ASEAN Business Outlook Survey
Designed and Printed by S C (Sang Choy) International Pte Ltd
2010 Report compiled by The American Chamber of Commerce in Singapore In cooperation with The American Cambodian Business Council The American Chamber of Commerce in Indonesia The American Chamber of Commerce of the Philippines The American Chamber of Commerce in Thailand The American Chamber of Commerce in Vietnam The American Malaysian Chamber of Commerce
ASEAN Business Outlook Survey
2010
CONTENTS 02 INTRODUCTION & METHODOLOGY
12 CAMBODIA REPORT Highlights
02 BUSINESS OUTLOOK
14 INDONESIA REPORT Highlights
04 ASEAN INTEGRATION & IMPORTANCE
16 MALAYSIA REPORT Highlights
06 STRENGTHS & CHALLENGES
18 PHILLIPINES REPORT Highlights
07 WORKFORCE EXPANSION
20 SINGAPORE REPORT Highlights
08 U.S. EXPAT ISSUES
22 THAILAND REPORT Highlights
10 CORPORATE SOCIAL RESPONSIBILITY
24 VIETNAM REPORT Highlights
INVOLVEMENT
11 COMMENTS FROM RESPONDENTS Across ASEAN
ASEAN Business Outlook Survey 2010
02
Introduction & Methodology The American Chamber of Commerce in Singapore (AmCham Singapore), in cooperation with other AmChams in the ASEAN region, conducted a study among U.S. companies in seven Southeast Asian countries: Cambodia, Indonesia, Malaysia, Singapore, The Philippines, Thailand and Vietnam. The purpose of the study, now in its ninth year, is to understand members’ outlook on business growth and their perceptions about a series of local factors. The members surveyed were senior executives, working with a company held by or with an American majority interest. AmCham developed a survey design using a web-based instrument. This regional report presents collective feedback received from members of: The American Chamber of Commerce in Singapore, The American Cambodian Business Council, The American Chamber of Commerce in Indonesia, The American Chamber of Commerce of the Philippines, The American Chamber of Commerce in Thailand, The American Chamber of Commerce in Vietnam amd The American Malaysian Chamber of Commerce. The 2010 ASEAN Outlook Survey marks the first time that a survey of Cambodia members was included. As a result, there is no comparative data for Cambodia.
Survey Methodology Table 1.1 Sample Size:
A list of AmCham members from U.S. companies with e-mail contacts was provided by each AmCham: •
Cambodia: List of 55 members, response rate was 31% (17)
•
Indonesia: List of 125 members, response rate was 14% (18)
•
Malaysia: List of 139 members, response rate was 14% (20)
•
Philippines: List of 241 members, response rate was 21% (51)
•
Singapore: List of 378 members, response rate was 21% (81)
•
Thailand: List of 258 members, response rate was 33% (84)
•
Vietnam: List of 213 members, response rate was 27% (57)
•
Overall: List of 1,409 members, response rate was 23% (328)
Data Collection Method:
Web-based, self-administered survey. No enforcement on participation.
Data Collection Period:
May 12—June 1, 2010
ASEAN Business Outlook Survey 2010
03
Business Outlook World Economic Outlook As the world shows signs of economic recovery, the ASEAN economic outlook appears much more positive in 2010 than in 2009. 73% of respondents expect the economy to do better or much better in 2010, as opposed to only 25% of respondents who felt the same way in 2009. No country shows this turnaround in attitude to a greater extent than Singapore, which shifted from having the most pessimistic outlook in 2009 to having the most optimistic one in the region in 2010. In 2010, a regional high of 73% of respondents expect the world economy to perform better or much better. Vietnam, the Philippines, and Thailand have the next most optimistic outlooks with 76%, 74%, and 70% respectively predicting better or much better world economic conditions in 2010.
In 2010 what are your expectations for performance of the world economy in comparison with 2009? 10%
17%
15%
64%
16%
14%
16%
60%
60%
54%
19%
24%
7%
2%
50%
58%
12% 40%
21% 5%
6% Regional
0%
Singapore
Malaysia
Vietnam
Worse
22% 8%
Philippines
About the Same
Thailand
17%
6%
44%
60%
33%
29%
6%
6%
Indonesia
Better
Cambodia
Much Better
Profit Outlook The majority of respondents expect companies’ profits to increase in 2010 and 82% expect a profit increase in 2011. Profit Expectations for the Next Two Years
120%
Compared to 2009, do you expect your profits in ASEAN to Increase, Decrease, or Remain the Same in 2010 and 2011?
100%
85%
82%
80%
80%
79%
73%
76%
72%
66%
63%
62%
60%
60%
67%
61% 50%
40%
40% 26%
20%
29%
24%
1% Regional
3%
0% Singapore
2010 Decrease
26% 20%
20%
14%
13% 4%
0%
100%
88%
11% 0%
0% Malaysia
2010 Remain
2%
0% Vietnam
2010 Increase
10% 0%
2%
28%
23% 10% 0%
Philippines
Thailand
2011 Decrease
2011 Remain
Note: Percentages may not add up to 100% due to respondents selecting “Don’t Know.”
11%
22% 6%
Indonesia 2011 Increase
27%
7% 0% 0% Cambodia
ASEAN Business Outlook Survey 2010
04
ASEAN Integration & Importance ASEAN integration is clearly valuable to most respondents with 73% finding it important to helping their companies do business in the region. The Importance of ASEAN Integration Is ASEAN integration important to helping your company do business in the region? 100% 90% 80%
86% 79%
75%
73%
70%
70%
71%
67%
56%
60% 50%
42%
40% 30%
33%
30%
27%
20%
29%
25%
21%
14%
10% 0% Regional
Singapore
Malaysia
Vietnam
Philippines
Yes
No
Thailand
Indonesia
Cambodia
ASEAN’S contribution to global business Most respondents (70%) expect that ASEAN’s contribution to global business will continue to increase over the next two years.
