vote of confidence in the promise of asean€¦ · the asean cut of the pwc 2015 apec ceo survey...

www.pwc.com/apec

Vote of confidence in the promise of ASEAN

PwC 2015 APEC CEO Survey The ASEAN cut

Vote of confidence in the promise of ASEAN | 1

The ASEAN cut of the PwC 2015 APEC CEO Survey summarises the measures of business confidence and analysis of notable trends, risks and opportunities from the perspectives of executives based in the 7 APEC economies which are also member states of ASEAN, i.e. Brunei Darussalam, Indonesia, Malaysia, The Philippines, Singapore, Thailand and Viet Nam. This report highlights a number of key findings for the ASEAN region, and we hope that the information contained in this report stimulates discussion and provides clarity on newer avenues for engagement with the private sector, public sector and policymakers in the ASEAN region.

In this report we have presented descriptive key findings in our 2015 survey for the 7 APEC economies in ASEAN. It covers a variety of indicators, measuring levels of business confidence, allocation of business investments, estimation of the demand for services, effects of possible disruptive scenarios, outlooks of the business environment in 2020, and factors that foster connectivity and inclusive growth. Where possible, comparisons with 2013 and 2014 have been presented.

Despite the recent market volatility and uncertainties in the growth outlook in major economies China and the United States, business confidence in revenue growth remained high among business leaders in the 7 APEC economies in ASEAN compared to their peers from the rest of APEC. 79% of them are confident of the prospects for the 12-month timeframe while 94% says the same for the 3-5 year horizon. Riding on their confidence, a large majority of business leaders plan to increase their organisations’ headcount across the Asia Pacific in the coming years, and demand more advanced computer systems and technologies for their operations and participation in the digital economy.

Preface

The ASEAN promise remains attractive to business leaders. Following the establishment of the ASEAN Economic Community (AEC) in December 2015, the full implementation of strategic measures for the AEC in the coming years will integrate ASEAN as a single market and product base, making the region highly competitive regionally and globally. 60% of the business leaders in 7 APEC economies in ASEAN identified this as the key game changer for their organisations. Their belief in the ASEAN promise is also seen in their investment plans for the next 12 months, which sees 6 out of 7 APEC economies in ASEAN expecting increases in investments from ASEAN compared to the views a year ago. However, it is worth noting that executives in the region are less optimistic on reduction of trade barriers and red tapes in the wider APEC business environment, and any escalation of geopolitical tension in the region will certainly cause them to be on edge about the future of their businesses and investments.

D | PwC 2015 APEC CEO Survey – The ASEAN cutD | PwC 2015 APEC CEO Survey

Key findings


1. Confidence in revenue growth consistently higher in the 7 APEC economies in ASEAN than the rest of APEC

20152013 2014

86%

93%

88%

61%

80%

79%

Rest of APEC7 APEC economies in ASEAN

20152013 2014

94% 94%95%

95%90%89%

Confidence in revenue growth consistently higher in the 7 APEC economies in ASEAN than the rest of APEC

Confidence in revenue growth in the 7 APEC economies in ASEAN versus the rest of APEC over the next 12 months

Confidence in revenue growth in the 7 APEC economies in ASEAN versus the rest of APEC�over the next 3-5 years

Business confidence in revenue growth over the next 12 months remained high among business leaders in the 7 APEC economies in ASEAN (79%) compared to those from the rest of APEC (61%), despite the market volatility in the recent months and uncertainties in the growth outlook in China and the United States. About 94% of business leaders are confident about the prospect for revenue growth in the 7 APEC economies in ASEAN over the next 3-5 years, with insignificant differences compared to the levels of confidence recorded in our 2013 and 2014 surveys.

4 | PwC 2015 APEC CEO Survey – The ASEAN cut

APEC economies remain attractive to business leaders in the 7 APEC economies in ASEAN

Proportion of the increase in business investments in the next 12 months by

business leaders in the 7 APEC economies in ASEAN

Proportion of the increase in business investments in the next 12 months�by

business leaders from the rest of APEC

73%APEC's 21 economies

66%APEC's 21 economies

34%Rest of the world

27%Rest of the world

Business leaders in the 7 APEC economies in ASEAN are more inclined to increase their investments globally in the next 12 months (58%) compared to their peers in the rest of APEC economies (51%). They also plan to allocate a larger proportion of the increase to APEC’s 21 economies than the rest of the world.

For business leaders in the 7 APEC economies in ASEAN, ASEAN remains the region of choice to increase their investments over the next 12 months. After comparing with the results from our 2014 survey, 6 out of 7 APEC economies in ASEAN will see increases in the proportion of business leaders planning to increase their investments in 2016. Outside ASEAN, China and the United States will see the most increases in investments in the coming year.

