Most U.S. companies with businesses in the Association of Southeast Asian Nations (ASEAN) plan to expand their operations as they expressed optimism about prospects in the region even in the face of global economic headwinds and challenges.
According to the 2017 ASEAN Business Outlook Survey released recently by the U.S. Chamber of Commerce and the American Chamber of Commerce in Singapore, U.S. firms cited a variety of reasons for their expansion plans, such as to diversify their customer base, to leverage the availability of trained personnel, and to capitalize on reasonable production costs.
Majority of the polled senior executives representing U.S. companies in all 10 ASEAN countries also said they expect their companies to correspondingly increase the size of their workforce this year. A significant minority of respondents in each country expect some diversification of operations from China into ASEAN.
Respondents across the region report that Vietnam (40%), Indonesia (38%), and Myanmar (34%) continue to be priority markets for future business expansion. Compared with respondents last year, respondents this year indicate the greatest increase in interest in expanding into Vietnam (from 31% in 2015 to 40% in 2016), Indonesia (from 31% to 38%), and the Philippines (from 20% to 27%).
The majority of respondents (63%) also report that their companies will be expanding in their current countries of operation, a figure unchanged from last year, while only 4% expect their companies to contract.
Executives in Myanmar almost universally expect to expand (96%). Myanmar is followed by Vietnam (80%), Laos (75%), Philippines (70%), and Indonesia (68%). Respondents from the consumer goods and consulting industries are, respectively, the least and most likely to expect their companies to expand.
The top reasons respondents cite for expansion in their response location are economic growth (59%), a rise in the middle class and consumer class (37%), diversification of the customer base (30%), and stable government/political conditions (30%).
Respondents who cite openness on business and land ownership as a primary reason for expanding their operations are the most likely to believe the overall investment environment in their response locations to be improving.
Conversely, respondents who report improvements in intellectual property protection and the availability of raw materials as incentives for expansion are the least likely to describe the investment environment in their response locations as improving.
A plurality of executives (49%) expect to increase the total number of employees in their response locations. This continues the slight downward trend since 2011, when 66% of respondents expected to expand their workforces. Responses vary widely across ASEAN, with 87% of respondents in Myanmar, 61% in Vietnam, and 58% in Laos expecting to increase the size of their workforce. Conversely, only 26% of respondents in Brunei and 36% in Malaysia and Thailand plan to do so.
Meanwhile, since peaking at 21% in 2012, interest in diversifying investments or businesses from China into ASEAN has been gradually decreasing over the years. Only 11% of executives report plans to diversify investments compared to 15% in 2015. The greatest decrease is observed in Vietnam, where 17% of respondents indicate plans to do so, down from 27% in 2015.
“The ASEAN region continues to be a dynamic and important market for U.S. businesses, and one that corporate executives cannot ignore,” said Tami Overby, the U.S. Chamber of Commerce’s senior vice president of Asia. “As our fourth-largest trading partner, growth in ASEAN also means more jobs here in the U.S. as our companies increase exports and sales to the region’s expanding middle class.”
About 78% of the respondents say they expect their profits to increase in 2017, with more than half (53%) reporting that ASEAN markets have become more important for their companies’ global bottom line.
Photo: Kiensvay