ASEAN’s Contribution to Global Business Over the Next Two Years (Country Outlook)
90%
83%
80% 70% 62%
70% 66% 65%
60%
72% 70% 70% 67%
72% 65%
64% 58%
50%
77% 69% 67% 65% 66%
67%
71%
69%
72%
60%
59% 56% 55% 51%
53%
40% 30% 20% 10% 0%
0% Regional
Singapore
More Important 2007
Malaysia
Vietnam
More Important 2008
Note: No past data available for Cambodia.
Philippines
Thailand
More Important 2009
Indonesia
More Important 2010
0% 0%0% Cambodia
ASEAN Business Outlook Survey 2010
05
Business expansion in ASEAN 80% of respondents’ companies plan to expand or expand significantly in ASEAN over the next two years. These numbers remain similar to 2009 data, showing a continued trend of ASEAN expansion. For every country, more than half of respondents plan to expand in ASEAN.
Business Expansion in the Next Two Years Contract Significantly
Contract
Remain About the Same
Expand
59%
57%
60% 55%
Expand Significantly
Thailand 56%
53%
53%
13%
Malaysia
11%
47%
15%
Indonesia
Singapore 10% 31%
30%
29%
28%
25%
16%
15% 10%
0%
2%
Regional
24%
24%
Singapore
17%
16%
10% 0%0%
7% Cambodia
Malaysia
Laos
Vietnam
1%1%
Philippines
0%
Thailand
31%
Vietnam
4% 4% Myanmar
6%
2% 0%
0%0%
7%
18%
11%
4% 0%
Philippines
22%
0%0%
Indonesia
Vietnam and Indonesia are key focuses for expansion in ASEAN
Cambodia
ASEAN Trade Agreements 77% of respondents said their companies use the tariff benefits of the ASEAN FTA. Those using the ASEAN FTAs with other trading partners range from 48% (ASEAN-China) to 21% (ASEAN-Japan).
ASEAN Trade Agreements Does your company use the tariff benefits of the following ASEAN Free Trade Agreements? 90% 80%
77%
70% 60%
48%
50% 40%
27%
30%
24%
22%
21%
ASEANKorea
ASEANJapan
20% 10% 0%
ASEAN FTA
ASEANChina
ASEANAustralia-New
ASEANIndia
2010
ASEAN Business Outlook Survey 2010
06
Strengths and Challenges Local Business Environment Excluding respondents from Singapore, corruption continues to be a top source of dissatisfaction for respondents, similar to findings in 2008 and 2009. Corruption was the highest source of dissatisfaction for all countries except Singapore and Thailand. For Thailand, political stability ranked higher than corruption as a source of dissatisfaction. Sentiment towards the U.S. remains highly positive across the ASEAN region. However, sentiment towards the U.S. decreased appreciably in Malaysia (from 66% in 2009 to 53% satisfaction in 2010) and particularly in Indonesia, where it dropped from 50% satisfied in 2009 to 35% satisfied in 2010. Factors Infrastructure
Malaysia
Philippines
Singapore
Thailand
Vietnam
Indonesia
Cambodia
70%
46%
98%
64%
73%
65%
41% 44%
Availability of raw materials Availability of low cost labor
76%
Availability of trained personnel
70%
58%
Office lease cost
63%
43%
60%
42%
Housing cost
53%
78%
61%
50%
Laws & Regulations
68%
63%
Local Protectionism (or lack of)
47%
84%
42%
Tax structure
48%
82%
90%
66%
74%
82%
61%
47%
40%
41%
48%
53%
81% 61%
76%
Stable Government & Political system
90%
77%
63%
New business incentives by government
77%
59%
Ease of moving products through customs
65%
71%
Free Movement of Goods within the Region
57%
Sentiment towards the US
53%
70%
87%
73%
72%
69% 53%
96%
Personal security
40%
65%
45%
85%
Corruption (or lack of)
63%
65%
77%
ASEAN Business Outlook Survey 2010
07
Financing and costs of borrowing The number of respondents experiencing significant financing constraints decreased considerably from 42% in 2009 to 24% in 2010. Experiences with costs of borrowing remained similar to those of 2009 with some variance across the region. Financing Constraints by Country “Yes” Responses
Is your company facing higher costs of borrowing?
Is your company facing significant financing contraints 55% 42%
41%
39%
37% 30% 24%
24%
50%
48%
48%
47%
29%
27%
24%
28%26%
30% 25%
26%25%
30%
29%
27% 26% 18%
15% 10%
Regional
Singapore
Malaysia
Vietnam
8%
Philippines
2009 “Yes” Response
Thailand
Indonesia
Cambodia
Regional
Singapore
2010 “Yes” Response
Malaysia
Vietnam
6%
Philippines
2009 “Yes” Response
Thailand
Indonesia
Cambodia
2010 “Yes” Response
Workforce Expansion Overall workforce by country Along with the profit increase predicted across the region in 2010, 60% predict an increase in the overall workforce. Only 5% expect a decrease in the workforce, while 34% expect it to remain about the same. These numbers represent a significant change in attitude since the 2009 survey, when only 37% anticipated an increase in the workforce and 47% expected it to remain about the same.
Do you expect your total number of employees in the response location to increase, decrease, or remain about the same in 2010? 80%
73%
72%
70%
65% 60%
60%
55%
50% 40%
51%
45%
43%
44%
38%
35%
34%
30%
25%
24%
20% 10%
50%
49%
13% 5%
3%
0% Regional
Singapore
0% Malaysia
Decrease
6%
6%
2%
0%
Vietnam
Same
Philippines
Thailand
Increase
Indonesia
Cambodia
ASEAN Business Outlook Survey 2010
08
Expat workforce Most respondents (65%) predict that the number of expatriates working for their companies will remain about the same in 2010. 16% expect the number of expatriates will increase, slightly outpacing the 14% that believe that the expatriate workforce will decrease. In every country besides Cambodia, 59% or more of the respondents predict that the size of the expatriate workforce will remain about the same.
