US firms weigh sustainability of PNoy’s reforms

A small majority or just 52 percent of American firms surveyed believe that President Aquino’s economic reform achievements will be sustained beyond his presidency, according to the annual ASEAN Business Outlook Survey.

The survey, conducted by the US Chamber of Commerce and American Chamber of Commerce in Singapore aimed at gauging American business sentiment in the region polled a total of 471 senior executives representing US companies in all 10 ASEAN countries, also showed that a meaningful 31 percent of respondents chose to be neutral while 17 percent do not believe that Aquino’s reforms will be sustained by the next administration.

Despite such seeming ambivalence, a big majority or 71 percent of American businesses surveyed said they plan to expand in the Philippines. Sixty-seven percent of businesses also expect to hire more workers this year.

In terms of profitability, an overwhelming majority or 81 percent of respondents said they see increase in profit this year while only 5 percent said profit will decrease and 14 percent, flat.

American businesses also showed a strong dismay against the Bureau of Customs operations, which got a high dissatisfaction rating of 74 percent. The survey also showed that 55 percent of American businessmen were dissatisfied with the country’s taxation/revenue system.

On the 16 aspects of the business environment, American companies gave a higher satisfaction rating in the areas of sentiment towards the US (79%), availability of trained personnel (74%), availability of low cost labor (67%), personal security (55%), state government and political system (48%), housing cost (40%) and office lease costs (38%).

Tax structure got the lowest score (10%) followed by corruption and laws and regulations tying at 14 percent. Other aspects with low scores include infrastructure, ease of moving products through customs, free movement of goods within the region, and availability of raw materials.

Overall, the survey showed that US companies remain generally optimistic about business prospects in ASEAN.

The survey showed that 72 percent reported that their company's level of trade and investment in ASEAN has increased over the past two years, and an overwhelming 86 percent of respondents expect it to increase over the next five years.

"The ASEAN region continues its solid growth despite regional and global economic headwinds, and this survey demonstrates that US business remains confident about prospects in ASEAN," said Tami Overby , US Chamber of Commerce Senior Vice President, Asia . "However, this confidence cannot be taken for granted. We have also seen a modest, but clear, downward drift over the past several years, in terms of some of overall indicators of optimism."

Over half (53 percent) of respondents said that ASEAN markets have become more important in terms of their companies' worldwide revenues over the past two years; this is ten percentage points lower than reported two years earlier. In addition, two-thirds (66 percent) of respondents this year expect ASEAN to become more important in terms of worldwide revenues over the

next two years; while still high, this is 7 percentage points lower than two years earlier.

"In many ways, 2015 will be a landmark year for ASEAN," said AmCham Singapore Executive Director Judith Fergin . "While the launch of the ASEAN Economic Community (AEC) will strengthen ASEAN's attractiveness to investors, the priorities ASEAN sets for the post-AEC agenda will determine the pace of development across the region."

In terms of future priority areas of work to enhance regional economic integration, survey respondents placed the greatest emphasis on overcoming non-tariff barriers to trade, increasing transparency, and promoting good governance.

"This means that policymakers in ASEAN – like everywhere else around the globe – must maintain and improve their competitiveness and attractiveness to investment," Overby said. "For the United States , it means that we need to continue to work in partnership with ASEAN to identify the policies that will best promote long-term economic growth to the benefit of both ASEAN and the United States. The TPP is a huge part of this picture for the ASEAN countries that are participating in it, and we continue to encourage those countries that are not to consider joining."

US companies identified a variety of concerns and impediments to their growth in the region. As in previous years' surveys, corruption was the top issue across ASEAN, cited by the majority of respondents in all countries except Brunei and Singapore . American companies also highlighted 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. 77 percent of respondents to this year's survey reported that exchange rate volatility has a "significant" or "somewhat significant" impact on their business operations in the region.

"This year's ASEAN Business Outlook Survey clearly demonstrates that American investors remain strongly positive about business prospects across the region. It also points to important areas where continued progress along the continuum of ASEAN integration has the potential unleash enormous additional opportunities for growth," Fergin stated.