U.S. companies remain optimistic about business prospects in the Association of Southeast Asian Nations (ASEAN), with Indonesia and Myanmar emerging as the leading destinations for business expansion.
This is the outcome of a new study, the “2015 ASEAN Business Outlook Survey,” released by the U.S. Chamber of Commerce and the American Chamber of Commerce in Singapore.
In a poll of 588 senior executives representing U.S. companies in all 10 ASEAN countries, 74 percent reported that their company’s level of trade and investment in ASEAN has increased over the past two years, and 89 percent of respondents expect it to increase over the next five years.
The profit outlook is solid, with 63 percent of executives expecting profit increases this year, and 81 percent next year. Slightly over half (53 percent) of the respondents expect their companies’ workforce to expand this year, while only 5 percent expect decreases.
“This survey underscores the confidence that U.S. businesses have about ASEAN, particularly as it integrates economies, deepens its trade and investment relations with major trading partners, and makes the region an important, attractive destination for U.S. investment,” said Tami Overby, the U.S. Chamber’s senior vice president for Asia.
“The ASEAN countries that are participating in the TPP will enjoy the greatest benefits from this trend toward regional integration, and we continue to encourage those countries that are not yet in the TPP to consider participation.”
However, the survey also found substantial issues to companies’ growth in the region. As in previous years’ surveys, corruption was the top concern across ASEAN, except in Brunei and Singapore.
American companies also pointed to burdensome laws and regulations, lack of transparency, poor quality of infrastructure, and the difficulty in moving products through customs in some countries as obstacles to greater investment.
“The survey results point clearly to a number of areas that ASEAN countries can address in order to maintain and enhance their competitiveness and attractiveness to foreign investment,” said Overby.
The survey also revealed that U.S. companies take advantage of regional economic integration efforts, including ASEAN’s free trade agreements (FTAs) with Australia and New Zealand, China, India, Japan, and Korea. Nearly half (49 percent) of respondents report that they use the FTA to export goods from ASEAN to China. American companies’ use of the other FTAs ranges between 43 and 47 percent.
ASEAN’s efforts to more closely integrate the economies of its 10 member nations are also important to U.S. companies’ investment plans. About 53 percent of respondents said that their company has a strategy based on the goals of the ASEAN Economic Community, which aims to integrate the region by 2015.
Country highlights
On a country basis, Indonesia was rated as the top destination in ASEAN for expansion, despite the many challenges in doing business there, foremost of which is insufficient infrastructure. Other significant challenges include corruption, finding trained personnel, moving products through customs, and problematic laws and regulations.
Myanmar also garnered a high rating, particularly for its ready supply of affordable labor. However, the U.S. business leaders currently operating in Myanmar cite 11 out of the 16 business factors in the survey as challenges, and indicate high dissatisfaction with the cost of housing, infrastructure, lack of trained labor, and office lease costs.
Brunei is one of two countries in ASEAN where the majority of respondents indicate satisfaction with a lack of corruption, but it poses challenges in providing trained personnel.
Cambodia’s strengths are availability of low-cost labor and positive sentiment towards the U.S. Corruption is perceived to be a continuing major problem, however.
Low-cost labor and personal security are strengths in Laos, as they are across much of ASEAN. Challenges include corruption, insufficient infrastructure, lack of trained personnel, and problematic laws and regulations.
Sentiment towards the U.S., the quality of infrastructure, and reasonable office lease costs are significant strengths for Malaysia, and the country enjoys moderate strengths across many business factors. In contrast, corruption and personal security remain challenges, as are the pitfalls of the middle-income trap.
Satisfaction in the Philippines increased across nine of the 16 business factors over the last five years, led by a 23 percentage point increase in satisfaction with the stability of the government and political system. Today, 86 percent of respondents are satisfied with the positive sentiments toward the U.S. and 78 percent with the availability of trained personnel in the Philippines, each representing the highest percentage in ASEAN. Insufficient infrastructure, corruption, the difficulty of moving products through customs, and the tax structure remain challenges in the country.
Singapore-based respondents cite greater satisfaction across polled business factors than any other ASEAN country. Major strengths in Singapore include personal security, a stable government and political system, infrastructure, and a lack of corruption. Challenges for businesses in Singapore, as in recent years, include high housing costs, high office lease costs, and a lack of low-cost labor.
Thailand’s major strengths lie in its personal security, positive sentiments towards the U.S., housing costs, and infrastructure. The lack of a stable government and political system and corruption are cited as the biggest challenges, followed by increasing labor costs.
Of the 588 executives surveyed, 55 percent are in services industries, 31 percent are in manufacturing, and the remainder are in extractive and other industries. The companies had turnover ranging from below $50 million to more than $1 billion.
Photo: ILO in Asia and the Pacific