2010 Change in Expatriate Workforce by Country
Will the number of expatriates working for your company in your response location increase, decrease, or remain about the same in 2010?
90%
78%
80% 70%
65%
60%
68%
65%
59%
69%
63%
47%
50% 40% 30% 20%
14%
16%
15%
21%
10% 0%
24%
20% 12%
14%
16%
14%
17%
13% 6%
5% Regional
Singapore
Malaysia
Decrease
Vietnam
Same
Philippines
Thailand
24%
11%
Indonesia
Cambodia
Increase
U.S. Expat Issues Expat Assignment Satisfaction The percentage of respondents that stated their companies regularly receive requests from employees based in other locations to work in their response locations increased from 37% in 2009 to 39% in 2010. Satisfaction rates remain at a high rate of 92%—the same rate as in 2009. Results show that increasing numbers of expatriate employees attempt to extend their time in their response location within ASEAN. Respondents stating that their expatriate employees attempt to extend their assignments rose from 79% in 2009 to 82% in 2010.
ASEAN Business Outlook Survey 2010
09
99%
96% 92%
93%
89%
82%
82%
71%
69%
94%
89%
86%
85%
81%
87%
71%
61% 44%
39%
39% 29%
24%
24%
15%
Regional
Singapore
Malaysia
Vietnam
Receive Assignment Requests
Philippines
Thailand
Happy with Assignments
Indonesia
Cambodia
Ask to Extend Assignments
Expatriate Concerns The percentage of respondents who have experienced an increase in the amount of income tax that they must pay to the U.S. on their foreign earned income grew in 2010 from 36% in 2009 to 47% in 2010.
Have you experienced a significant increase in the amount you must pay toward U.S. income tax on your foreign earned income since the legislative changes in 2006?
36%
47% 2010
2009
64%
53% Yes
No
*Note: The question on Expatriate Concerns was an optional question on the survey for the first time this year, and thus have a significantly smaller sample size. Of the 327 total respondents that took the 2010 survey, 148 answered the optional question. Results may have been affected by this change.
ASEAN Business Outlook Survey 2010
10
CORPORATE SOCIAL RESPONSIBILITY INVOLVEMENT In 2010, the percentage of respondents who stated their companies are involved with CSR increased (from 72% in 2009 to 78% in 2010), as did the percentage that plans to increase CSR efforts in the future (from 36% in 2009 to 57% in 2010). The highest rate of respondents (79% stated that their efforts include employee volunteering. While Malaysia has taken the lead, other countries were not far behind - every country surveyed has rates of 72% or more involved with CSR.
CSR Increase/Decrease Do you expect your company’s CSR efforts to increase or decrease in 2010 compared with 2009 120% 100%
100% 75%
80% 57%
60% 41%
40%
46%
58%
39%
37%
25%
2% Regional
61%
54% 45%
40% 40% 20%
20% 0%
56%
Cambodia
0%
0% 0%
0%
Indonesia
Malaysia
Philippines
Decrease
0%
Remain the Same
5%
0%
Singapore
Thailand
Vietnam
Increase
Form of Company’s CSR Efforts What form does your company’s CSR efforts take? 120% 100%
100% 79%77%
80% 60%
80%80%
75% 75%
83%
83%
100% 89%
82%
78%
72%
53%
50%
56%
82%
62% 48%
61% 56%
40%
40%
25%
20% 0% Regional
Cambodia
Indonesia
Fundraising
Malaysia
Philippines
Employee Volunteering
Singapore
Thailand
Vietnam
Cash Donations
*Note: The questions on Corporate Social Responsibility were optional questions on the survey for the first time this year, and thus have a significantly smaller sample size. Of the 327 total respondents that took the 2010 survey, 148 answered the optional question. Results may have been affected by this change.
ASEAN Business Outlook Survey 2010
11
Comments From Respondents Across ASEAN
Respondents were given an option to contribute additional comments to some of the questions. Below are some of their comments.
Q
: Top 3 reasons why your company plans for business expansion in ASEAN?
Increasing sophistication of customer base.
Consumers’ Ability to afford FMCG Products.
Opportunities for growth.
Q
: What does your company see as the most significant barrier to conducting business within ASEAN?
Corruption! Where it may not be a direct link it affects everything and everybody, no matter if your company is small or large.
Lack of experienced middle management.
Barriers created by respective governments to protect local and quasi governmental companies or state enterprises.
Q
: Top 3 reasons why your company feels that ASEAN markets will be more important for its worldwide operations and revenues in the next two years?
Slow economic recovery in the U.S.
Growth of Asian economies, less reliance on economic growth of U.S. and Europe
Increased spending power.
ASEAN Business Outlook Survey 2010
12
Cambodia Report Highlights BUSINESS OUTLOOK
GRAPHS AND CHARTS
World Economic Outlook:
Figure 1: World Economic Outlook in 2010
•
World Economic Outlook
65% predict a better or much better performing economy in 2010 than in 2009.
Do you expect the world economy this year to perform much better, better, about the same, worse, or much worse than last year?
Current Business Climate:
70%
•
41% face significant financing constraints in 2010.
60%
•
18% face higher costs of borrowing in 2010
50%
Importance of ASEAN Markets in Global Business:
40%
•
53% of respondents feel that ASEAN markets have increased in importance in the past two years.
30%
•
76% of respondents expect ASEAN importance to increase in the next two years.
59%
29%
20% 10% 0%
6%
6%
0% Much Worse
Worse
About the Same
Effectiveness of ASEAN: •
86% of respondents find ASEAN integration important to helping their companies do business in the region.
•
67% of respondents use the ASEAN FTA.
