With so much uncertainty permeating the financial markets, not least emerging markets, it’s heartening to see a big, solid multinational making a big, solid €10bn bet on EM growth.
On Tuesday, German chemicals group BASF announced plans to double annual sales in the Asia-Pacific region to €25bn by 2020, including €2bn to come from new businesses and acquisitions.In a decisive shift away from Germany-centred thinking, it will raise local content from around 60 per cent now to 75 per cent, and base 25 per cent of research and development in the region.
BASF will create 9,000 new jobs in Asia-Pacific, or, as the statement calls them, “value-adding employment opportunities”. The regional R&D staff will soar from around 800 t0 3,500 in a dramatic refocusing of resources. The group is considering establishing a second innovation centre in the region on the lines of its existing site in Shanghai.
BASF estimates the cumulative annual growth rate (CAGR) for real chemical production through 2020 for Asia Pacific at 6.2 per cent, well above the world average of 4.0 per cent. BASF intends “to grow profitably at least two percentage points” above the forecast regional rate, and achieve annual sales increases of more than 8 per cent. Costs will be cut by €1bn a year, including by increasing local procurement.
Martin Brudermüller, BASF vice-chairman, responsible for Asia Pacific, said in the statement:
In the next decade, Asia Pacific will face huge challenges while remaining the fastest growing market for the chemical industry. With our Asia Pacific strategy, we are positioning BASF as the leading provider of sustainable solutions for the Asia Pacific region. Based on our strong global R&D network, we will considerably strengthen our innovation capabilities in Asia Pacific, enabling us to better serve our customers in all industries in the region.
The €10bn investment programme, includes spending by local partners, not least in China, where the group has a huge integrated production complex (along with another in Malaysia). But while China figures prominently in BASF’s plans, this isn’t only about China. BASF says it “will explore untapped markets in Mongolia, Laos, Myanmar, and Cambodia”.
With sales of €72.1 billion in 2012 and more than 110,000 employees, BASF is in a position to make big bets. But this is still quite a statement of confidence by a European company in the future of Asia. It’s also quite a statement about the future of Europe. But that’s another story.