This is the first of a series of six posts that will be published over the next three months and that will report our firm's analysis and forecasts for five Asia-Pacific legal markets that we believe will offer the greatest growth in the demand for legal services from international law firms and well-established national and local firms.
These are not the only Asia-Pacific markets that will experience significant growth and changes in the delivery of legal services. For example, we do not intend to exclude well-established legal markets like China, Japan, Hong Kong, South Korea, or Singapore. However, each of the five jurisdictions on our list presents a somewhat distinct growth scenario that will produce opportunities for strategically alert firms, while also being instructive case studies in the dynamics of legal markets in the second quarter of the 21st century.
Another distinguishing feature of each of these markets is that, in our opinion, there are equally good opportunities for local and national firms -- not just foreign firms. (This is very important to us at Walker Clark, because we advise local, national, and regional law firms in emerging legal markets, rather than the global giants.) There are good opportunities for foreign law firms in each of these markets, to be sure; but the better opportunities will be for well-managed local firms that can demonstrate differentiating competitive advantages in a much more competitive market.
five for the next five years
As we considered every jurisdiction in the Asia-Pacific region (which we defined as extending from Iran to the Pacific and including Australia, New Zealand, and other western Pacific countries), we identified interesting opportunities for significant law firm growth in more than half of them. However, five jurisdictions stood out as especially promising opportunities. As with all promising opportunities, each presents a significant and somewhat unique set of risks.
Subsequent posts in this series will present the strategic case for each of these five legal markets. Here is a quick preview, in the order in which we will discuss each country further in future posts (and not necessarily in order of our degree of confidence or relative enthusiasm about each one).
The International Monetary Fund projects that Philippine economic growth in 2016 will be the fastest among the ASEAN countries, at 6% in 2016 and 6.2% in 2017. This will be driven by robust economic demand, as well as an expected government stimulus package this year. Barring any major regional or global disturbances, this level of growth should continue, we believe, at approximately the same rate through 2019 or 2020. Direct foreign investment is expected almost to quadruple between the end of 2016 and 2020.
There are number of useful metaphors in the experiences of law firms in other quickly emerging legal markets over the past 15 years, which describe what we expect in the Philippines for the next five to ten years. We expect a substantial growth in the demand for inbound legal services, which will produce significant challenges for the current market leaders as well as opportunities for "younger" law firms that can demonstrate to foreign clients and referring law firms that they can deliver convincing competitive advantages. We also expect local firms to be challenged by increased price competition and at least some predatory pricing of legal services. Sustainable profitability will be a key survival skill for some local firms, if they want to continue to compete at the top level of the market.
Vietnam's economic growth over the past 25 years has been among the fastest in the world, with an increase in GDP per capital averaging 6.4% in the 2000s, and expected to be 6.7% this year. The government's Socio-Economic Development Strategy for 2011-2020 continues the investment and effort that has given Vietnam one of the lowest poverty rates in the world, and a population that is healthier and better-educated than most other countries with similar per capita incomes.
We expect the movement of foreign law firms into the Vietnamese legal market to continue through 2020, posing strategic and practical operational challenges to foreign and local firms that want to take advantage of robust growth that is expected to continue well into the 2020s. It will be expecially attractive to regional firms in southeast Asia, as well as global firms seeking to diversify their global client bases. This will present competitive challenges, but also collaborative opportunities, for good Vietnamese law firms.
As we observed previously in the WorldView blog, and as reinforced by our more recent research, it is almost certain that there will be a dramatic increase in foreign investment in Iran in the near future,(i.e.,the next four or five years). This will be followed by what we would describe as a "cautious stampede" of foreign firms, following their clients into the country. The most prominent Iranian law firms currently are general practice firms, which could place some of them at a disadvantage until they can demonstrate specialized expertise in the more sophisticated legal and regulatory issues that may be presented by new clients entering the Iranian market. Although we expect that the first foreign firms to establish a credible market presence will be from Europe and the Persian Gulf region, we also expect some early entrants from China, India, and South Korea to establish at least representative offices, as well as Iranian desks in their home jurisdictions.
India would be a key focal point for strategic observation and instruction, even if it would not be, as now appears probable, going to surpass China as an economic power sometime in the next decade. The prospect of foreign lawyers and law firms being permitted to practice in India (although not Indian law), as reported in a recent WorldView post, will present serious competitive challenges against which Indian law firms have been protected, at least partially. At the same time, the Indian legal market already is occupied by a substantial number of very sophisticated, successful firms. This realization should dampen the temptation among partners in law firms in New York and London to go rushing to India. (It should, but in some cases, it probably won't.)
In short, we view India as too big an opportunity for foreign firms with Asian practices to ignore; but, like most big opportunities, this one presents risks that must be evaluated and managed carefully.Likewise, we see the opening of the Indian legal market as an opportunity for well-managed Indian law firms -- likewise, one that is too big to ignore or deny.
We see Russia's best and most probable future as an Asian, rather than European, economic power.
Despite the recent economic setbacks and international sanctions, development of the Russian Far East is going to continue, with heavy investment from South Korea, China, and other Asian investment centers. It is too important to the Russian government and to its foreign partners for the effort to fail.
However, the legal market in the Russian Far East is still largely undeveloped, serviced remotely primarily from Moscow, as well as Seoul and other distant commercial centers. We continue to evaluate the Russian Far East as an excellent opportunity for law firms that can demonstrate expertise in areas such as public-private partnerships, procurement, special economic zones, and cross-border investments, and that can master the challenges of superior client service in a still somewhat remote part of the world.
"One size fits nobody."
We will present the strategic case for each of these five legal markets in future posts in the Walker Clark WorldView blog, Each of these legal markets is different; and there is no "one size fits all" strategic approach to all of them or within any of them.
The experience of the members of Walker Clark, advising law firms worldwide on strategic issues for more than 20 years, as reinforced by our analysis of each of these five markets, make it clear to us that many of the traditional approaches and habits of law firm strategic planning are unlikely to work in the unique, dynamic environments of each of these five markets. Instead, the challenges and opportunies for foreign and local firms in each of these jurisdictions will best be managed by well-informed, practical decisions, disciplined innovation, and intense ongoing alertness to an every changing competitive environment.