•
33% of respondents use the ASEAN-China and the ASEANAustralia-New Zealand agreements.
•
38% of respondents’ companies expanded in ASEAN in the past two years. 65% plan to expand in ASEAN in the next two years. The largest rate (33%) of respondents plan to expand in Cambodia and Laos.
Reasons for saying ASEAN markets will be more important 90%
60%
46%
50% 40%
•
100% expect a profit increase in 2011.
20%
•
67% expect a profit increase in 2010.
10%
65% of respondents expect a workforce increase in the coming year.
77%
70%
30%
•
85%
80%
Profit Outlook:
Workforce Expansion:
Much Better
Figure 2: Reasons for ASEAN Importance
Business Direction and Movement in ASEAN: •
Better
2010
31%
31% 15%
15%
0% Economic recovery
Improvement in infrastructure
Favorable government policies
Increased availability of trained personnel
Limited growth opportunities in other regions
Stable political conditions
Change in business strategy
2010
FACTORS IMPACTING BUSINESS Economic Conditions: •
59% expect the overall Cambodian economy to expand.
•
44% expect an increase in cost of living.
•
38% expect an increase in housing cost.
•
12% expect the Cambodian Riel to appreciate against the U.S. Dollar.
•
6% expect an increase in the interest rate.
Other Local Business Environment Factors: •
50% are neutral with regard to the clarity of government guidelines on payment of IPR royalties.
•
47% are neutral with regard to the clarity of transfer pricing regulations.
•
47% are neutral with regard to the clarity of government guidelines on reverse logistics.
8%
Figure 3: Expectations of Expansion of the Cambodian Economy
Neutral, 41%
Expand, 59%
Other
ASEAN Business Outlook Survey 2010
13
Business Environment: Strengths and Concerns Major Strengths (% Satisfied)
Major Concerns (% Dissatisfied)
Sentiment towards the U.S. (76%)
Corruption (64%)
Availability of low cost labor (68%)
Availability of trained personnel (53%) Availability of raw materials (43%) Infrastructure (41%)
Comments from respondents in Cambodia
Q
: What does your company see as the most significant barrier to conducting business within ASEAN?
Stronger competition with lower margins.
Local companies have little knowledge of business services.
General indifference to ASEAN.
Q
: What hinders your business in using trade agreements?
Time consuming, as we need to follow the standards of these trade agreements.
Our business is medical equipment, and it is not part of the agreements ASEAN has with India and China.
Q
: What kind of impact will further ASEAN integration have on your business’ activities in the region?
More cross-border investment.
More ASEAN companies will enter this market.
ASEAN Business Outlook Survey 2010
14
Indonesia Report Highlights BUSINESS OUTLOOK
GRAPHS AND CHARTS
World Economic Outlook:
Figure 1: World Economic Outlook in 2010 in Comparison With 2009 Economy
•
61% predict a better or much better performing economy in 2010 than in 2009. 24% of respondents predicted a better or much better economy in 2009 than in 2008.
•
Respondents facing significant financing constraints decreased from 55% in 2009 to 29% in 2010.
•
Respondents facing higher costs of borrowing decreased from 50% in 2009 to 6% in 2010.
Worse, 6%
Much Better, 17%
Current Business Climate:
About the Same, 33%
Importance of ASEAN Markets in Global Business: •
72% of respondents expect ASEAN importance to increase in the next two years.
•
53% of respondents feel that ASEAN markets have increased in importance to their companies in the past two years.
Better, 44%
Effectiveness of ASEAN: •
71% of respondents find ASEAN integration important to helping their companies do business in the region.
•
100% of respondents use the ASEAN FTA.
•
33% of respondents use the ASEAN-China agreement.
Figure 2: Growth of ASEAN Importance over Next Two Years 90%
Business Direction and Movement in ASEAN:
80%
•
29% of respondents’ companies expanded in ASEAN in the past two years. 73% plan to expand in ASEAN in the next two years.
70%
The largest rate of respondents (69%) plan to expand in Indonesia.
40%
•
61% expect a profit increase in 2011.
•
50% expect a profit increase in 2010.
50%
28%
30%
17%
20%
10%
10% 0%
Workforce Expansion: •
72%
60%
Profit Outlook: •
83% 69%
2%
More Important
Remain the Same 2007
2009
7%
6%
Less Important 2010
The rate of respondents expecting a workforce increase in the coming year rose from 21% in 2009 to 44% in 2010.
FACTORS IMPACTING BUSINESS Economic Conditions: •
76% expect the overall Indonesian economy to expand.
•
81% expect an increase in cost of living.
•
76% expect the interest rate to remain the same.
•
62% expect an increase in housing cost.
•
47% expect the Indonesian rupiah to appreciate against the U.S. dollar.
Figure 3: Profit Outlook 2010
Figure 4: Expectations of Expansion
of Indonesian Economy
Increase, 50%
Decrease, 11%
Neutral, 24%
Other Local Business Environment Factors: •
75% find importing goods into Indonesia a significant problem
•
44% are dissatisfied with regard to the clarity of government guidelines on reverse logistics.
•
36% are dissatisfied with regard to the clarity of government guidelines on payment of IPR royalties.
•
With regard to the clarity of transfer pricing regulations, both the “neutral” and “satisfied” options received response rates of 24%.
Remain, 28%
Expand, 76%
ASEAN Business Outlook Survey 2010
15
Business Environment: Strengths and Concerns Major Strengths (% Satisfied)
Major Concerns (% Dissatisfied)
Availability of low cost labor (65%)
Corruption (82%) Laws and Regulations (82%) Ease of moving products through customs (71%) Infrastructure (65%) New business incentives offered by government (59%) Tax structure (53%) Local protectionism (41%)
Comments from respondents in Indonesia
Q
: What does your company see as the most significant barrier to conducting business within ASEAN?
Lack of government regulatory processes … even if there are processes, they are not being implemented.
