telecom, IT, automobiles, media, real estate and alike. The large talent pool of India also offers extensive opportunities. To explore these opportunities extensively, Korean companies need to build up strategic partnerships with the Indian industry. They should first keep India as a key focus, and after that, devise bold, long term targets. The entire decision-making process should be extensive so that India-specific business models pertaining to product, value and pricing can be effectively built. However, one should remember that there are also a number of key cultural challenges in India that can create misunderstanding and conflict as well as huge direct and indirect costs to the organisation if overlooked. Navigating the challenges of doing business in India can be difficult without a comprehensive understanding of Indian social and business culture. India is a country riddled with complexities – distinct differences in culture, language, class, hierarchy and communication styles. So a first-timer’s experience doing business in India can be both exciting and extremely vexing. I list below a few tips that may help you understand Indian business culture. Firstly, the attitudes towards authority are similar to Korean culture. Traditionally a caste society with roots in Hinduism, Indian culture places a high importance on authority and status. Communication between levels is relatively closed so valuable insight or suggestions from employees in lower positions will rarely be shared with their superiors. In this context, Koren companies will feel at home. Like in Korea, Indians have a high tolerance to uncertainty, generally accepting social etiquette and norms instead of rules and regulations. Even though rules do exist, the low level of adherence to them creates huge challenges for companies setting up business in India ,who are used to following Korean regulations. Another similarity between Korean and Indian business cultures is the focus on relationship and trust building. As is the communication style. Indians have a preference for indirect, high context communication. In other words, Indians prefer to see the whole picture, place a high importance on the impact relationships, body language and emotion have on communication and will often avoid saying ‘no’. What might be a bit upseting for Korean businessmen is the lack of respect for time schedules in India. People’s attitudes towards punctuality are relaxed and they tend to change priorities depending on their importance. Most Korean companies are accustomed to the ‘ppalli ppalli’ way of working which requires adherence to strict deadlines and fast decision-making, so they may struggle to cope with the idea that when doing business in India, time cannot be controlled. In India there are a number of cultural differences to keep in mind, especially as they relate to the day to day interactions with Indian clients and employees. The traditional caste system has been outlawed, however the large power distance indicates that the attitudes still remain. As a result, it will be important to make sure to adhere to formal titles and take great care to treat all with a great deal of respect. There is a lot of subtle emphasis on class and hierarchy. Language compatibality is also one thing that must be taken care of. Most Koreans are used to ‘American English’ which is quite different from ‘Indian English.’ Although most university graduates and Indians residing in major urban centres have a very high level of English, understanding them can be challenging, because of the different vocabulary and expressions as well as heavy accents. Many people are unaware of these differences and expect communication with Indians to be simple. In India, business is usually done over lunch as opposed to dinner. Remember to check what their culinary preferences are as many people in India are vegetarians and don’t drink alcohol. Also, gift giving is not a very important part of business and if receiving one, they should never be opened in the presence of the giver. Understanding the cultural differences which exist when doing business in India is only the first step. Korean companies must also develop strategies to effectively cope with these challenges. This will help companies maximize the immense opportunities and benefits of doing business in India.

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Interview: Mr. Chip Pitts, Vice Chair/Chair Designate, Fairtrade International

Fairtrade International (FLO) is a non-profit, multi-stakeholder association that develops and reviews Fairtrade Standards, assists producers in gaining and maintaining Fairtrade certification and capitalizing on market opportunities. Its mission is to enable the sustainable development and empowerment of disadvantaged producers and workers in developing countries through Fairtrade certification by: setting international Fairtrade Standards; facilitating and developing Fairtrade business; supporting producers in making maximum use of the opportunities offered by Fairtrade certification; and by promoting the case for trade justice in debates on trade and development. FLO is the only organization in the world that specializes in Fairtrade standard-setting. 