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Holland among low-cost leaders in mature marketsAccording to KPMG's latest guide on international business location costs
Among mature markets the United Kingdom and the Netherlands have just been ranked by
KPMG International as the low-cost leaders in which to do business.
KPMG’s Competitive Alternatives survey has seen the UK move from fourth place among mature
countries in 2010 to first this year, aided by a combination of lower post-recession costs for labor,
industrial facilities, and utilities, plus corporate tax cuts and a lower value for the pound due to the
European debt crisis.
KPMG’s Competitive Alternatives looks at 26 significant business cost elements, including labor,
taxes, real estate, and utilities in more than 100 cities in 14 countries around the world.
The 2012 edition is the first edition of KPMG’s Competitive Alternatives study to examine the
major high growth countries and compare cost competitiveness in Brazil, Russia, India, China
and Mexico. To that end, the study found that China and India are the low cost leaders among all
countries studied, with overall business costs 25.8 and 25.3 percent below the US baseline,
respectively. Low labor costs drive the advantage for China and India, with China offering the
lowest costs in the manufacturing sector and India in the services sectors.
While labor costs vary greatly between the high-growth and mature markets, many other
business costs in the high-growth countries are similar to, or higher than, those of mature
countries. For example, Canada and the US offer lower industrial facility leasing costs than
China, Mexico, Russia, or Brazil, while India, the Netherlands, Mexico and Germany are the
lowest cost countries for office leasing. High tax burdens, particularly for indirect taxes, also offset
labor cost savings in a number of the high growth markets.
Commenting on the study, Mark A. Goodburn, Global Head of Advisory for KPMG International
said, “Many companies are looking to the high-growth markets to support and enable an effective
global supply chain. The advantages of these markets are not simply cost driven, but value
driven. With the surge of technology, manufacturing capabilities and engineering specialism,
these markets have earned their place among the leading locations for global business. However,
local market complexities in these countries can be intricate, from labor supply to taxes, making a
well thought-out business strategy vital to success in these markets.”
Despite a surge of interest from many companies in serving Brazil’s large and growing domestic
market, costs in Brazil are higher than in the other high growth countries and approach the cost
levels of the leading mature countries. Brazil’s wage levels, including minimum wage standards,
are significantly above those of the other high growth countries studied, and a heavy tax burden
also impacts Brazil’s total cost performance.
According to Greg Wiebe, Global Head of Tax for KPMG International, “Around the world
companies are dealing with an immense amount of change that comes with many challenges.
This is especially true for those who work across multiple borders. A major component is how to
manage the risks while adding value to the bottom line. Thus understanding all the elements of
operating in one country over the other is of critical importance.”
Among mature markets the United Kingdom and the Netherlands have just been ranked by KPMG International as the low-cost leaders in which to do business. KPMG’s Competitive Alternatives survey has seen the UK move from fourth place among mature countries in 2010 to first this year, aided by a combination of lower post-recession costs for labor, industrial facilities, and utilities, plus corporate tax cuts and a lower value for the pound due to the European debt crisis. KPMG’s Competitive Alternatives looks at 26 significant business cost elements, including labor, taxes, real estate, and utilities in more than 100 cities in 14 countries around the world. The 2012 edition is the first edition of KPMG’s Competitive Alternatives study to examine the major high growth countries and compare cost competitiveness in Brazil, Russia, India, China and Mexico. To that end, the study found that China and India are the low cost leaders among all countries studied, with overall business costs 25.8 and 25.3 percent below the US baseline, respectively. Low labor costs drive the advantage for China and India, with China offering the lowest costs in the manufacturing sector and India in the services sectors. While labor costs vary greatly between the high-growth and mature markets, many other business costs in the high-growth countries are similar to, or higher than, those of mature countries. For example, Canada and the US offer lower industrial facility leasing costs than China, Mexico, Russia, or Brazil, while India, the Netherlands, Mexico and Germany are the lowest cost countries for office leasing. High tax burdens, particularly for indirect taxes, also offset labor cost savings in a number of the high growth markets. Commenting on the study, Mark A. Goodburn, Global Head of Advisory for KPMG International said, “Many companies are looking to the high-growth markets to support and enable an effective global supply chain. The advantages of these markets are not simply cost driven, but value driven. With the surge of technology, manufacturing capabilities and engineering specialism, these markets have earned their place among the leading locations for global business. However, local market complexities in these countries can be intricate, from labor supply to taxes, making a well thought-out business strategy vital to success in these markets.” Despite a surge of interest from many companies in serving Brazil’s large and growing domestic market, costs in Brazil are higher than in the other high growth countries and approach the cost levels of the leading mature countries. Brazil’s wage levels, including minimum wage standards, are significantly above those of the other high growth countries studied, and a heavy tax burden also impacts Brazil’s total cost performance. According to Greg Wiebe, Global Head of Tax for KPMG International, “Around the world companies are dealing with an immense amount of change that comes with many challenges. This is especially true for those who work across multiple borders. A major component is how to manage the risks while adding value to the bottom line. Thus understanding all the elements of operating in one country over the other is of critical importance.”
About KPMG’s Competitive Alternatives StudyKPMG's 2012 Competitive Alternatives study provides an independent comparison of international business locations in more than 110 cities in 14 countries around the world. The study looks at a wide range of issues when assessing competitiveness for business, with a primary focus on business costs, but also population and demographics, education and skilled labor, innovation, infrastructure, economic conditions, regulatory environment, cost of living, and personal quality of life. It also examines cost competitiveness of locations for different industry sectors including manufacturing, digital, research & development, and corporate services. The study enables businesses executives to take an initial scan of how business location issues compare among a variety of cities in leading countries. It also assists KPMG member firm professionals and economic developers in their work with businesses considering relocation or expansion, and enables policy makers to help determine the impact of a proposed tax and/or incentive policy change on the cost competitiveness of their jurisdictions. To access the full report, please visit www.competitivealternatives.com. Exchange rates per USD used in the Competitive Alternatives 2012 study are as follows: AUD $0.99, BRL $1.80, CAD $1.02, CNY ¥6.36, EUR €0.74, GBP £0.64, INR 50.75, JPY ¥77.33, MXP $13.64 and RUB 31.07. About KPMG InternationalKPMG is a global network of professional firms providing Audit, Tax and Advisory services. KPMG operates in 152 countries and have 145,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ('KPMG International'), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. Source: KPMG International press release, 22 March 2012
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