Many ASEAN countries are perceived as highlycorrupt with high hidden cost and lack of laws and regulations to attract foreign investment.
Real market potential varies across countries in ASEAN and may seem lower in an emerging market like Indonesia.
Corruption, unprofessional civil servants, lack of education.
Q
: What hinders your business in using these trade agreements?
Lack of understanding by relevant authorities. Lack of coordination by ministries concerned.
No clear local government policies and regulations on the implementation resulting many ‘guessing games’ in how that has changed the previous trade barriers.
Q
: Reasons why your company feels that ASEAN markets will be more important for its worldwide operations and revenues in the next two years?
Companies will improve their supply chains.
Consumer confidence and purchasing power of the middle class.
ASEAN Business Outlook Survey 2010
16
Malaysia Report Highlights BUSINESS OUTLOOK
GRAPHS AND CHARTS
World Economic Outlook: • 60% predict a better or much better performing economy in 2010 than in 2009. 21% of respondents predicted a better or much better economy in 2009 than in 2008.
Figure 1: World Economic Outlook in 2010 in Comparison With 2009 Economy
Much Better, 10%
Current Business Climate: • Respondents facing significant financing constraints decreased from 24% in 2009 to 15% in 2010. • Respondents facing higher costs of borrowing increased from 25% in 2009 to 30% in 2010.
About the Same, 40% Better, 50%
Importance of ASEAN Markets in Global Business: • 55% of respondents feel that ASEAN markets have increased in importance to their companies in the past two years. • 55% of respondents expect ASEAN importance to increase in the next two years. Effectiveness of ASEAN: • 58% of respondents said ASEAN integration important to helping their companies do business in the region. • 100% of respondents use the ASEAN FTA. • 33% of respondents use the ASEAN-China and the ASEANAustralia-New Zealand agreements.
Figure 2: Growth of ASEAN Importance over Next Two Years 70% 60%
Business Direction and Movement in ASEAN: • 55% of respondents’ companies expanded in ASEAN in the next two years. • 90% plan to expand in ASEAN in the next two years. • The largest rate (44%) of respondents plan to expand in Malaysia.
59%
56% 55%
50% 40%
40%
36%
33%
30% 20% 10%
Profit Outlook: • 60% expect a profit increase in 2010. • 80% expect a profit increase in 2011.
0%
5%
More Important
Remain the Same 2008
2009
3%
5%
Less Important 2010
Workforce Expansion: • The rate of respondents expecting a workforce increase in the coming year rose from 47% in 2009 to 55% in 2010.
FACTORS IMPACTING BUSINESS Economic Conditions: • 89% expect the overall Malaysian economy to expand. • 95% expect an increase in cost of living. • 84% expect an increase in housing cost. • 68% expect an increase in the interest rate. • 67% expect the Malaysian ringgit to appreciate against the U.S. Dollar. Other Local Business Environment Factors: • 61% find importing goods into Malaysia a significant problem in 2010. • 40% are neutral with regard to the clarity of transfer pricing regulations. • 40% are neutral with regard to the clarity of government guidelines on payment of IPR royalties. • 40% are neutral with regard to the clarity of government guidelines on reverse logistics.
Figure 3: Profit Outlook 2010
Figure 4: Expectations of Expansion
of the Malaysian Economy Remain, 40%
Increase, 60%
Expand, 89%
Neutral, 11%
ASEAN Business Outlook Survey 2010
17
Business Environment: Strengths and Concerns Major Strengths (% Satisfied)
Major Concerns (% Dissatisfied)
Infrastructure (70%)
Corruption (63%)
Sentiment towards the U.S. (53%)
Local Protectionism (47%) Personal Security (40%)
Comments from respondents in Malaysia
Q
: What does your company see as the most significant barrier to conducting business within ASEAN?
Government policy uncertainty, racial biases, corruption, low levels of employee productivity, excessive bureaucracy, uncertain regulations.
The limited availability of trained, skilled human capital.
Availability of talent and local employment legislation.
Q
: Is ASEAN integration important to helping your company do business in the region?
A borderless ASEAN will help efficiency in terms of resources and supply chain.
Integration and cooperation within the region is essential to countries like Malaysia. Country leaders seem to be responding in words only, with little tangible results. Abundant opportunities will not be realized until real integration is achieved and leveraged.
Q
: What kind of impact will further ASEAN integration have on your businesses’ activities in the region?
Efficient supply chain.
Expanded global linkages, relationships and opportunities.
Better movement of human resources.
ASEAN Business Outlook Survey 2010
18
Philippines Report Highlights BUSINESS OUTLOOK
GRAPHS AND CHARTS
World Economic Outlook:
Figure 1: World Economic Outlook in 2010 in Comparison with 2009 Economy
•
74% predict a better or much better performing economy in 2010 than in 2009. 30% of respondents predicted a better or much better economy in 2009 than in 2008.
Worse, 2%
Current Business Climate: •
Respondents facing significant financing constraints decreased from 39% in 2009 to 10% in 2010.
•
Respondents facing higher costs of borrowing decreased as well from 29% in 2009 to 8% in 2010.
Much Better, 14%
Importance of ASEAN Markets in Global Business: •
67% of respondents expect ASEAN importance to increase in the next two years.
•
51% of respondents feel that ASEAN markets have increased in importance to their companies in the past two years.
About the Same, 24%
Better, 60%
Effectiveness of ASEAN: •
67% of respondents find ASEAN integration important to helping their companies do business in the region.
•
68% of respondents use the ASEAN FTA.
•
58% of respondents use the ASEAN-China agreement.
Figure 2: Growth of ASEAN Importance over Next Two Years 80%
Business Direction and Movement in ASEAN:
70%
•
60%
•
57% of respondents’ companies expanded in ASEAN in the past two years. 75% plan to expand in ASEAN in the next two years.
•
72% expect a profit increase in 2010.