2. APEC economies remain attractive to business leaders in the 7 APEC economies in ASEAN

3. Business leaders in the 7 APEC economies in ASEAN plan to increase their investments more within ASEAN

Business leaders in the 7 APEC economies in ASEAN plan to increase their investments more within ASEAN

MalaysiaPeople'sRepublicof China

SingaporeViet NamIndonesiaThe Philippines

ASEAN member states 20152014

Non-ASEAN member states 2015201443%

49%

41%44%

22%

37%

26%

33%

22% 21%

28%33%

% investments will increase over the next 12 months in…

ThailandThe United States

27%24%

21%18%


4. Scientific research and development less demanded among businesses in the 7 APEC economies in ASEAN

Demand for services over the next 3-5 years in the 7 APEC economies in ASEAN

Computer systems (e.g. design, integration)

Management and technical consulting

Risk reduction

Legal

Financial services

Accounting, auditing and book-keeping

Tax

Logistics and supply chain

Advertising

Construction and related services

Scientific research and development

Architecture and engineering

Scientific research and development less demanded among businesses in the 7 APEC economies in ASEAN compared to the rest of APEC

To some extent To a great extent

51.5%

58.8%

55.8%

52.3%

56.8%

43.2%

49.2%

32.2%

33.5%

32.8%

60.2%

63.5%

20.6%

30.7%

23.6%

14.1%

22.0%

12.4%

14.5%

22.4%

9.9%

18.6%

15.7%

14.1%

82.2%

79.4%

79.4%

77.6%

74.3%

72.6%

71.3%

65.6%

59.1%

50.8%

49.2%

46.9%

Business leaders in the 7 APEC economies in ASEAN expect the demand in their organisations for computer systems (82%), management and technical consulting services (79%), risk reduction services (79%) and legal services (78%) to grow over the next 3-5 years.

However, after comparing the demand by business leaders in the 7 APEC economies in ASEAN with their peers from the rest of APEC, it is worth noting that only 49% of them expect the demand for scientific research and development services to grow versus 70% of the business leaders from the rest of APEC. This difference between the 7 APEC economies in ASEAN and the rest of APEC is the largest among the list of services we surveyed this year.

Rest of APEC

The 7 APEC economies in ASEAN

Scientific research and development less demanded among businesses in the 7 APEC economies in ASEAN compared to the rest of APEC

To some extent To a great extent

28.6%

15.7%33.5%

41.0% 69.6%

49.2%


79% of business leaders in the 7 APEC economies in ASEAN expect their organisations’ headcount in the Asia Pacific region to increase over the next 3-5 years, higher than their peers from the rest of APEC (69%). A large majority of them (79%) remain confident in securing the right talents with the required skills in the region to perform globally.

5. Businesses in the 7 APEC economies in ASEAN look set to expand in the coming years, riding on their leaders’ strong confidence in talent acquisition

41.3%4.5%

8.6%

22.7% 14.5%

36.5% 21.8% 10.8%

78.5%

69.1%

Decrease

Increase by 5-8% annually

Increase by less than 5% annually

Increase by more than 8% annually

Businesses in the 7 APEC economies in ASEAN look set to expand in the coming years, riding on their leaders’ strong confidence in talent acquisition


Rest of APEC

Expected changes to organisations' headcount in the Asia Pacific over the next 3-5 years

Businesses in the 7 APEC economies in ASEAN look set to expand in the coming years, riding on their leaders’ strong confidence in talent acquisition

Confidence about securing the talent and skills needed to perform globally

79%

The 7 APECeconomiesin ASEAN

80%

Rest of APEC


6. Most business leaders in the 7 APEC economies in ASEAN fear an escalation of geopolitical tension in the region which will adversely affect their organisations

An overwhelming majority of business leaders in the 7 APEC economies in ASEAN (91%) feel that an escalation of geopolitical tension in the region would adversely affect their organisations. Any occurrence of a cyber-attack on critical infrastructure in their economies or a food safety crisis will also cause them on edge more than their peers from the rest of APEC, among many possible disruptors that may affect their organisations.