25 members around the world produce or promote products that carry the FAIRTRADE Certification Mark. They developed the Fairtrade labeling model and are responsible with the global board of directors for governance and decision making within FLO. Its members include three producer networks, 19 labeling initiatives, two marketing organizations, and one associate member. The Europe Korea Foundation, philanthropic arm of the EUCCK, has been involved as it’s marketing organization for the initiative in South Korea since early last year. As noted by Mr. Chip Pitts, Vice Chair/Chair Designate of the FLO Board, Fairtrade represents a new way to do business that looks holistically at the supply chain to address market failures and their social impact at source. It is not about aid or charity, but about recognizing the global community as having rights and responsibilities that extend across all of its stakeholders. “This is a really exciting time for FLO because Fairtrade has had an exponential growth over the past years. This mega-trend of Fairtrade which leads to more sustainable, and more equitable economic relations is something we need to build on. We have to make sure that the movement is always at the cutting edge of being relevant and high impact for small farmers and workers in the quest for a more just world.” One of the focuses of the board is to take cognizance of the changing dynamics, the fact that there are these competitive approaches that are coming up, including ones that focus just on sustainability, or just on environment, or just on human rights or labor rights. The nice thing about his particular label is that it represents all of these things- environmental, human rights and labor rights. It also really contributes to the companies’ needs to have sustainable supply chains, he said. He observed that Fairtrade certification benefits marginalized producers and workers in the Global South in four critical ways. First, it provides producers with guaranteed prices that are higher than conventional world market prices, particularly in volatile tropical commodity markets. Second, it supports organizational capacity building for the democratic groups that are required to represent small-scale producers and workers. Third, it enhances production and marketing skills for participants and their families which extend beyond Fairtrade Certified production. Fourth, it provides a social premium to finance broader community development projects, such as health clinics, schools, better roads and sanitation, and other social services. Mr. Pitts is an academic, technologist, attorney, businessperson, and activist who has led technology enabled grassroots campaigns and coalitions for human rights, economic development, and social justice in the United States and in various countries around the world. Having started his international career with a public interest law firm working against apartheid in South Africa, he then became a partner at the world’s largest law firm, Chief Legal Officer of Nokia, Inc., and founding executive of startup companies in Silicon Valley and Austin while offering volunteer leadership to various non governmental organizations. He is also an advisor to the UN Global Compact and former Chair of Amnesty International USA, and serves on several other global boards and advisory boards, including the Business and Human Rights Resource Center (London), the Negotiations Center (Dallas), and the Electronic Privacy Information Center (D.C.). During the current academic year, he is serving as a Visiting Professor at CEIBS (Shanghai), Kyung Hee University (Seoul), and the Center for Human Rights (University of Minnesota), in addition to ongoing teaching in Corporate Social Responsibility and Sustainable Development at Stanford Law School and Oxford University. “I prioritized my personal activities in this region because despite being one of the most connected regions in the world, in terms of economic globalization, Asia is a bit of a laggard when it comes to human rights and social compliance.” For this reason, although the Fairtrade movement has been making inroads in many Asian countries, it has not made much of an impact in China. There are nascent pilot efforts because of the government obstacles that have to be overcome. Notwithstanding this, the other emerging markets are coming on-line and and are acting in big way. Without a doubt the ‘second world’ economies will be driving the process in the future, he said. There is a nascent ASEAN mechanism for human rights now, with the establishment of a Working Group whose primary goal is to establish an intergovernmental human rights commission for the region. It is a coalition of national working groups from ASEAN states which are composed of representatives of government institutions, parliamentary human rights committees, the academe, and NGOs. It is still at an early stage, while the mechanisms in America and Europe are well established. Even the African system is actually quite strong, while Asia is a latecomer, he said. “Asia is at the forefront of economic liberalization, but needs to catch up when it comes to CSR and human rights. We have seen amazing progress just in the last five years and there is a rapid race to catch up with the global norms. Not just WTO and commercial norms but also best practices and social norms. This old idea that CSR is just about philanthropy or giving back a percentage of your profits, that was dominant five years ago, is changing rapidly in countries like India, Malaysia, Indonesia, China and also definitely here in Korea.” “This is partly being aided by the United Nations Global Compact and the new UN Business and Human Rights Framework which have very strong roles for the State to protect rights. They also have roles for civil society and businesses, whereby human rights must be respected. It is not a discretionary matter anymore, but rather an imperative...a global norm, crystallized in ethical norms and also in soft law and hard law. We are seeing an explosion of soft law standards on this topic. In every industry in the world there is a code of conduct and often those codes are made into hard law,” he noted. The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption. The UN Framework on Human Rights and Business comprises the State’s duty to protect human rights, the corporate responsibility to respect human rights, and the duty to remedy abuses. “Asia is playing catch up, and the opportunity that Fairtrade presents is something that should be compelling to all stakeholders. It is in the interest of government and businesses as well as producers. It addresses the trust deficit that businesses are having globally and is a non-partisan, neutral, common- sense way to have more fair, sustainable trade that is in the interest of everyone. Moreover, consumers, too will benefit as they don’t want to be part of unethical trade,” Mr. Pitts noted “Human Rights are about empowerment. This was