ASEAN Business Climate Survey 2014
PRESS RELEASEFor immediate release
Thailand, 13 June 2014
The seven German Chambers of Commerce and Industry (AHKs) in the ASEAN region who have formed the German ASEAN Chamber Network (GACN) in 2012, namely Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, conducted the ASEAN Business Climate Survey 2014 amongst their member companies in May 2014. The questions focused on business confidence, growth expectations, investments, and company indicators comparing the current situation with the past year and forecasts for the year ahead. In addition, respondents were also asked on their views of the current overall economy in their respective countries. The respondents mainly represented the services, machinery and engineering, electrical equipment, transport and automotive as well as the chemical sector.
GERMAN BUSINESSES OVERALL POSITIV ON THE ECONOMIC OUTLOOK IN ASEAN
Positive market developments over the past year and a good current situation lead to a more positive outlook than in 2013 with a decrease in negative ratings across the board.
“In the run-up to the ASEAN ECONOMIC COMMUNITY (AEC) 2015German business, especially also small and medium-sized enterprises, increasing their engagement in the region. Notwithstanding a certain cautiousness, the results of the survey reflect that ASEAN is currently the most dynamic economic region in the world. As a single market it would already be the 9th largest economy with its population of more than 600 million and a combined GDP approaching 3 trillion USD. The ongoing integration of the ASEAN economies is a roadmap for growth, high quality jobs and technological development. This creates many opportunities for German business.” says Jörg Buck, Executive Director, German-ASEAN Chamber Network, and CEO of the German-Thai Chamber of Commerce (GTCC).
Economic situation in ASEAN remainsgood with lesser weaknesses than 2013 and a positive outlook towards 2015
German businesses in the ASEAN region judge the current overall economic situation as satisfactory to good. Only 13.0 percent of the respondents rate it as bad, which is clearly better than in 2013 (18.4 percent). The “good” values are slightly down from 2013, but so are the “bad” ratings. In terms of capital expenditure German companies see room for improvement, whereas in business demand and private consumption the values for 2014 are significantly better than last year.
Looking at the expectation for the next 12 months the majority of companies do not expected much changes. However, only a few see the future worsen compared to the current situation (13.5 percent compared to 16.9 percentin the 2013 survey) and a good number (38.8 percent) see an improvement of the economic scenario over the next year.
German companies are well positioned in the ASEAN market with high expectations for 2015
For the first time, the majority of respondents reported that present overall businesses situation as good with an increase of almost 7 percentage points. The production and sales values on the “good” ratings are slightly weaker, but the “bad” ratings have remained stable compared to the 2013 survey, still in a range below 15 percent.
Theassessment by the companies of the developments of the past and the expectations for the future show a strong market position. Around 40 percent have done better compared to last year and expect to continue this strong run, especially on the sales side where 55.2 percent of the respondents forecast an increase over the next 12 months. The number of those who see their situation as having worsened over 2013 has increased to 14.0 percent compared to the 2013 survey (7.5 percent), but so has the number of those who see themselves better off than last year (42.8 over 39.6 percent). More importantly, the survey shows a clear increase in business confidence for the future with all “worse” values have fallen below 10 percent and the “better than today” ratings range from 48.8 percent (production) over 54.7 percent (overall) up to 55.2 percent (sales).
German companies increase their workforce and keep capital expenditure high
Most companies have and will retain their employees and 40.5 percent of the enterprises have more employees than a year ago and expect to raise the number of staff further (53.9 percentover the next 12 months). These values are better than in 2013 (33.7 and 45.4 percent). Also, the number of companies having reduced their workforce (12.6 percent) or expect to have fewer staff in a year from now (7.3 percent) are significantly lower than in the 2013 survey (17.3 respectively 13.4 percent).
In terms of capital expenditure the picture is not much different. 34.4 percent of the companies have increased their spending over the past 12 months and 40.7 percent intend to do so over the next year. With about half the respondents indicating no changes for the past and future period, the numbers with decreasing capital expenditure remain low at 11.5 percent (last year) and 17.5 percent (next 12 months).
Lack of skilled labor, government policies not conducive for business and bureaucracy remain the most significant hurdles
The dominating issues (rating of “high influence or importance”) for an engagement in the ASEAN region are the availability of skilled labor (67.3 percent), business friendly policies (63.8 percent) and transparent, lean and efficient administrative provisions and procedures (59.1 percent). Availability of highly skilled people as the most important item for German business also showsthat the educational and training systems are closely linked to the perception of the overall economic competitiveness. Since these resultshave shown little change since the survey was first conducted in 2012, it is fair to assume that not enough attention has been paid to these limiting factors.
Other significant factors are import trade barriers (54.4 percent),tax burden (44.5 percent) and inflation rate (34.6 percent). Improvements were registered in the area of trade barriers for exports and access to public procurement, where around a third respondents reply with “no or little influence or importance”.
