This week the U.S. Chamber of Commerce and the American Chamber of Commerce in Singapore announced the results of their annual survey of American businesses in the region. The major headlines are seemingly contradictory, ranging from “US Firms Doubt ASEAN 2015 Single Market Goal” to “US Firms Optimistic on Business Prospects in ASEAN.” Were both publications (affiliated under Singapore’s Mediacorp) reading the same survey results? (A disclaimer that I was formerly a Vice Chair of the American Chamber of Commerce in Singapore, but was not involved in this year’s survey).
A closer reading indicates that American companies are bullish on Southeast Asian countries, but bearish about the ASEAN Economic Community (AEC). In the poll, 79% of respondents said that their company’s level of trade increased over the past two years and 91% said that it would increase over the next five years. This is where the optimism comes from.
Yet in the same poll, 52% said that they “do not think that the AEC's goals will be realised by 2015” and about 60% “think that ASEAN will not reach AEC's goals until 2020 or later".
What this reflects is confidence in the Southeast Asian economy but less confidence in the ASEAN institutions. But it also reflects the focus of American companies in the region on services, rather than manufacturing. As I have written elsewhere, the AEC will create both a single market in Southeast Asia and a single production base. The single production base is much more developed than the single market. In fact, as I have suggested, we already have an AEC in Southeast Asia, only it is focused on the single production base and dominated by the Japanese automotive and electronics companies that have been long present in the region. In other words, the AEC can be likened to a glass of water, and the Japanese see a half-full glass.
American companies, on the other hand, are less involved in manufacturing and emphasize services such as legal, financial and distribution. These are more interlinked to the development of the single market in ASEAN. Yet, as noted elsewhere, non-tariff barriers to trade in goods, services and investment are much more difficult for the ASEAN members and the ASEAN Secretariat to deal with. Hence the relative pessimism of American companies towards the AEC, because they are looking at a half-empty AEC glass of water.
Thus, the Amcham/US Chamber poll accurately reflects American corporate sentiments in the region, because American companies have a different outlook on Southeast Asia. Improving that sentiment will be difficult for ASEAN members, but will result in much greater economic welfare for all of ASEAN’s citizens, not just those involved in the single production base. In other words, if American companies become happier with the AEC, everyone will be happier with the AEC.