CEOs as­sess busi­ness sen­ti­ment across ASEAN mar­kets

Viet Nam News - - MARKETS -

HAØ NOIÄ — Some 20 years af­ter the Asian fi­nan­cial cri­sis brought many South­east Asian na­tions to their knees, busi­ness sen­ti­ment is buoy­ant in a re­gion that now func­tions as one of the pri­mary en­gines of global growth, ac­cord­ing to the re­sults of our in­au­gu­ral Busi­ness Barom­e­ter: OBG in ASEAN CEO Sur­vey.

Around 84 per cent of ex­ec­u­tives sur­veyed across six ASEAN states – Indonesia, Malaysia, Myan­mar, the Philip­pines, Thai­land and Vi­etä Nam – had pos­i­tive or very pos­i­tive ex­pec­ta­tions for lo­cal busi­ness con­di­tions in the com­ing 12 months, while 72 per cent were likely or very likely to make a sig­nif­i­cant cap­i­tal in­vest­ment.

The upbeat re­sults re­flect Asia’s emer­gence as the main driver of global eco­nomic ex­pan­sion. The IMF fore­casts the GDP of the “ASEAN-5” – de­fined by the fund as Indonesia, Malaysia, the Philip­pines, Thai­land and Vi­etä Nam – to grow by 5.4 per cent and 5.3 per cent in 2018 and 2019, re­spec­tively, and projects emerg­ing and de­vel­op­ing Asia will ex­pand by 6.5 per cent an­nu­ally over the same pe­riod, mak­ing it the fastest-grow­ing con­ti­nent by some dis­tance.

This is the first time we have col­lated our pro­pri­etary data from in­di­vid­ual ASEAN mar­kets cov­ered by OBG into a col­lec­tive sam­ple, al­low­ing us to pro­vide commentary on re­gional in­vestor sen­ti­ment, as well as ob­serve dif­fer­ing na­tional per­cep­tions within the bloc. Un­sur­pris­ingly, given its 250 mil­lion-strong pop­u­la­tion, the largest na­tional sam­ple came from Indonesia, fol­lowed by the Philip­pines, Myan­mar and Thai­land, while the small­est sam­ples came from Vi­etä Nam and Malaysia.

As ASEAN’s main trade part­ner and an in­creas­ingly im­por­tant source of foreign di­rect in­vest­ment and in­bound tourists, China’s grow­ing in­flu­ence is re­flected by the fact that 33 per cent of CEOs sur­veyed across the six coun­tries cited a slow­down in Chinese de­mand as the top ex­ter­nal fac­tor that could im­pact their na­tional economies in the short to medium term.

China’s trade with ASEAN grew 13.8 per cent to hit a record high of US$514.8 bil­lion in 2017, ac­cord­ing to of­fi­cial Chinese fig­ures. While its share of global trade in the mid-1970s was just 0.5 per cent, it is now the world’s largest ex­porter and the top trad­ing part­ner for all six coun­tries cov­ered in our sur­vey. Its un­prece­dented growth and strategic am­bi­tions are re­shap­ing the geopo­lit­i­cal and eco­nomic dy­nam­ics of the re­gion, with China now the hub of a flour­ish­ing transcontinental trade net­work that largely by­passes the US.

As Pres­i­dent Xi Jin­ping presses for­ward with plans to pur­sue a so­called “high-qual­ity”, sus­tain­able­growth model, ex­ec­u­tives across ASEAN hope that any re­sult­ing mod­er­a­tion in China’s GDP ex­pan­sion does not trans­late into sig­nif­i­cant falls in trade vol­umes and in­vest­ment flows.

It is in­ter­est­ing to note the two coun­tries in our sur­vey with the great­est con­cern about a po­ten­tial slow­down in Chinese de­mand – Thai­land and Indonesia – have been cited in var­i­ous stud­ies as among the ASEAN mem­bers most vul­ner­a­ble to China’s eco­nomic re­bal­anc­ing to­wards con­sump­tion as the main growth driver. Thai­land’s vul­ner­a­bil­ity stems from its par­tic­u­larly close trade link­ages and Indonesia’s from be­ing a net com­modi­ties ex­porter.

