Asian Currency Turmoil Expected to Cause US Corporations to Rethink Expatriate Programs in Pacific Rim Region
Business Wire - January 20, 1998 09:00
%KPMG %NEW-YORK %BANKING V%BW P%BW
NEW YORK--(BUSINESS WIRE)--January 20, 1998--
Shift From Expatriate Employees To Local Nationals May Arise
Asia's currency turmoil has adversely affected financial results of US corporations with operations in the Pacific Rim region. As US companies seek to cut overall operational costs in an effort to weather the effects of the currency problem, expatriate programs in the region may fall under new scrutiny. Jeffrey Stein, New York City based KPMG Tax Partner in Charge of the International Services practice notes: "With US corporations fighting to remain competitive overseas despite the currency devaluation, overall compensation package reductions may be a quick answer in cutting operational costs. As part of the cost of an international assignee generally is borne by the overseas operation hiring local labor may become a less costly and more attractive alternative. With local labor costing a considerable amount less than that of expatriate labor, companies may now turn to local labor pools in a quest to cut back on company expenditures." "But labor unrest in the region is also a factor to be considered when examining the future of expatriate programs in Asia," Stein says. As a result of the currency turmoil, the Asian unemployment rate has clearly elevated. According to Jeffrey Stein: "The currency turmoil has created an increased unemployment rate within the Pacific Rim region. Competition for jobs is intense. Companies with expatriate programs may now find that they are faced with heightened backlash from the local workforce." It is also possible that the number of Asians coming into the US on assignment may diminish. "Asian companies may find it too expensive to send their employees on foreign assignment due to the Asian currency devaluation," says Daniel Orchant, New York City based KPMG Tax Senior Manger, International Services. "To compound this, whereas before Asians were anxious to return home because the Asian economy was booming, in the current environment they may opt to stay abroad." Another trend that many corporations have used to reduce the cost of expatriate assignments has been "localizing" long-
term international assignees. Some US expatriates have found this to be a better alternative than returning home to down-sized organizations that are not prepared to offer positions that will leverage off the experiences gained from the assignments. "Clearly, the conversion from expatriate status where you receive assignment allowances for costs such as housing to local employee status provides cost savings to the company. However due to the Asian currency plunge, US expatriates may be very reluctant to accept a pay package delivered completely in local currency especially if they have continuing US obligations they need to meet," comments Stein. KPMG is the U.S. member firm of KPMG International, the worldwide professional services firm. KPMG International has more than 6,000 partners and 76,000 professionals serving clients in 153 countries. In the U.S., KPMG partners and professionals deliver a wide range of value-added assurance, tax and consulting services. The firm is moving toward becoming the leader among professional services firms in capturing, managing, assessing and delivering information to create knowledge that will help its clients maximize shareholder value. Additional information about the firm is available on KPMG's World Wide Web site (http://www.us.kpmg.com).
CONTACT: Wendy Klein
KPMG 201-505-3537
E-mail: wklein@kpmg.com
or
Billee Howard
Shandwick USA
212-420-8100, ext. 306
800-223-2121
E-mail: bhoward@shandwick.com
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