Business Outlook Survey: U.S. Companies Are Bullish on Southeast Asia
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Southeast Asia is one of the few islands of optimism in a sea of economic pessimism. The member countries of the Association of Southeast Asian Nations (ASEAN) are forecast to grow strongly this year; by IMF reckoning, Indonesia will grow 6.1%, while Thailand, Vietnam, and Malaysia will see growth of 5.5%, 5.6% and 4.4%, respectively. That compares well with the global economic growth forecast of 3.5%. The 10 ASEAN countries collectively have a GDP of $2 trillion, and the region is a vital U.S. trade and investment partner. As far as islands go, it’s a big one.
The optimism was underscored this week in the results of the ASEAN Business Outlook Survey. The survey, a cooperative effort between the U.S. Chamber and the AmChams in the region, polled 356 executives from U.S. companies across the region about their views on business prospects in ASEAN, and 90% of the respondents expected their company’s business in the region to grow over the next five years. Respondents were similarly optimistic on their companies’ profit outlooks for this year and next, and a majority of them expect to expand their workforce in the region.
Internally, ASEAN continues to integrate its markets, with regional agreements on trade in goods, services, investment, and customs, as part of its broader effort to create an ASEAN Economic Community by 2015. These efforts are important to U.S. companies, who are increasingly factoring regional integration into their investment plans in Southeast Asia.
The survey also showed that U.S. companies are thinking strategically about taking advantage of ASEAN’s preferential trade agreements with major partners such as Australia and New Zealand, China, India, Japan, and Korea. While fewer than half of the companies surveyed are currently utilizing those agreements, large majorities indicate that they plan to do so in the future.
The policy implication for the United States is that we need to be more aggressive in pursuing free trade in the region. ASEAN’s major trading partners, who naturally want to ensure access to its large, lucrative, and rapidly-growing market, have actively and aggressively courted the region. If we are not equally aggressive, we will be left behind. The Trans-Pacific Partnership (TPP) trade negotiation is an important start – four ASEAN members are currently participating – and we need to encourage more countries in the region to sign up.
ASEAN took in $76 billion in U.S. exports last year, and hosts $156 billion in American direct investment. The region demonstrated its resilience when it emerged largely unscathed by the global financial crisis. With ASEAN’s heady growth expectations, and America’s low ones, we need to be a full and active participant in that market.