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.