Made in Germany more important than the image of the European Union
The majority of the respondents see the attribute “Made in Germany” as a selling point of “high influence of importance” (43.8 percent) with only 15.5 percent assigning little or no relevance to that factor. Compared to the significance the companies see in the image of the European Union the values are higher, but the replies also indicate that there are benefits for German companies through a good image of the EU.
Domestic and regional markets of high significance
The results of the survey indicate that the importance of domestic and regional markets remain high, even though the significance of international markets has gained a little bit compared to the results of the 2013 survey. Influence by the dynamics of the larger domestic markets in Indonesia, the Philippines and Vietnam the highest significance has shifted to the domestic markets (52.3 percent), closely followed by the regional markets (49.1 percent). The importance of international markets has gained 1.1 percentage points (47.9 percent).
This is also a reflection of the strategies of German companies when setting up entities in South-East Asia. Moving away from the “work bench” concept it brings them closer to their customers which benefits their sales performance and adds the comparative advantage of being able to provide swift and cost-efficient after-sales services. It can also be seen as acknowledgement of the dynamics of the South-East Asian region and the growing importance for German business to strengthen its regional presence and engagement.
Free trade agreement have a positive influence on business exchange
The perceptions of the relevance of free trade agreements is shifting toward “high importance of influence”. Only a fifth of the respondents see little or no significance in such developments within ASEAN or between ASEAN countries and the EU. The number of companies attaching “high influence or importance” to free trade agreements has grown to 45.5 percent (Intra ASEAN) respectively 47.2 percent (ASEAN / EU).
Highly qualified technical staff difficult to find, companies turn to in-house trainings – German dual vocational training would be an option
Looking at the availability of high skilled people, 65.6 percent of the companies have responded that they have great difficult to find qualified employees with a university level training. At the vocational level the value is lower with 48.6 percent but still indicates that there is an important supply shortage. In the area of non-technical staff the situation is better, but still far from optimal.
To ease negative impacts on the companies’ performance almost all companies have installed in-house training programs (90.5 percent) and collaborate with training providers (76.6 percent). Such trainings are offered equally to technical as well as non-technical staff.
Responding to the question whether they would participate in a dual vocational training program based on the German model, two thirds of the companies replied positive. The dual vocational model provides the participating companies with a high degree on influence of delivering the training aligned with their business and production process complemented by theoretical knowledge acquired at a training school. Such trainings are based on government approved curricula within a stringent quality control framework.
The Thai Angle
The perceptions of companies based in Thailand in general correspond with those in the other four ASEAN countries. Companies do not expect many changes on internal situations though hoping to see overall economy stabilizing in the coming periods. Even though more than 70 percent mentioned that this year’s situations have aggravated as compared to last year, most of the companies engaging with production (more than 50 percent) remain satisfied with their level of activities.
Despite the political situation, around 50 percent of the respondents stating that “expected workforce” and “situation on capital expenditures” over the next year are seen to be stable as well. As long as domestic demands and foreign supplies are not much affected, companies based in Thailand will still be continuing to maintain their current outlook.
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About the German-ASEAN Chamber Network (GACN)
Launched in November 2012 by the five German Chambers (AHKs) in the ASEAN region (Indonesia, Malaysia, Singapore, Thailand and Vietnam), GACN is a business platform across ASEAN for enterprises and policy-makers from ASEAN, Germany and the EU. It provides a space to meet, network and exchange knowledge towards a sustainable trade and investment-friendly environment. GACN identifies future fields and business opportunities to foster the relationship between ASEAN and Europe in general and to identify and to develop business opportunities for SMEs in particular.
About GTCC
AHK Thailand or the German-Thai Chamber of Commerce (GTCC)
(GTCC) is the leading non-profit entity which promotes bilateral economic relations between Germany and Thailand. It is a member of the German Chambers of Commerce Worldwide Network (AHKs), with 126 locations in 86 countries around the world.
The Chamber, being one of the biggest foreign chambers of commerce in Thailand, advises, informs, mediates and helps companies identify new business possibilities as well as prepares information about the investment conditions in Thailand and Germany. It offers a comprehensive range of services and expertise gathered since its establishment in Thailand in 1962.
As a founding partner of the German-ASEAN Chamber Network, the GTCC also provides access to an open platform for German enterprises and their partners, and interlocutors from business, politics and administration to exchange dialogue on various levels among all relevant stakeholders in ASEAN. Under the collaboration with the Chambers of Industry and Commerce (IHKs) in Germany, the GTCC is ready to support companies to build up and extend business relations in ASEAN and Germany alike.
Survey Coordination:
Mrs. Shobini Kupper
Head of Communications
AHK Malaysia
Tel : +60 3-9235-1800
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