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.
