From the sidelines of this week’s ASEAN Economic Ministers’ meeting in Naypyidaw, the Nation reports that US companies are still bullish on Southeast Asia, but bearish on the ASEAN Economic Community (AEC):
As 2015 and the Asean Economic Community approaches, US companies are keeping a close eye for opportunities offered by regional economic integration, although most respondents don't believe that the goals of the AEC will be reached until 2020 or later.
This comes from the 2015 ASEAN Business Outlook Survey published by the American Chamber of Commerce and US Chamber of Commerce, and available here.
In the survey, 66% of respondents from the American business community expected ASEAN to be more important to their companies’ business operations within the next two years, and 89% expected to increase their investments in ASEAN during the next two years. However, only 4% of respondents said that ASEAN would reach its AEC goals by end 2015, a drop from 23% who said this in last year’s survey. Furthermore, 52% of respondents said that the AEC goals would not be reached until 2020 or later, an increase from 31% who said this last year.
Americans are therefore bullish on Southeast Asia, but bearish on ASEAN. I posted on this split opinion in the American business community last year:
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.
This year’s survey shows that this half-empty, half-full view of the AEC is more prevalent than ever in the American community. Major reforms to the ASEAN institutions, along with concrete actions to implement AEC commitments, will be needed to improve these bellwether indicators of confidence in the AEC.