Today the American Chamber of Commerce in Singapore and the US Chamber of Commerce released their annual ASEAN Business Outlook, a survey of top-level executives in American companies in the region. Although the survey respondents were generally optimistic, the level of optimism has fallen in recent years, according to a Singapore Business Times article:
In a poll of 471 senior executives representing US companies in all 10 Asean countries, 72 per cent reported that their companies' level of trade and investment in the region has increased over the past two years, and 86 per cent of respondents expect it to increase over the next five years.
"The Asean region continues its solid growth despite regional and global economic headwinds, and this survey demonstrates that US businesses remain confident about prospects in Asean," said Tami Overby, US Chamber of Commerce senior vice-president, Asia, who added that this confidence cannot be taken for granted. "We have also seen a modest, but clear, downward drift over the past several years, in terms of some of overall indicators of optimism."
More than half of those surveyed said that Asean markets have become more important in terms of their companies' worldwide revenues over the past two years - this is 10 percentage points lower than reported two years earlier. Two-thirds (66 per cent) of respondents this year expect Asean to become more important in terms of worldwide revenues over the next two years. While still high, this is seven percentage points lower than two years earlier.
For me, the survey continues to confirm the mixed sentiment of the US business community regarding the AEC. Although 75% of respondents said that the AEC was important to their operations, 51% of all respondents indicated that they had not developed an AEC-specific strategy. Moreover, when asked to cite a specific AEC agreement that was important to their companies’ operations, a much higher percentage of respondents cited AEC agreements dealing with investments and services than agreements dealing with goods:
ASEAN Framework Agreement on Services 70%
ASEAN Comprehensive Investment Agreement 63%
Trade Facilitation Workplan and Customs Agreement 66%
ASEAN Trade in Goods Agreement 58%
Again this reflects the American business community in Southeast Asia’s focus on services and distribution/marketing of goods, rather than the production of goods, as I have commented in earlier posts. In other words, the American business community has much more at stake in the single market to be created by the AEC, rather than the single production base; with the single market taking that much more time and effort to develop, American companies are understandably more reserved about the AEC’s prospects.
For similar reasons, American companies are more optimistic about the Trans Pacific Partnership (TPP) than the Regional Comprehensive Economic Partnership (RCEP). According to the survey, 46% of ASEAN respondents said that the TPP would have a positive impact on their operations (including 56% of respondents from ASEAN members who are part of the TPP talks). On the other hand, only 34% of ASEAN respondents said that RCEP would benefit their operations. These results are understandable, since the TPP will have much wider and deeper regulatory effects on services, investment and market access than the RCEP, which is focused mainly on harmonizing existing obligations under the ASEAN FTAs.
In any event, improving American business sentiments regarding the AEC will require improving governance at the national and regional levels in ASEAN. That in turn will require improving the legal and institutional foundations of the ASEAN Economic Community.