ASEAN's overall attractiveness matters for business investment decisions

The Survey collated 405 usable responses across various firm size categories, age and ownership profiles and industries from all ten ASEAN member economies. The Survey was conducted by ASEAN-BAC in collaboration with Dr. Marn-Heong Wong, Assistant Professor at the Lee Kuan Yew School of Public Policy (LKY School), National University of Singapore. The Singapore segment of the Survey was supported by the Singapore Business Federation (SBF). The 2011-12 Survey followed from the success of the inaugural 2010 Survey, where results were reported by ASEAN-BAC to ASEAN Leaders and ASEAN Economic Ministers. The 2011-12 Survey Report, prepared by Marn-Heong Wong and Andre Wirjo of the LKY School, is released today.

The Survey found that businesses continue to view the ASEAN region’s competitiveness for investments favourably. 88 percent of businesses planned to invest or increase investments in at least one ASEAN country over a three-year horizon (2011/12-2013/14) (Figure 1). The top investment destination was Indonesia, followed by Vietnam, Singapore, Thailand and Malaysia. 36.5 percent of respondents indicated an ASEAN country as offering the best prospects worldwide for their organizations’ offshore direct investments over the next three years. ASEAN’s attractiveness was also rated higher than China’s both as a market for goods and services and as a production location.

Two-fifths of businesses considered the investment attractiveness of ASEAN as a whole when planning their investments in ASEAN countries over the next three years (Figure 2). “This finding might point to a rising consciousness among businesses of ASEAN’s initiatives to create an AEC and of the opportunities that a more integrated ASEAN might bring, as ASEAN member governments implemented more measures under the AEC Blueprint and stepped up their outreach efforts to different extents,” note the authors of the Survey Report. It was observed that some two-thirds of respondents whose organizations considered the overall investment attractiveness of ASEAN had at least general knowledge of ASEAN policy initiatives related to trade and investment, compared with around half of the respondents whose organizations made their investment decisions based on the attractiveness of individual ASEAN country.

Implementation of the AEC Blueprint across 14 policy areas was rated by businesses (on a scale of 1 to 5) to be of relatively high importance to enhancing trade and investments in ASEAN (Figure 3). Businesses expressed below-average to above-average satisfaction level with ASEAN’s implementation of measures across the areas, with those related to increasing foreign equity participation in services sectors, consultation with businesses, the development and implementation of mutual recognition of professional qualifications, development or enhancement of national competition policies and dissemination of information being identified as among the least satisfactory. The gap between importance and satisfaction level was widest in the areas of investment protection, simplification of customs procedures and enhancing the transparency of non-tariff barriers.

To underscore the crucial role of small and medium enterprises (SMEs) in furthering regional economic development and integration, the 2011-12 Survey also sought businesses’ views on the importance and effectiveness of government initiatives to promote SME development and participation in trade and investment activities in ASEAN. Financing was rated by businesses to be by far the most important policy area, followed by the promotion of SME innovations and creativity. On satisfaction level with implementation, the areas that businesses across a number of ASEAN countries were least satisfied with included platforms to promote networking among SMEs in ASEAN, business missions to other ASEAN countries, information on opportunities from ASEAN and ASEAN-plus FTAs (Free Trade Agreements) and FTA-related documents, and information on SME Service Centres, non-bank funding availability and available technology for SMEs in ASEAN.

Arising from these findings, ASEAN-BAC has put forth some policy recommendations to ASEAN. A measure of ASEAN’s success in forging closer economic integration will lie in a rise in the number of businesses that would plan their investments in ASEAN countries by adopting an ASEAN-wide perspective. To this end, ASEAN needs to not only ensure the continuous effective implementation of measures towards an AEC but also raise awareness among businesses of the measures being undertaken so that they can better exploit the opportunities that arise.

Dr Robert Yap, Singapore member of ASEAN-BAC., comments: “ASEAN economic integration can only be achieved through close cooperation among stakeholders. It is important for policy makers in ASEAN to know what the business community think and to respond to their concerns. I am heartened that the national business chambers in ASEAN including the Singapore Business Federation continue to work with academia to gather wider feedback through the survey vehicle from the business community for ASEAN's consideration.”

ASEAN-BAC urges ASEAN to strengthen in particular its implementation in areas of the AEC Blueprint that businesses found to among the least satisfactory or where the gaps between importance and satisfaction level were the widest. In the area of promoting SME development and internationalization, ASEAN-BAC suggests that ASEAN, especially the ASEAN SME Working Group, could reference the views of businesses from the 2011-12 Survey in their prioritization and implementation of work plans, such as stepping on areas related to the promotion of networking and information dissemination.

The full Survey Report can be downloaded here.

Appendix

Figure 1: ASEAN countries that organizations plan to invest in over the next three years (2011/12-2013/14)

(% of Respondents)

Note: Each respondent is allowed to select multiple responses. Percentages do not sum to 100%.
Source: Wong, M-H. and Wirjo, A., 2012. Findings from 2011-12 ASEAN-BAC Survey on ASEAN Competitiveness, Jakarta: ASEAN Business Advisory Council.

Figure 2: Organization’s consideration of ASEAN’s attractiveness as a whole in planning investments in ASEAN countries

(% of Respondents)

Source: Wong, M-H. and Wirjo, A., 2012.

Figure 3: The importance of AEC Blueprint by policy areas for organizations and their satisfaction levels with its implementation

(Ratings)

Source: Wong, M-H. and Wirjo, A., 2012.