While China’s in­flu­ence is clear, it should be noted that the sur­vey was car­ried out be­fore talk of a global trade war gath­ered pace in the first quar­ter of 2018. Just 19 per cent of ex­ec­u­tives sur­veyed chose trade protectionism as the big­gest ex­ter­nal risk to their economies, but one might ex­pect that pro­por­tion to in­crease among busi­ness lead­ers cur­rently be­ing asked the same ques­tion.

The US trade deficit with ASEAN stood at around $69 bil­lion in 2015, with neg­a­tive im­bal­ances with Vi­etä Nam, Malaysia, Thai­land and Indonesia es­pe­cially no­table. If US Pres­i­dent Don­ald Trump pur­sues his pledge to re­duce bi­lat­eral trade deficits, busi­nesses across the re­gion could face new re­stric­tions on ac­cess to the US mar­ket, or in­creased com­pe­ti­tion from US en­trants at home.

With the ex­cep­tion of Sin­ga­pore, no ASEAN coun­try fea­tures in the top ech­e­lons of re­spected global in­di­ca­tors on na­tional busi­ness en­vi­ron­ments or com­pet­i­tive­ness. There­fore, it is lit­tle sur­prise that our ques­tions fo­cused specif­i­cally on these ar­eas elicited a mixed re­sponse.

Over­all, 47 per cent of re­spon­dents said trans­parency in their mar­ket was high or very high rel­a­tive to the re­gion, while 41 per cent said it was low or very low.

Re­spon­dents from Vi­etä Nam and Myan­mar were most neg­a­tive about busi­ness trans­parency, although re­sults in the for­mer may im­prove if a con­tro­ver­sial, high­level crack­down on cor­rup­tion leads to tan­gi­ble changes in the way busi­ness is con­ducted. Myan­mar, mean­while, is still deal­ing with the legacy of six decades of in­ter­na­tional iso­la­tion and mil­i­tary rule. Efforts by law­mak­ers in the civil- ian-led gov­ern­ment to en­act probusi­ness leg­is­la­tion have of­ten re­sulted in am­bigu­ous reg­u­la­tions that in­vestors have strug­gled to in­ter­pret.

This var­ied picture was repli­cated on the mat­ter of tax com­pet­i­tive­ness, with half of the re­spon­dents say­ing their coun­try’s tax en­vi­ron­ment was ei­ther un­com­pet­i­tive or even very un­com­pet­i­tive on a global scale, while 41 per cent said it was com­pet­i­tive or very com­pet­i­tive.

CEOs from Malaysia, Vi­etä Nam and Thai­land were more pos­i­tive about their re­spec­tive tax en­vi­ron­ments, while ex­ec­u­tives from the Philip­pines and Myan­mar were the most neg­a­tive.

It will be in­ter­est­ing to see if busi­ness lead­ers in the Philip­pines have a more favourable view of their tax regime in our next na­tional sur­vey, due to be pub­lished in the com­ing months, now that the first pack­age of the multi-phase Tax Re­form for Ac­cel­er­a­tion and In­clu­sion has been passed, and the sec­ond pack­age is in the lat­ter stages of the leg­isla­tive process.

Fur­ther dis­par­i­ties can be ob­served in re­gard to ac­cess to credit, with 55 per cent say­ing it is ei­ther easy or very easy, and 40 per cent say­ing it is dif­fi­cult or very dif­fi­cult. Break­ing this down, the only re­ally neg­a­tive out­lier was Myan­mar, where pro­hib­i­tive in­ter­est rates, oner­ous col­lat­eral re­quire­ments, a lack of credit his­tory and re­stric­tions on the op­er­a­tions of foreign banks com­bine to cre­ate a bar­ren lend­ing en­vi­ron­ment in the for­mal sec­tor. — Ox­ford Busi­ness Group

Level of trans­parency for con­duct­ing busi­ness in the coun­try rel­a­tive to the re­gion. — Photo Ox­ford Busi­ness Group

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