Most business leaders in the 7 APEC economies in ASEAN fear an escalation of geopolitical tension in the region which will adversely affect their organisations

21.0%29.2%

35.3%29.1%

19.3%14.8%

91.2%86.1%

85.3%72.8%

67.2%49.4%34.6%

47.9%

43.7%50.0%

56.9%70.2%Escalation of geopolitical tension

in the region

Major disruption of Internet or a cyber-attack on critical infrastructure in your principal economy

Food safety crisis in your principal economy

To some extent

To a great extent

To some extent

To a great extentThe 7 APEC economies in ASEAN

Rest of APEC


Business leaders in the 7 APEC economies in ASEAN are not as optimistic as their peers from the rest of APEC on the likelihood of fewer barriers and restrictions to facilitate business growth and trade in the Asia Pacific by 2020. The ongoing negotiations to promote free trade and economic integration between economies and trade blocs did not seem to impress as many business leaders in the 7 APEC economies in ASEAN, a signal to governments that they do not foresee the red tapes and policy hindrances which still persist in limiting the growth possibilities in APEC economies are going away any time soon.

On the prospect of the Chinese yuan becoming a global and viable reserve currency by 2020, less proportion of business leaders in the 7 APEC economies in ASEAN (26%) felt that it would be likely compared to their peers from the rest of APEC (46%). Although the International Monetary Fund (IMF) has announced the inclusion of the yuan in the basket of its Special Drawing Rights (SDR) by September 2016, it remains to be seen whether more central banks will begin holding the yuan in their foreign exchange reserves, as well as the pace of adoption to change the composition of their reserves.

Establishment of Free Trade Area of the Asia Pacific (FTAAP)

Fewer barriers to procuring a range of services from across the region

Fewer barriers to skilled people moving across APEC economies

Fewer barriers to importing or exporting goods across the region

Fewer restrictions on foreign business investment

China's yuan becomes a global and viable reserve currency

On the prospect of the removal of barriers and restrictions to facilitate business growth and trade in the Asia Pacific, business leaders in the 7 APEC economies in ASEAN are not as optimistic as their peers from the rest of APEC

57%

61%

Rest of APEC


59%

67%

50%

46%60%

46%26%

56%

54%

51%

Likelihood of scenarios about the business environment in APEC

7. More needs to be done to remove the barriers and restrictions to facilitate business growth and trade in the Asia Pacific


8. Expansion of digital infrastructure and trade facilitation more preferred in fostering regional connectivity by business leaders in the 7 APEC economies in ASEAN31% of business leaders in the 7 APEC economies in ASEAN feel that expanding broadband access and increasing participation in the digital economy will provide the greatest opportunity for their organisations. Agreements to facilitate trade and remove trade barriers and tariffs are also more preferred, compared to the lower preference for the development of land and maritime transport corridors.

Expansion of digital infrastructure and trade facilitation more preferred in fostering regional connectivity by business leaders in the 7 APEC economies in ASEAN

Frequency of being ranked first


Rest of APEC

15% 15%

6% 17%

Development of maritime corridors

Regional or bilateral trade agreements

Development of new land transport corridors

Expanded broadband access and increased participation in the digital economy

31% 27%

27% 25%

Trade Facilitation Agreement (TFA)23% 16%


The ASEAN Economic Community (AEC) will establish ASEAN as a single market and production base, which will provide abundant opportunities for businesses to grow and expand across ASEAN member states. It is therefore not surprising that majority of business leaders in the 7 APEC economies in ASEAN (60%) identified the full implementation of AEC as the greatest game changer for their organisations. The preference for the direct benefits of AEC in trade and movement of talents trumps that of the wider but less direct promise of the Regional Comprehensive Economic Partnership (RCEP), which is the proposed free trade agreement (FTA) between ASEAN and the six states that the regional bloc has existing FTAs with (Australia, People’s Republic of China, India, Japan, Republic of Korea and New Zealand).

If fully implemented, the ASEAN Economic Community will be the ‘mega regional’ game changer for business leaders in the 7 APEC economies in ASEAN


Rest of APEC

ASEAN Economic

Community (AEC)

24%

60%

Regional Comprehensive

Economic Partnership

(RCEP)

16%

7%

Pacific Alliance (Chile, Colombia,

Mexico, and Peru)

1%

12%

Bilateral trade agreements

4%

3%

Trans-Pacific Partnership

(TPP)

13%

29%

9. If fully implemented, the ASEAN Economic Community will be the ‘mega regional’ game changer for business leaders in the 7 APEC economies in ASEAN


Expanding access to high-quality education is the most direct enabler to promote inclusive growth in the 7 APEC economies in ASEAN

79%66%

55%45%

48%60%

47%

40%28%

39%35%

37%

32%38%

29%49%

48%

49%

73%

Expanded access to high-quality education at all levels

Improved transport (roads, rail, ferries, airports)

Expanded access to healthcare

Greater economic incentives for savings and access to financial services

More reliable access to power and electricity

More stable food prices

Raising minimum wages

More affordable high-speed internet access

Improved access to water and sanitation

Expanded worker protections (overtime pay, maternity leave, etc)

Rest of APEC

84%


Top ranked #1 option in the 7 APEC economies in ASEAN

Consistent with the view from the rest of APEC, a large majority of business leaders in the 7 APEC economies in ASEAN (84%) believe that the key enabler to promote inclusive growth and reduce inequality is expanding access to high-quality education at all levels. 4 out of 10 business leaders consider it as the best way to enable people who are currently on the margins of the economy to participate in and benefit from growth and trade in APEC.

