APEC CEOs' 10 key insights into ASEAN

The ASEAN cut of the PwC 2015 APEC CEO Survey summarises the measures of business confidence and analysis of notable trends, risks and opportunities from the perspectives of executives based in the 7 APEC economies which are also member states of ASEAN, i.e.Brunei Darussalam, Indonesia, Malaysia, The Philippines, Singapore, Thailand and Viet Nam.
 
This report highlights a number of key findings for the ASEAN region, and we hope that the information contained in this report stimulates discussion and provides clarity on newer avenues for engagement with the private sector, public sector and policymakers in the ASEAN region.

Research findings by PWC, Singapore

 

Following the establishment of the ASEAN Economic Community (AEC) in December 2015, the full implementation of strategic measures for the AEC in the coming years will integrate ASEAN as a single market and product base, making the region highly competitive regionally and globally. 60% of the business leaders in 7 APEC economies in ASEAN identified this as the key game changer for their organisations. Their belief in the ASEAN promise is also seen in their investment plans for the next 12 months, which sees 6 out of 7 APEC economies in ASEAN expecting increases in investments from ASEAN compared to the views a year ago. However, it is worth noting that executives in the region are less optimistic on the reduction of trade barriers and red tapes in the wider APEC business environment, and any escalation of geopolitical tension in the region will certainly cause them to be on edge about the future of their businesses and investments.
 
 

1. Confidence in revenue growth consistently higher in the 7 APEC economies in ASEAN than the rest of APEC

 
Business confidence in revenue growth over the next 12 months remained high among business leaders in the 7 APEC economies in ASEAN (79%) compared to those from the rest of APEC (61%), despite the market volatility in the recent months and uncertainties in the growth outlook in China and the United States. About 94% of business leaders are confident about the prospect for revenue growth in the 7 APEC economies in ASEAN over the next 3-5 years, with insignificant differences compared to the levels of confidence recorded in 2013 and 2014.
 
 

2. APEC economies remain attractive to business leaders in the 7 APEC economies in ASEAN

 
Business leaders in the 7 APEC economies in ASEAN are more inclined to increase their investments globally in the next 12 months (58%) compared to their peers in the rest of APEC economies (51%). They also plan to allocate a larger proportion of the increase to APEC’s 21 economies than the rest of the world.
 

3. Business leaders in the 7 APEC economies in ASEAN plan to increase their investments more within ASEAN

 
For business leaders in the 7 APEC economies in ASEAN, ASEAN remains the region of choice to increase their investments over the next 12 months. After comparing with the results from our 2014 survey, 6 out of 7 APEC economies in ASEAN will see increases in the proportion of business leaders planning to increase their investments in 2016. Outside ASEAN, China and the United States will see the most increases in investments in the coming year.
 
 

4. Scientific research and development less demanded among businesses in the 7 APEC economies in ASEAN

 
Business leaders in the 7 APEC economies in ASEAN expect the demand in their organisations for computer systems (82%), management and technical consulting services (79%), risk reduction services (79%) and legal services (78%) to grow over the next 3-5 years.

 

5. Businesses in the 7 APEC economies in ASEAN look set to expand in the coming years, riding on their leaders’ strong confidence in talent acquisition

 
79% of business leaders in the 7 APEC economies in ASEAN expect their organisations’ headcount in the Asia Pacific region to increase over the next 3-5 years, higher than their peers from the rest of APEC (69%). A large majority of them (79%) remain confident in securing the right talents with the required skills in the region to perform globally.
 

 

6. Most business leaders in the 7 APEC economies in ASEAN fear an escalation of geopolitical tension in the region which will adversely affect their organisations

 
An overwhelming majority of business leaders in the 7 APEC economies in ASEAN (91%) feel that an escalation of geopolitical tension in the region would adversely affect their organisations. Any occurrence of a cyber-attack on critical infrastructure in their economies or a food safety crisis will also cause them on edge more than their peers from the rest of APEC, among many possible disruptors that may affect their organisations.

 

7. More needs to be done to remove the barriers and restrictions to facilitate business growth and trade in the Asia-Pacific

 
Business leaders in the 7 APEC economies in ASEAN are not as optimistic as their peers from the rest of APEC on the likelihood of fewer barriers and restrictions to facilitate business growth and trade in the Asia Pacific by 2020. The ongoing negotiations to promote free trade and economic integration between economies and trade blocs did not seem to impress as many business leaders in the 7 APEC economies in ASEAN, a signal to governments that they do not foresee the red tapes and policy hindrances which still persist in limiting the growth possibilities in APEC economies are going away anytime soon.
 
On the prospect of the Chinese yuan becoming a global and viable reserve currency by 2020, less proportion of
business leaders in the 7 APEC economies in ASEAN (26%) felt that it would be likely compared to their peers from the rest of APEC (46%). Although the International Monetary Fund (IMF) has announced the inclusion of the yuan in the basket of its Special Drawing Rights (SDR) by September 2016, it remains to be seen whether more central banks will begin holding the yuan in their foreign exchange reserves, as well as the pace of adoption to change the composition of their reserves.
 

8. Expansion of digital infrastructure and trade facilitation more preferred in fostering regional connectivity by business leaders in the 7 APEC economies in ASEAN

 

31% of business leaders in the 7 APEC economies in ASEAN feel that expanding broadband access and increasing participation in the digital economy will provide the greatest opportunity for their organisations. Agreements to facilitate trade and remove trade barriers and tariffs are also more preferred, compared to the lower preference for the development of land and maritime transport corridors.

 

9. If fully implemented, the ASEAN Economic Community will be the ‘mega-regional’ game changer for business leaders in the 7 APEC economies in ASEAN

 

The ASEAN Economic Community (AEC) will establish ASEAN as a single market and production base, which will provide abundant opportunities for businesses to grow and expand across ASEAN member states. It is therefore not surprising that majority of business leaders in the 7 APEC economies in ASEAN (60%) identified the full implementation of AEC as the greatest game changer for their organisations. The preference for the direct benefits of AEC in trade and movement of talents trumps that of the wider but less direct promise of the Regional Comprehensive Economic Partnership (RCEP), which is the proposed free trade agreement (FTA) between ASEAN and the six states that the regional bloc has existing FTAs with (Australia, People’s Republic of China, India, Japan, Republic of Korea and New Zealand).

 

10. Expanding access to high-quality education is the most direct enabler to promote inclusive growth in the region

 
Consistent with the view from the rest of APEC, a large majority of business leaders in the 7 APEC economies in ASEAN (84%) believe that the key enabler to promote inclusive growth and reduce inequality is expanding access to high-quality education at all levels. 4 out of 10 business leaders consider it as the best way to enable people who are currently on the margins of the economy to participate in and benefit from growth and trade in APEC. Close to 80% of business leaders in the 7 APEC economies in ASEAN have also identified the improvement of transportation infrastructure as another key enabler to promote inclusive growth in the region.

 

 

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