one of the best things going. Having studied international development, and been active with a lot of anti-poverty initiatives around the world, ranging from direct cash grants to less direct systems, I think that the Fairtrade system represents a sort of culmination of a market-based system based on enhanced transparency in the value of the supply chain but also enhanced equity. It has the potential to contribute a changed consciousness globally where we as consumers, business people, government, all the stakeholders, we all need to be aware that the old idea of “business as usual” --exploitation, violating labor rights, and destroying the environment -- is not only wrong morally is not sustainable. We cannot have business like that in the world; it’s not fit for our current population. That’s what fair trade represents...not just the commercial perspective but also people and the planet.” Fair trade guarantees that there are minimum standards that all rights will be complied with standard processes. So instead of the classic race to the bottom we have the race to the top. All companies can compete on a level playing field. “Frankly it’s sort of a microcosm of the core challenge of the 21st century economy: How do we have a more sustainable and ethical capitalism, showing the way for an equitable relationship between capital and the supply chain -- one that will be sustainable for the future? We can avoid these frequently recurring and ever more intense and problematic financial crises. Fairtrade and CSR offer circuit breakers for global capitalism so that we can achieve a more level playing field and a more resilient system that will allow people to survive and prosper in the future.” Speaking on the challenges that the movement faces, he said that the organization has to ensure that it is an adaptive learning enterprise, that can take on board scientific challenges like climate change, but also not lose its core anti-poverty mission, which is essentially to connect producers and consumers more fairly. It has to do so in a more equitable fashion, so that farmers and workers who are often excluded from the global economic system have a means of earning a more sustainable living, with more empowerment, more autonomy over their lives. “What we need is economic development, not growth, so that people have opportunities. We have to look at ways in which these are interrelated. South-South trade is increasing, and that’s a reality we have to encourage and recognize. We need to be cognizant of the need to have much bigger impact. We want to take it to next level and make a much bigger dent in global poverty by bringing more people into system,” he said.

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Interview: Mr. Robert McKellar, CEO- Asia Pacific, Savills Asia Pacific Ltd.

The Savills Group, established in 1855, advises on allmatters of commercial, residential and leisure properties. It provides a comprehensive range of advisory and professional property services to developers, owners, tenants and investors alike. These include consultancy services, facilities management, space planning, corporate real estate services, property management, leasing, valuation and sales in all key segments of commercial, residential, industrial, retail, investment and hotel property. The company which is listed on the London Stock Exchange, has an international network of more than 200 offices and associates throughout the Americas, the UK, continental Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. In Asia Pacific, it has over 44 regional offices comprising 20,000 staff. This regional market includes Australia, China, Hong Kong, Japan, Korea, Macau, Taiwan, Thailand, Singapore, Vietnam, with associate offices in Malaysia, Indonesia and New Zealand. As noted by Mr. Robert McKellar, Chief Executive Officer- Asia Pacific, Savills Asia Pacific Ltd., the company offers a unique combination of sector knowledge and entrepreneurial flair, giving clients access to real estate expertise of the highest caliber. “We choose to focus on a defined set of clients, offering a premium service to organizations and individuals with whom we share a common goal. Last year our revenue was approximately $500 million. We sold $9.2 billion worth of real estate in 2011, guided over 21000 valuations for $320 billion,managed over 111 million sq. m. of real estate property and leased over 2.4 million sq. m. for commercial, industrial and retail,” he noted Savills is synonymous with a high quality service offering and a premium brand, taking a long term view of real estate and investing in strategic relationships, he said. Mr. McKellar was appointed CEO, in March 2005 and is responsible for overseeing Savills’ regional operations across the Asia Pacific region. He relocated to Seoul in July 2009 to be able to focus more on North East Asia, while continuing to oversee the company’s operations across the region. At the same time, Savills increased its management team in the region, and delegated responsibilities for businesses in China and South East Asia to several core individuals reporting to him. Mr. McKellar joined the group in December 1988 as Financial Controller and then Managing and Financial Director for Savills Commercial Ltd., before being appointed Finance Director for Savills Plc in July 2000. Prior to working for Savills he worked for BP Minerals Ltd. and Babcock Power in London,and British Steel Corporation in Scotland. “There are several reasons why I chose to relocate to Seoul, as Asia Pacific CEO. Logistically, it is easier to travel to Shanghai, Beijing, Tokyo and Singapore. Our focus is North East Asia and it made sense to be based in part of the region. I see no reason why regional CEOs should be based in Singapore and Hong Kong all the time. Moreover, I travel all the time anyway, so I could be anywhere,” he said. He also noted that Korea is the third largest economy in Asia and is still a very big and attractive real estate market. “I think it is good for any CEO in Asia Pacific to spend time in Seoul. Because, then you begin to understand the