30%
23%
30% 29%
20%
8%
10% 0%
More Important
Remain the Same
2008
Workforce Expansion: •
67%
40%
Profit Outlook: 76% expect a profit increase in 2011.
66%
50%
The largest rate of respondents (43%) plan to expand in the Philippines.
•
69%
2009
4%
2%
Less Important
2010
The rate of respondents expecting a workforce increase in the coming year rose from 39% in 2009 to 51% in 2010.
FACTORS IMPACTING BUSINESS Economic Conditions: •
86% expect the overall Philippines economy to expand.
•
69% expect an increase in cost of living.
•
62% expect an increase in housing cost.
•
49% expect the Philippine peso to appreciate against the U.S. Dollar.
•
45% expect an increase in the interest rate.
Figure 3: Profit Outlook 2010
Figure 4: Expectations of Expansion
of the Philippine Economy
Remain, 26%
Other Local Business Environment Factors: •
64% find importing goods into the Philippines a significant problem in 2010.
•
42% are neutral with regard to the clarity of government guidelines on reverse logistics.
•
39% are neutral with regard to the clarity of transfer pricing regulations.
•
39% are neutral with regard to the clarity of government guidelines on payment of IPR royalties.
Increase, 72%
Expand, 86%
Neutral, 14%
ASEAN Business Outlook Survey 2010
19
Business Environment: Strengths and Concerns Major Strengths (% Satisfied)
Major Concerns (% Dissatisfied)
Availability of low cost labor (76%)
Corruption (84%)
Sentiment towards the U.S. (70%)
Infrastructure (46%)
Availability of trained personnel (70%)
Tax structure (42%)
Office lease costs (63%) Housing costs (53%)
Comments from respondents in The Phillipines
Q
: What does your company see as the most significant barrier to conducting business within ASEAN?
Political conditions.
Too much red tape in most countries.
In the Philippines, foreign direct investment and corruption.
Q
: Describe a personal experience with an increase in U.S. taxation on your foreign-earned income.
It has increased my tax bill and impacted my bottom line.
I’ve seen a drastic decrease in the amount of U.S. expats versus other nationalities …. U.S. companies must pay a significantly higher amount to send a U.S. citizen, so they send Europeans/British/Australians to fill these positions. In the future, U.S. business leaders will have less international experience …
Q
: Describe your company’s experience with regards to the issue of space constraints at international education institutions.
Our employees’ assignments are delayed until their children get off the waiting list …
The situation is expected to get worse before it gets better.
ASEAN Business Outlook Survey 2010
20
Singapore Report Highlights BUSINESS OUTLOOK
GRAPHS AND CHARTS
World Economic Outlook: • 81% predict a better or much better performing economy in 2010 than in 2009. 16% of respondents predicted a better economy in 2009 than in 2008.
Figure 1: World Economic Outlook in 2010 in Comparison With 2009 Economy
Worse, 5%
Current Business Climate: • Respondents facing significant financing constraints decreased from 37% in 2009 to 24% in 2010. • Most respondents (75%) do not face higher costs of borrowing. Importance of ASEAN Markets in Global Business: • 79% of respondents find ASEAN integration important to helping their companies do business in the region. • 58% of respondents feel that ASEAN markets have increased in importance to their companies in the past two years. • Respondents expecting ASEAN importance to increase in the next two years rose from 64% in 2009 to 72% in 2010. Effectiveness of ASEAN: • 57% of respondents use the ASEAN FTA. • 54% of respondents use the ASEAN-China agreement.
About the Same, 12%
Much Better, 17%
Better, 64%
Figure 2: Growth of ASEAN Importance over Next Two Years 80%
72%
70% 60%
Business Direction and Movement in ASEAN: • 70% of respondents’ companies expanded in ASEAN in the past two years. 84% of respondents plan to expand in the next two years. • The largest rate (27%) of respondents plan to expand in Singapore.
59%
64%
50%
37%
40%
28%
30%
22%
20% 10%
Profit Outlook: • 85% expect a profit increase in 2011. • 73% expect a profit increase in 2010.
0%
5%
More Important 2008
Remain the Same 2009
8%
6%
Less Important
2010
Workforce Expansion: • 73% expect a workforce increase in 2010. • Only 33% expected such an increase in 2009.
FACTORS IMPACTING BUSINESS IN SINGAPORE
Figure 3: Profit Outlook 2010
Figure 4: Expectations of Expansion
Economic Conditions: • 94% expect the overall Singapore economy to expand. • 91% expect an increase in cost of living. • 89% expect an increase in housing cost. • 61% expect the Singapore Dollar to appreciate against the U.S Dollar. • 49% expect an increase in interest rate.
of Singapore Economy
Other Local Business Environment Factors: • 60% do not find importing goods into Singapore a significant problem. • 50% are satisfied with the clarity of transfer pricing regulations. • 46% are satisfied with the clarity of government guidelines on payment of IPR royalties. • 40% are satisfied with the clarity of government guidelines on reverse logistics.
Decrease, 3%
Neutral, 6% Remain, 24%
Increase, 73% Expand, 94%
ASEAN Business Outlook Survey 2010
21
Business Environment: Strengths and Concerns Major Strengths (% Satisfied)
Major Concerns (% Dissatisfied)
Infrastructure (98%)
Housing Costs (78%)
Personal Security (96%)
Availability of Low Cost Labor (29%)
Corruption Levels (90%)
Office Lease Costs (43%)
Stable government & political system (90%) Sentiment towards the U.S. (87%) Laws & Regulations (85%) Tax Structure (81%) New Business Incentives offered by Government (77%) Ease of moving your products through customs (65%) Availability of trained personnel (58%)
Comments from respondents in Singapore
Q
: What does your company see as the most significant barrier to conducting business within ASEAN?
Lack of qualified staff.
ASEAN is not an integrated market and there are intra-ASEAN trade barriers.