Close to 80% of business leaders in the 7 APEC economies in ASEAN have also identified the improvement of transportation infrastructure as another key enabler to promote inclusive growth in the region.

10. Expanding access to high-quality education is the most direct enabler to promote inclusive growth in the region


ASEAN Member States

Population1 GDP (USD)2 Percentages

APEC member economies

Brunei Darussalam 417,394 $ 17,256,754,269 The 7 APEC economies in ASEAN represent:

• 87.9% of total ASEAN population

• 96.3% of total ASEAN GDP

• 19.4% of total APEC population

• 5.4% of total APEC GDP

Indonesia 254,454,778 $ 888,538,201,025

Malaysia 29,901,997 $ 326,933,043,801

The Philippines 99,138,690 $ 284,582,023,121

Singapore 5,469,700 $ 307,871,907,186

Thailand 67,725,979 $ 373,804,134,912

Viet Nam 90,730,000 $ 186,204,652,922

Sub-Total: 547,838,538 $ 2,385,190,717,236

Non-APEC member economies

Cambodia 15,328,136 $ 16,709,432,403

Lao PDR 6,689,300 $ 11,771,725,798

Myanmar 53,437,159 $ 64,330,038,665

APEC 2,828,142,431 $ 44,045,128,984,835

ASEAN 623,293,133 $ 2,478,001,914,102

• The 7 ASEAN Member States which are part of APEC represent more than 96% of total GDP produced in the ASEAN region. The top 6 ASEAN economies are all APEC economies. Business growth and performance in these economies will have direct impact on the trajectory of the ASEAN regional economy as a whole. Level of confidence among the business leaders in these economies will also affect revenue and investment outlook for ASEAN.

• The total GDP produced in the entire ASEAN region are approximately US$ 2,478 billion, ranked just after the GDP of the United States, People’s Republic of China, and Japan.

• The total GDP produced in the 7 APEC economies in ASEAN are approximately US$2,385 billion, also ranked just after the GDP of the United States, People’s Republic of China, and Japan.

About the 7 APEC economies in ASEAN:

1 The population numbers were extracted and calculated based on the statistics available on the website: The World Bank Group (2015): Data > Population, total, via http://data.worldbank.org/indicator/SP.POP.TOTL. All population numbers are for 2014.

2 The GDP numbers were extracted and calculated based on the statistics in the following online publication: The World Bank Group, 18 September 2015: Gross domestic product 2014. World Development Indicators database, World Bank, 18 September 2015. Access via http://databank.worldbank.org/data/download/GDP.pdf. All GDP figures are for 2014.


Profile of respondents from the 7 APEC economies in ASEAN (cont’d)

Banking & Capital markets15%

Business & Professional Services

8%

Construction & Civil Engineering

4%Others41%

Industrial manufacturing4%

Energy (incl. oil/gas)9%

Consumer goods6%

Retail & Distributive wholesale4%

5%Technology

Transportation & Logistics

4%

Sector distribution of the ASEAN

sample

6%

US$10 billion or greater

16%

US$5 billion to less than US$10 billion

8%

Don’t know3%

10%

7%3%

10%

Profile of respondents from the 7 APEC economies in ASEAN (cont’d)

Less than US$100 million32%

Distribution of sample by

revenue in the last fiscal year

5%

US$2.5 billion to less than US$5 billion

US$1 billion to less than US$2.5 billion

US$750 million to less than US$1 billion US$500 million

to less than US$750 million

US$250 million to less than US$500 million

US$100 million to less than US$250 million

Profile of respondents

The PwC 2015 APEC CEO Survey was implemented between June and August 2015. This is an enterprise survey and a mix of quantitative and qualitative methods were used. The sample size for the 7 APEC economies in ASEAN is 262 (Brunei Darussalam 1, Indonesia 44, Malaysia 7, The Philippines 110, Singapore 55, Thailand 6, Viet Nam 39), and the distributions of the sample by sector and firm revenue are as follow:

www.pwc.com/apec

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2015 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

vote of confidence in the promise of asean€¦ · the asean cut of the pwc 2015 apec ceo survey...

Documents