ASEAN’s Bullish Business Confidence

By Tim Hill, Director, Business Development, Ipsos Business Consulting

The ASEAN business community is largely optimistic about the prospects for 2015, despite or because of cheap oil prices and a strong US dollar, according to the ‘ASEAN Outlook 2015’ survey conducted by Ipsos Business Consulting.

The survey results point to Indonesia as a star performer, and the era of the ASEAN Economic Community (AEC) scheduled for the end of 2015, as largely being welcomed, although few people expect major changes before the end of the decade.

The survey of 866 executives, conducted in March 2015, focused on Indonesia, Malaysia, Singapore, Thailand, The Philippines and Vietnam.

Some of the variance across countries shows where priorities lie. Indonesia may be the market where most executives were expecting to make their money in 2015, but Singapore was voted as the country most likely to benefit from AEC. Vietnam executives are much more concerned with disturbances in the South China Sea in 2015, than their counterparts elsewhere. Malaysian executives see the drop in oil prices as being one of the biggest challenges to their economy this year.

And there are some interesting variations by seniority in the outlook for the region, with CEO concerns over lack of staff skills not being shared by their teams. Last but not least, executives were unified in viewing big data and the internet of things as being technology drivers that would impact their operations in 2015.

Why AEC is viewed positively

Survey respondents, mostly representatives of large and multinational enterprises, viewed intra-ASEAN trade as a difficult process. A retail sector manager from Malaysia complained of “the restriction by ASEAN country governments hampering the growth of multinationals.” A vice-president from the automotive sector in Singapore summed up their biggest hurdles as being “inefficient government approval processes and corruption… non-tariff-trade… and countries implementing local standards which are not in line with international standards.” And yet this executive, along with most of the other 866 surveyed, felt optimistic about the region as a whole and that the AEC is “a step in the right direction.”

The recommendation from this respondent and others surveyed was that, at this stage, it was best to focus on some of the stronger individual markets rather than to roll out regional marketing plans.

Opinions on which countries would benefit most from the AEC seemed to focus on four of the ASEAN-6, with Singapore, Thailand and Indonesia appearing at the top of most lists.

Pan-ASEAN companies to benefit

Respondents to the survey seemed to agree that perhaps the biggest beneficiaries from AEC were not necessarily going to be multinationals looking to expand their reach in the region, but rather the large pan-ASEAN companies. These companies are familiar regional brands often with a long history and distribution network with local managers that are accustomed to the challenges of inter-ASEAN trade and regulations. Larger domestic companies and small- and medium-sized companies were not expected to benefit significantly from AEC, presumably because they are not doing business in multiple countries.

Respondents mostly agreed that AEC would be a positive thing for their own companies, primarily for facilitating cross-border trade and logistics. A CEO from an agricultural company in Vietnam explained that “a free (trade) zone in ASEAN (with) no visas and no tax would give us a lot of opportunities to do business with Indonesia, Singapore and the Philippines... It (would) change our company a lot.”

However, most respondents felt they would not see positive developments before 2020. Hence, respondents were perhaps stating what they hoped to see eventually from AEC in the longer term, rather than what they were expecting to see at the end of 2015.

Singapore and Malaysia lowest awareness levels of AEC

The perceptions of business leaders towards AEC were shown when asked about the awareness of their senior regional managers about AEC. Across the region, just over 51 per cent of respondents claimed their regional senior staff were very familiar, or familiar, with AEC. However, this differed by country. Indonesia had a slightly lower rate of 47 per cent. Singapore respondents were about 10 per cent-less confident than the ASEAN average in their familiarity with AEC. This is perhaps surprising given the high ratings that both countries were given by respondents overall in terms of being primary beneficiaries. Malaysian respondents were even less sure of the benefits of AEC with only 38 per cent claiming familiarity from their senior staff.

Concerns about qualified staff

ASEAN executives seem to be somewhat bullish about both their local economies and their revenue expectations for 2015 with 84 per cent predicting growth for their offices this year. CEOs are notably more optimistic than their staff with 32 per cent predicting growth rates in excess of 10 per cent for the year, whereas only 18 per cent of their managers are expecting growth rates of this magnitude.

However, 63 per cent of Malaysian respondents were not very optimistic, or not at all optimistic, about their economy. Malaysian respondents had a higher concern than the rest of the region about falling oil prices and the rise of the US dollar.

Despite the overall optimistic expectations, most respondents were still concerned about whether the local economies would enable them to hit targets, although, again, there were differences around the region and up the management ranks.

All this points to the ASEAN business community being largely optimistic about prospects for 2015.

Tim Hill is the Director of Business Development for Ipsos Business Consulting based in Singapore. A frequent speaker and writer on ASEAN business issues, he works with clients in SE Asia and Australia to help them expand in emerging markets.

FIA issues regular e-bulletins with analysis on relevant food and beverage industry issues across the region. To subscribe to this service, please click here.