The reason for this omnipresence and focus on regional hubs is clear enough. The Asia Pacific region represented 20% of all revenues for AkzoNobel in 2009 (north America was 21%), and the company recognises the need for a strong presence in the region. AkzoNobel's Decorative Paints business has units headquartered in Singapore for ASEAN and in Shanghai for China and north Asia. Its performance coatings businesses also have units in the region.
'It's an emerging market,' said Dale Laidler, the company's spokesman for research, development and innovation. 'We have got to be close to and in the same environment as our customers. That applies not only to marketing and selling, but also to production, research and technical support. You need your manufacturing there and increasingly we're building R&D capabilities in the region, not just for the local markets but for markets elsewhere.' Tax incentives can also concentrate the minds of the big players. Thailand offers a 10% income tax rate on net profits, interest and royalties for regional operating headquarters, and reduced tax rates for companies listed on the stock exchange of Thailand and Malaysia offers wide range of tax incentives for manufacturing projects. 'Most of the governments in ASEAN countries do offer tax incentives for MNC's [multinational companies] to enhance economic growth in,' pointed out Choong Li Jiun of analysts Frost & Sullivan.
There are several strategic reasons for establishing a hub, according to Ms Choong. 'It allows proximity to markets, creating new revenue streams and growth platforms, understanding consumers' needs for bringing out new products and reducing manufacturing costs. 'A regional hub also helps in reducing costs with regards to distribution. Companies might follow a hub-and-spoke model for distributing their end products across geographies. There is also the attraction of cheap labour, basic infrastructure availability; strong relationships with end users and local market knowledge.'