Q
: Have you experienced a significant increase in the amount you must pay toward U.S. income tax on your foreign-earned income since the legislative changes in 2006?
U.S. tax makes hiring U.S. expats too expensive. The inclusion of tax on housing for expats living in Singapore is not realistic.
Yes, U.S. income tax on foreign-earned income – including benefits – is a major discouragement to working outside the U.S. This needs to be looked at carefully by Congress, as U.S. companies benefit by having citizens abroad.
Q
: Will the ability to find adequate space at international education institutions be a significant problem in the next 1 to 3 years?
The Government of Singapore has undertaken a proactive program to encourage international schools to expand – which is happening.
Space seems to be available but there is limited space in premium schools.
Yes, this will affect both the acceptance and timing of some personnel moves.
ASEAN Business Outlook Survey 2010
22
Thailand Report Highlights BUSINESS OUTLOOK
GRAPHS AND CHARTS
World Economic Outlook:
Figure 1: World Economic Outlook in 2010 in Comparison With 2009 Economy
•
70% predict a better or much better performing economy in 2010 than in 2009. 30% of respondents predicted a better economy in 2009 than in 2008.
Worse, 8%
Current Business Climate: •
Respondents facing significant financing constraints decreased from 48% in 2009 to 27% in 2010.
•
Most respondents (73%) do not face higher costs of borrowing.
Much Better, 16% About the Same, 22% Better, 54%
Importance of ASEAN Markets in Global Business: •
59% of respondents feel that ASEAN markets have increased in importance to their companies in the past two years.
•
Respondents expecting ASEAN importance to increase in the next two years rose from 60% in 2009 to 71% in 2010.
Effectiveness of ASEAN: •
75% of respondents find ASEAN integration important to helping their companies do business in the region.
•
78% of respondents use the ASEAN FTA.
•
50% of respondents use the ASEAN-China agreement.
Figure 2: Growth of ASEAN Importance over Next Two Years
80%
Business Direction and Movement in ASEAN: •
•
70%
57%of respondents’ companies expanded in ASEAN in the past two years. 81% of respondents plan to expand in the next two years.
71%
67% 60%
60% 50%
The largest rate (33%) of respondents plans to expand in Vietnam.
36%
40%
32%
30%
Profit Outlook:
20%
•
88% expect a profit increase in 2011.
10%
•
63% expect a profit increase in 2010.
0%
20% 1%
More Important
Workforce Expansion: •
49% expect a workforce increase in 2010.
•
32% expected such an increase in 2009.
Remain the Same 2008
2009
3%
4%
Less Important 2010
FACTORS IMPACTING BUSINESS Economic Conditions:
Figure 3: Profit Outlook 2010
Figure 4: Expectations of Expansion
•
57% expect the overall Thailand economy to expand.
of Thailand Economy
•
59% expect an increase in cost of living.
•
46% expect the Thai Baht to appreciate against the U.S. Dollar.
•
45% expect an increase in interest rate.
•
42% expect an increase in housing cost.
Decrease, 10%
Remain the Same, 23%
Other Local Business Environment Factors: •
52% find importing goods into Thailand a significant problem.
•
50% are neutral with regard to the clarity of transfer pricing regulations.
•
40% are neutral with regard to the clarity of government guidelines on reverse logistics.
•
38% are neutral with regard to the clarity of government guidelines on payment of IPR royalties.
Reduce, 13%
Neutral, 30%
Increase, 63%
Expand, 57%
ASEAN Business Outlook Survey 2010
23
Business Environment: Strengths and Concerns Major Strengths (% Satisfied)
Major Concerns (% Dissatisfied)
Sentiment Towards the U.S. (73%)
Stable Government & Political System (77%)
Availability of Low Cost Labor (68%)
Corruption (66%)
Infrastructure (64%)
Local Protectionism (47%)
Housing Cost (61%) Personal Security (61%) Office Lease Cost (60%)
Comments from respondents in Thailand
Q
: What does your company see as the most significant barrier to conducting business within ASEAN?
Cross-border trade barriers, including widely varying commercial rules and regulations and restrictions on foreign business activities.
Protectionism, uneven playing field.
Affected ministries and industries of ASEAN member countries not following their own AFTA Agreements. This is true in Thailand right now.
Lack of IPR protection, corruption.
Q
: Is ASEAN integration important to helping your company do business in the region?
They are a long way off from being an entity.
A healthy ASEAN economy will benefit Thailand, and in turn, our business will benefit.
It would reduce red tape for getting workers to work in various ASEAN countries.
Q
: Has this increase in the amount of U.S. taxes to be paid on foreign earned income affected your company’s decision to employ Americans abroad?
Yes, we are eliminating as many American Expats as possible with a goal of zero.
No effect on hiring, but i am considering changing my nationality.
No, but it has affected the willingness of American employees to be located here and increased their salary expectations.
ASEAN Business Outlook Survey 2010
24
Vietnam Report Highlights BUSINESS OUTLOOK
GRAPHS AND CHARTS
World Economic Outlook:
Figure 1: World Economic Outlook in 2010 in Comparison with 2009 Economy
•
74% predict a better or much better performing economy in 2010 than in 2009. 23% of respondents predicted a better economy in 2009 than in 2008.
•
Respondents facing significant financing constraints decreased from 47% in 2009 to 30% in 2010.
•
Respondents facing higher costs of borrowing increased from 30% in 2009 to 48% in 2010.
About the Same, 22%
Importance of ASEAN Markets in Global Business: •
70% of respondents expect ASEAN importance to increase in the next two years.
•
60% of respondents feel that ASEAN markets have increased in importance to their companies in the past two years.
Worse, 8%
Much Better, 16%
Current Business Climate:
Better, 54%
Effectiveness of ASEAN: •
70% of respondents find ASEAN integration important to helping their companies do business.
•
93% of respondents use the ASEAN FTA.