market here and it is a good experience. Spending time in a market like Korea should be an opportunity anyone would welcome. We know it is much more difficult here than Hong Kong and Singapore. We all know it, but that adds to the value. Other reason is that Korean are big investors overseas, so why not spend time here and talk to the institutional investors.” This, despite the fact that Korea is not the biggest market for Savills. Looking at its split in terms of profile, the company is very heavily geared towards Hong Kong, China, Macau and Taiwan which account for 75 percent of its business in Asia Pacific. Other big markets are Singapore and Australia. “Korea and Japan are smaller. They are more mature, and more difficult to do business in. The emerging markets like China and Vietnam are easier for us to get a position there. More mature markets like Korea and Japan are difficult because of historical barriers to entry. Having said that, I must add that the opportunities in Korea are tempting.” In Korea, Savills has around 140 staff doing property management, investment sales, leasing, valuation, project management and closed asset property management. “Performance in 2011 was OK, it wasn’t great. We were profitable last year, the same as 2010 and the global economic slump did not really affect us because property management, asset management are consistent businesses. As regards investment sales, we roughly did two last year and two the year before. Leasing was quite good, but generally speaking it was OK...much the same as 2010.” “This year the company has got a few deals, a few investment transactions it is working on, and hope to transact soon. In fact last year would have been much better, if they had managed to complete one or two deals that slipped into 2012.” “We also reduced our costs. This year will be better, although not as good as Hong Kong or Singapore, but certainly better than 2011.” Speaking on the advantages that Savills enjoys vis-a-vis local competitors, he noted that being international players they can bring in international clients into the market and also can take the Korean clients overseas. Many Korean institutional investors are investing in London, since it is a very attractive capital market for overseas investors, and Savills can offer the ability to acquire real estate in Europe and other overseas markets. One of its strengths is internationalization, compared to local competitors. “We have some systems and applications and procedures which are international that help us to manage real estate in places like Korea and offer overseas sales that local players cannot offer.” For that matter, Savills is one of the advisors to the biggest institutional players in Korea, the National Pension Service, which has over $300 billion in assets. NPS aims to boost overseas investments to about 20 percent of its assets by 2016, up from 12.9 percent. “We are lucky to be able to advise some of the large institutions in Korea. Increasingly, we are seeing that capital flows are going from east to west...not just the Koreans, but the Chinese and Singaporeans too. This will continue to happen. Especially in big cities like London.” As regards the opportunities for investment arising from the eurozone sovereign debt crisis, McKellar noted that a lot of assets are going cheap. “However, most of the overseas investors tend to want to go to London as the prime focus since it is a liquid market, and a very big institutional market. Other markets in Europe tend to be less attractive. Even the other European investors are buying real estate in London because of the problems they perceive in the eurozone. There will be opportunities in eurozone if you are brave.” “While places like France and Germany continue to be attractive, most investors are focusing on London and the Scandinavian countries where there is less volatility. Europe will come back. The great thing about real estate is that it goes in cycles. The key is buying it near the bottom of the cycle. It’s all about timing,” he said. He picked as for the potential markets that will do well this year, besides London, “Australia is another market which has tremendous opportunity. It is a very transparent market, and the economy is strong with net immigration. In terms of risk, Indonesia may be stable, but real estate investments in Jakarta will give very good returns. Hong Kong and Singapore on the other hand continue to be volatile.” “I would consider Korea to deliver high returns, as long as you can access the product. Unfortunately, the real estate market is tightly held by the conglomerates. Many German funds want to come here, but are unable to proceed further.” In terms of product mix, he noted that despite global economic conditions, Asia Pacific’s retail sector will continue to grow off the back of continued consumer demand. “The retail fundamentals remain solid in the region, with sustained consumer spending in Hong Kong, Shanghai and Beijing. China has been the most significant growth driver for 2011 which has consequently led to higher retail rents in Chinese cities.” He also noted that the Asian market has become a prime target and pertinent region for retailers resulting in an increase in investment sales and retail constructions. This will continue, especially as new opportunities arise in countries like Vietnam and India. Referring to the challenges that a company like Savills faces in the Asia Pacific region, Mr. McKellar said that being a listed company, there are many compliance constraints which the local competitors, especially in China take advantage of. “The Asian way of doing business strongly relies on relationships, whereas the western model is different. Having to adjust to this is quite a challenge. Moreover, regulations in Asia tend to change very quickly and are unpredictable.” “We however still consider the region to be an exciting place to do business. We are expanding this year, to move into Malaysia, Indonesia and New Zealand. We are also keen on India, especially the retail sector.”

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