Global Relocation Forecast Optimistic

MBA (5/30/2008 ) Palaparty, Vijay
Companies remain optimistic about future growth of expatriate populations regardless of global economies. A report from GMAC Global Relocation Services, Oakbrook, Ill., found 68 percent of respondents expect an increase in expatriate population this year, only 1 percent lower than the record 69 percent set in 2006.
“International assignments can cost companies two to three times the cost of usual employee compensation,” said Scott Sullivan, senior vice president of GMAC Global Relocation Services. “Trends continue to be optimistic as 2007 results show 67 percent of companies reporting an increase in expatriate population. The previous peak was in the 1997 report which was at 63 percent.”

Sullivan said the lowest point in expatriate population growth was reported in 2001—perhaps caused by both 9/11 as well as the bursting of the dot-com bubble. The 2008 forecast is "well above historical levels and people are looking forward to an expanding population. But the optimism may be letdown as the threat of global recession is oncoming,” he said.

In April, the International Monetary Fund reported that global GDP growth would decline from 4.1 percent to 3.7 percent—barely enough for markets to expand, Sullivan said. “If credit markets remain tight, global growth may lean toward 3 percent,” he said.

The report, the Global Relocation Trends Survey , said optimism could be linked to the international makeup of survey respondents and expansion of the European Union, creating a large and open marketplace encompassing 500 million .

“On the other hand, the booming economy of China and widespread use of expatriates in that region yield additional expatriate population growth,” the report said. It noted that international response to the Sarbanes-Oxley Act of 2002, which pushed up the cost of doing business in the U.S., resulted in companies conducting business in other countries, also expanding the international marketplace.

While expecting further growth, 58 percent of respondents also indicated that their companies would reduce expenses for international assignments in response to economic conditions. Among those reducing expenses, 29 percent indicated they were reducing policy offerings and amounts. More companies said they expect to reply on localization as a ways to reduce expenses—the practice of localization rose from fifth position to second position in 2007. Respondents also revealed a lack of concern over assignments' tax ramifications and potential to reduce expenses.

“Companies are looking for alternatives to long-term assignments to save costs,” Sullivan said. “Since a desire for cost effectiveness was cited by 75 percent of respondents as the reason for seeking these alternatives, this search is part of the movement to reduce expenses in response to economic conditions. Consequently, it is not surprising that companies utilize short-term assignments, hire local employees, rely on localization and take advantage of commuter assignments to save money and minimize the impact on employees’ families.”

The report also revealed that 56 percent of expatriates were relocated to or from their headquarters' country—a trend that has been steadily declining since 2002, the report said. More and more, international assignments are taking place between non-headquarters locations.

“Increase in non-headquarters transfers reflects an effort to reduce labor costs” Sullivan said. “Instead of utilizing expatriates that have ties to headquarters locations, companies increasingly are relying on transfers between non-headquarters locations. Furthermore, since the Asia-Pacific region has grown substantially in terms of economic importance, we believe that a large portion of the non-headquarters transfers are taking place in that region—where third-country nationals are being transferred from rapidly growing economy to another.”