•
41% of respondents use the ASEAN-China agreement.
Figure 2: Growth of ASEAN Importance over Next Two Years 80%
Business Direction and Movement in ASEAN:
70%
•
The largest rate (71%) of respondents plan to expand in Vietnam.
60%
•
57% of respondents’ companies expanded in ASEAN in the past two years. 81% plan to expand in ASEAN in the next two years.
40%
50%
•
28% 28%
30% 20%
Profit Outlook: •
70% 72% 70%
14%
10%
79% expect a profit increase in 2011.
0%
62% expect a profit increase in 2010.
More Important
2008
Workforce Expansion: •
Remain the Same 2009
2% 2% 0% Less Important 2010
The rate of respondents expecting a workforce increase in the coming year rose from 54% in 2009 to 72% in 2010.
FACTORS IMPACTING BUSINESS Economic Conditions: •
82% expect the overall Vietnam economy to expand.
•
85% expect an increase in cost of living.
•
67% expect the Vietnamese Dong to depreciate against the U.S. Dollar.
•
64% expect an increase in the interest rate.
•
59% expect an increase in housing cost.
Figure 3: Profit Outlook 2010
Figure 4: Expectations of Expansion
of Vietnam Economy
Decrease, 2%
Neutral, 14% Remain the Same, 29%
Other Local Business Environment Factors: •
66% find importing goods into Vietnam a significant problem.
•
49% are neutral with regard to the clarity of transfer pricing regulations.
•
41% are neutral with regard to the clarity of government guidelines on payment of IPR royalties.
•
37% are neutral with regard to the clarity of government guidelines on reverse logistics.
Reduce, 4%
Increase, 62%
Expand, 82%
ASEAN Business Outlook Survey 2010
25
Business Environment: Strengths and Concerns Major Strengths (% Satisfied)
Major Concerns (% Dissatisfied)
Personal security (76%)
Corruption (74%)
Sentiment towards the U.S. (72%)
Infrastructure (73%)
Stable government & political system (63%)
Housing costs (50%)
Availability of low cost labor (63%)
Laws & Regulations (48%) Tax structure (48%) Availability of trained personnel (45%) Office lease costs (42%)
Comments from respondents in Vietnam
Q
: What does your company see as the most significant barrier to conducting business within ASEAN?
Corruption! Whether it may be a direct link, it affects everything.
The inability of government officials to understand the needs of the market and to respond positively.
Lack of IPR protection, lack of quality enforcement on our competitors due to corruption, lack of proficient local senior managers.
Q
: Please describe your personal experience with an increase in American taxation on your foreign earned income.
Most companies I know are firing U.S. employees and hiring European & other nationalities to fill the positions because of this.
I have seen U.S.-based multinational clients cut their senior U.S. expatriate managers to replace them with Australians, British and Canadians who are not subject to home country tax. This means a net loss of tax revenue to the U.S., not to mention the erosion of U.S. sales and cultural influence abroad.
Q
: Has this increase in the amount of U.S. taxes to be paid on foreign earned income affected your company’s decision to employ Americans abroad?
Yes - we don’t employ any and most of the expats in Vietnam are Australian or Europeans.
Yes, Americans inevitably require a higher income than professionals with equivalent skills coming from competing countries. The U.S.’ trade surplus in the services sector will erode if nothing is done to level the playing field.
ASEAN Business Outlook Survey 2010
26
Key Findings
• Respondents are positive about world economic recovery. Financing constraints have improved, although concern over costs of borrowing is similar to 2009. • Companies find ASEAN integration very important and make use of ASEAN trade agreements. • ASEAN is predicted to continue to increase in importance and expansion is expected to continue region-wide. • Companies are expecting much higher profits in 2010 and 2011 than they experienced in 2009. • Outside of Singapore, corruption rated the highest business concern in ASEAN with the exception of Thailand, where political instabiity ranked first and corruption second. • Many respondents have expanded significantly in ASEAN over the past two years and even more plan on doing so within the next two years. This business expansion is directed most strongly towards Vietnam (31%), Indonesia (15%), Thailand (13%), and Singapore (10%). • The level of local protectionism also remains a concern in a range of countries — Malaysia, Thailand, Vietnam, and Indonesia.
© Copyright The American Chamber of Commerce in Singapore 2010
ASEAN Business Outlook Survey 2010
27
Acknowledgements This report was compiled and published by The American Chamber of Commerce in Singapore. Editor-In-Chief - Laura Deal, Executive Director, AmCham Singapore Contributing Editor – Anne Marie Brooks, Government Relations Manager, AmCham Singapore Research and Analysis – Carolyn Brown, Research Assistant, AmCham Singapore For media enquiries, please contact Liyana Othman, Corporate Communications Manager, AmCham Singapore at: lothman@ amcham.org.sg.
AmCham Singapore would like to thank the leadership of the following AmChams in the region for their support and contribution to this report: Judy Benn, Executive Director, The American Chamber of Commerce in Thailand Herb Cochran, Executive Director, The American Chamber of Commerce in Vietnam Sarah Howe, Executive Director, The American Chamber of Commerce in Indonesia Rob Sears, Executive Director, The American Chamber of Commerce of the Philippines Fui Soong, Executive Director, The American Malaysian Chamber of Commerce Jim Swander, Executive Director, The American Cambodian Business Council For more details on survey findings, please visit www.amcham.org.sg/aseanbusinessoutlook.
This page has been intentionally left blank.
ASEAN Business Outlook Survey
Designed and Printed by S C (Sang Choy) International Pte Ltd
2010 Report compiled by The American Chamber of Commerce in Singapore In cooperation with The American Cambodian Business Council The American Chamber of Commerce in Indonesia The American Chamber of Commerce of the Philippines The American Chamber of Commerce in Thailand The American Chamber of Commerce in Vietnam The American Malaysian Chamber of Commerce