By Bernie Cahiles-Magkilat
A growing consumer market has been identified as the number one attraction of ASEAN, rather than its economic integration, in driving investors into the region, results of a survey conducted among Australian businessmen showed.
The survey also noted that corruption among ASEAN countries ranked as the number one challenge faced by Australian companies in operating in the region, even as they acknowledged the huge opportunities of doing business in the world’s fastest trading bloc.
The Australian Business in ASEAN Survey 2017 was conducted by the Australia Chamber Singapore in collaboration with the other Australian chambers and business councils from each of the ASEAN member countries to bring together a survey of Australian business interests in the region.
Notably, survey results identified the growing consumer class as the number one reason by business for expanding trade and investment in ASEAN.
A majority of 61 percent, an improvement from 60 percent last year, of Australian businesses have identified the growing consumption among ASEAN people as the main reason for doing business in the region.
The second reason identified was improvement in infrastructure at 35 percent, a 5 percent increase from 30 percent in the previous survey.
Regional integration ranked only third among the top three factors for business expansion in the region with only 36 percent of Australian businessmen putting importance on the ASEAN Economic Community as a major come on for them.
The survey results showed that regional economic integration of ASEAN has lost its weight as an attraction of the 10-member countries to foreign investors.
In the previous survey, 53 percent of Australian businessmen ranked economic integration as the second most important reason for investing in ASEAN.
Nonetheless, only 19 percent of Australian businesses believe that ASEAN integration does not matter to their business, although it has also increased from 16 percent in 2016.
The survey, however, tried to explain why economic integration has been relegated as a lesser attraction of the region to poor understanding of the ASEAN integration and therefore Australian firms need more information on the region’s economic integration.
Survey respondents also said that market access and better mobility of staff as the major areas of benefit from ASEAN integration for their operations.
While ASEAN is a priority region for many Australian companies, the survey said that 17 percent of firms did not consider that their head office had a strong understanding of the region.
Australia-ASEAN Chamber of Commerce President Fraser Thomson noted that in their 2016 survey showed that the AEC and regional integration was the second important motivation for Australian firms wanting to invest and operate in the region.
Thomson said that Australian firms surveyed indicated that they wanted more information to properly understand what ASEAN regional integration could mean for their business.
Priority areas to accelerate in order to achieve ASEAN integration were seen as the removal or reduction in investment or service restrictions, fair enforcement of the law, and eliminating infrastructure gaps.
The survey further highlighted that 42 percent of Australian businessmen still identified corruption as number one challenge of doing business in the region.
The score though posted a 1 notch improvement from last year’s survey at 43 percent.
The other two top challenges were barriers to ownership and investment, and lack of access to skilled labor, among 13 challenges identified in the survey.
Corruption, barriers to ownership and investment, and lack of access to skilled labor continue to be substantial roadblocks to operating within ASEAN for the Australian business community and were noted by more than a third of firms, the survey said.
In the Philippines, majority or 52 percent of Australian businessmen ranked corruption as number one challenge among the 13 business challenges they identified.
Among ASEAN countries, corruption ranked high in Vietnam with 72 percent; Cambodia with 67 percent; and, Indonesia with 55 percent. Only 32 percent of Australian businessmen noted of corruption in Singapore, which is the lowest in the region.
Overall, 42 percent of Australian businessmen were challenged by corrupt practices in the region.
Despite these challenges, the survey showed that Australian businessmen still continue to transact business with the world’s fastest growing region.
The survey also showed that 62 percent of respondents had expanded their trade and investment in the region over the past two years, with only 6 percent of firms reducing their presence in the region over that time. This is a moderate growth from last year’s survey where 60 percent of firms indicated they had expanded their trade and investment and 7 percent indicating a contraction, according to the survey.
Among the ASEAN countries, Singapore has been the favorite destination with more than 50 percent of Australian firms operating their regional hubs in the city state.
Malaysia and Thailand also got their fair share of regional hubs at 40 percent, reflecting their growing importance as regional hubs.
The survey further showed that more than 86 percent of firms plan to increase their investment in the ASEAN region over the next five years, with less than 2 percent of businesses planning to reduce their presence in the region.
Vietnam has overtaken Myanmar as the most popular market for expansion, but Myanmar, Indonesia and the Philippines were also targeted by more than 15 percent of firms for expansion.
ASEAN is an import trading partner of Australia, accounting for 14 percent of Australia’s total trade ($93 billion in 2015-2016). Two-way investment was valued at $224 billion at the end of 2016.
Australian business operations in the region continued to be dominated by services firms, with property, construction and infrastructure, and manufacturing making the top five industries represented.