As one of the Big Four global accounting firms, Deloitte & Touche Tohmatsu sees China as one of the main drivers for growth in the Asia Pacific region. It has 6,000 employees spread over 10 China offices and plans to invest a further US$150 million in the country. Chaly Mah Chee Kheong, Deloitte’s new CEO for Singapore and Southeast Asia, spoke to CHINA ECONOMIC REVIEW about how he hopes to take advantage of both emerging opportunities in China and growing regional interdependence.
Q: This region is very diverse – in languages, people and standards. How do you deal with that?
A: We formed a regional cluster about a year ago and the intention is to run it as one firm even though we have seven country firms in there. We think this will enable us to serve our clients better. [Pooling] our resources helps us share some of the expertise that resides in various countries so it can be used across the entire region. At the same time, it will help us develop our people because they will now have the opportunity to work with experts on cross-border assignments.
Q: How do you amalgamate all the standards across the region?
A: We put together a project management office that deals with change management. Basically, people’s mindsets have to change – we have to make sure everybody abides by Deloitte global standards. In China, a few years ago we started spending US$150 million as a global investment project. The money has gone into bringing talents to China and helping develop the Chinese market. We started with just a small share of the big state-owned enterprise (SOE) audits. Today, we audit more than 20% of the top 50 SOEs in China. We started out not auditing any of the Big Five Chinese banks; now we audit two of them.
Q: How are the challenges in China different to those in India?
A: In India, we have a similar investment program on which we have spent US$50 million. We are also helping our India firm set up proper infrastructure. What we have needed to do is make sure they have a common reporting platform, which has never been the case before. Our India strategy is very similar to our China strategy – and I would say in China we are more or less there in terms of achieving our objective. Both countries represent high growth markets for us. Even though people talk about China having 1.3 billion people and India having 1.1 billion people we still don’t hire enough accountants there.
Q: What role does the region play?
A: As far as Deloitte is concerned, the entire Asia Pacific region is our number one priority. We embarked on this project to create a Southeast Asia cluster because we believe that, besides China and India, there is a role for Southeast Asia to play. Singapore has been very successful; exciting things are happening in Thailand; Indonesia is very stable. The total population of the entire Southeast Asia region is about half a billion… that’s a pretty big region. I always say to our clients operating in the region, there is no point in competing with China or India, you have to try and work with them – if they are successful you will be successful.
Q: What does this mean for you?
A: Our new global CEO’s focus is on implementing our 2010 strategy. In a nutshell, the strategy focuses on three major areas: the promotion and enhancement of the Deloitte brand; generating our next generation of talents; and, of course, our clients. Many people have this misconception that the Big Four firms focus only on big clients. It’s true we have our marquee clients but at the same time, when you look at most of our markets… a big chunk of our business still comes from the ‘meat’ markets, no matter how you define it. Not the mom-and-pop shops but small- and medium-sized enterprises, no matter how you define them.
Q: Are there any particular targets you have identified as part of this three-prong strategy?
A: One of the things I will be focusing on is trying to get all the countries in the Asia Pacific region to cooperate and make sure we are successful in cross border execution. In this globalized world, a lot of our clients are not interested in how well we can serve them in China. They want us to deliver the same Deloitte experience to them wherever they operate. It’s a bit like eating a McDonald’s hamburger – it tastes the same no matter where you eat it.
Q: Is the problem within Deloitte or with different standards?
A: You are already seeing some conversion. For many years the Koreans have been pretty much in line with the US. You have a lot of Korean companies that have listed in the US market and therefore they adhere to US Generally Accepted Accounting Principals (GAAP).But now many of them are asking for International Financial Reporting Standards (IFRS).
Q: What is driving the change?
A: More and more companies operate across borders. The Chinese themselves have committed to IFRS. A lot of Chinese companies have come to Hong Kong to list and they have Hong Kong GAAP, which is IFRS compliant. If I were to put a bet on whether we’ll end up with IFRS or US GAAP, I’d say more companies are going towards IFRS.
Q: What is your biggest challenge in dealing with all these standards?
A: We have IFRS centers all over the world. Because IFRS is principle-based – versus US GAAP, which is rules-based – it requires a lot more consultation. Our practitioners on the ground know the application in most cases. Having said that, because of this move towards IFRS, there is now a growing demand for IFRS-trained accountants. There will be shortage – it is already visible now.
Q: How can you deal with this?
A: The way we are solving it right now is to reach out to firms that practice in IFRS jurisdictions and try to get them to train more people. What you are going to find is that, as more countries move towards IFRS, the pool of resources will grow.
Q: Is it difficult to bridge the cultural and legal gaps between countries?
A: It is difficult, but one of the pluses of working for a global organization is that you start to think globally. Cultural differences will always be there but, as far as we are concerned, we want everybody to deliver the same Deloitte experience. Because the China phenomenon happened so fast, everybody is chipping in to help produce well-trained Chinese [accountants]. We have Chinese nationals who have been posted outside to gain experience in foreign offices. At the same time, we are hiring many mainland Chinese who are studying in Singapore, the US and the UK, training them, and plowing them back into China. Eventually, we will end up with a lot of mainland Chinese who have trained overseas.
Q: Is the approach local-to-global or global-to-local?
A: For an organization like us it would have to be a global experience but delivered locally by the right people. You can’t have a lot of expats running around China… but you can bring in the expertise and deliver it through local staff.