US hotel chain Hilton is one of many US businesses that have enjoyed tremendous success in ASEAN. Image: Hilton Singapore.

Despite Challenges, American Companies Anticipate Continued Success in ASEAN Markets

ASEAN

On August 28th, the US Chamber of Commerce, in partnership with the American Chamber of Commerce in Singapore, released the 2015 ASEAN Business Outlook Survey, detailing the optimism that the majority of the 588 senior executives of US companies share about their companies’ futures in the ASEAN markets. Representing US companies located in all 10 ASEAN nations, the executives highlighted the importance of ASEAN in terms of their global revenues, with 66% expecting that importance to continue to grow over the next two years. Economic recovery and limited growth opportunities elsewhere were cited as the main reasons behind ASEAN’s particular importance (61% and 54% respectively), and 89% of the executives predict their companies’ trade and investment levels with ASEAN will continue to rise over the next five years.

With these expected increases comes the expectation of increased profit over at least the next two years. Across the board, executives predicted that their profits in all 10 countries would increase by the end of this year and into 2015. The focal point of this optimism was Myanmar. 86% of executives believe their investments in Myanmar will lead to increased profits this year and 91% percent believe profits will increase in 2015.

Myanmar is also one of the ASEAN markets where many companies plan to expand (35%), joining Indonesia (41%) and Vietnam (37%) in the top three. Companies wished to expand more into ASEAN due to a more diverse array of customers (49%), the availability of manpower (39%) and reasonable production costs (34%). It is these advantages in ASEAN that are leading many executives to consider moving their companies out of China and into ASEAN. Despite a slight dip from last year in other ASEAN countries, Vietnam saw a 5% increase in those who wished to diversify from China and set up shop within its borders, with 27% of executives considering this new business direction.

The majority of US company executives see their new business directions in ASEAN only truly reaching their full potential if ASEAN integrates into the ASEAN Economic Community by next year. However, while 81% see this as integral to their companies’ future successes, only 4% believe that ASEAN is on the right track to meet its Community goals by 2015. Hand in hand with this skepticism are concerns about the local business environment in ASEAN countries. Corruption topped the list, with only Brunei and Singapore receiving positive ratings in this poll. Similarly, there have been significant decreases in satisfaction regarding the availability of trained personnel (14%), low cost labor (13%), business incentives from the local governments (11%), availability of raw materials and office lease costs (both 10%).

Nevertheless, US companies and their executives have good reason to remain optimistic about the potential of ASEAN markets. With current bilateral trade already supporting over 500,000 US jobs, the prospects for future trade with ASEAN remain strong.

Sarah Batiuk is a Research Intern at the East-West Center in Washington, DC.