Kuala Lumpur, 01.08.2012 - The five German Chambers of Commerce and Industry (AHKs) in the ASEAN region (Indonesia, Malaysia, Singapore, Thailand and Vietnam) conducted a survey amongst their members in April 2012 on the business climate in the region. The survey’s objective is to acquire a better understanding on the assessment of German business in the region on economic developments, their company’s situation and outlook, as well as the importance of various factors in doing business in the ASEAN region.
The respondents represent a cross cutting of branches from industry as well as the services sector, largely from machinery, electrical equipment, food, chemical products, health and engineering.
Survey Highlights: An Increase in Business Confidence for the Year Ahead
Business confidence in ASEAN’s general economy remained unchanged in April 2012 compared to the same time last year. About half of the companies expect ASEAN’s overall economy, capital expenditure, business and private consumption for the year ahead to remain the same as last year, while 40 percent expect ASEAN’s general situation to improve over the next 12 months. Respondents’ overall sentiment of ASEAN’s economy at present was positive, with 51.1 percent satisfied, 40.1 percent said it is good and only 8.7 percent saw a decline.
For most companies (50.4 %) sales and production are currently satisfactory and a majority expects to do better in the year ahead. Comparing the last 12 months with the expectation for the coming period, positive sentiments clearly pick up. Overall, businesses are confident that sales and production will see an upward trend, with 56.7 percent expect improvement and about 40.9 percent expect about the same in general business conditions in the next 12 months.
Looking at the indicators staff head count and capital expenditures as significant number of companies have increase the number of employees over the past (45.3 %) and expect to continue to do so (54.3 %). Only 9.4 % have reduced their workforce, the number for the next twelve months even further coming down to 7.4 %. Few German companies have reduced their capital expenditures compare to a year ago (9.5 %) and around a third have made increased investment. The figures for the 12 months ahead are a continuation of this trend.
A comparison of the result for the five ASEAN countries show a more differentiated picture:
With the exception of Vietnam, where half of the respondents rate the current situation as unsatisfactory, more than 90 % rate the current overall economic situation as satisfactory to good. The highest values were achieved in Indonesia where 65.7 % of the companies feel that the overall economy is good. Developments over the last 12 months are more split, but still around 80 % see them as positive. Again Vietnam marked a decline (65 %), only Indonesia almost reaches the 50 % mark of a good assessment. Expectations over the coming year are slightly better, including Vietnam where only 15 % see a further decline. Indonesia again reaches the highest value (48.6 %) in positive expectations.
A similar picture in how the companies see their situation: Most companies are currently in a satisfying to good condition, Vietnam at the lower end with (10.5 % bad), Indonesia at the higher (59.4 % good). Looking back at the past year most companies have kept their position or are doing better. Malaysia comes out on top with 62.5 % better, but at the same time Malaysia scores the highest value in a decline over the past 12 months with 18.8 %. Expectations for the year ahead are overall good with less than 6 % in any country seeing deterioration. The majority (50 + %) expect to do better a year from now.
Workforce and investments
Most companies have retained their staff over the past 12 months, with a significant number increasing their staff. Especially in Malaysia staff numbers are higher than a year ago (81.3 %). Only Vietnam saw as significant decline (27.8 %). The trend for the coming year is similar with more companies planning to increase their workforce. A similar development can be seen in capital expenditures, although the figures on the increase side are more moderate than in employment. Singapore comes out on top compared to last year, with 46.2 % of the companies having increased their investments. Malaysia is top of the list when it comes to expectations for the coming months. 58.8 % or the companies plan to increase their investments.
Policies and regulations
Governments and public authorities have the major influence on the success of German companies in the region. Economic policies and administrative processes are the most important factors when it comes to doing well in a country. In 4 out of the 5 ASEAN countries covered by this survey companies have listed these two in their top 3 list of important factors. Individual values in most countries reach well over 50 %, with Vietnam reaching the highest values with 88.2 and 82.4 %. Less relevant factors are access to public procurement and export barriers. Companies in Singapore seem to face the least problems in the area of policies and regulation. Compared to the other 4 countries the answer “no or little influence” reached the highest values in 6 out of 7 questions posed in this area.
The survey reveals a high importance of the domestic and the regional markets for German companies. While their still is a significant export element, products and services seem to stay mainly in the region. This applies especially to the larger economies Indonesia and Thailand. In Vietnam, being one of the larger economies in the region, the picture is somewhat different as the importance of the international market is rated above the domestic and regional markets. For companies based in the smaller economies Singapore and Malaysia their main market are regional. The results indicate the growing importance of producing and selling in the region (“go east”). Free trade agreements are seen as significant, where developments in ASEAN are seen more important compared to those in the EU context.
Among other factors influencing the business success of German companies in ASEAN, the availability of skilled labor clearly tops the list. This is followed by corruption and tax burden. The inflation rate is currently only an area of concern for companies operating in Vietnam. The image of Germany is perceived as of lesser importance. The exception is Thailand where 68.8 % see the image of Germany as an important factor to do well. The importance of the EU image is even rated lower. Malaysia reaches the highest value 37.5 %. The lowest values come from Singapore (8.7 %) and Indonesia (12.5).
Highlights from the individual countries
• High scores in business climate (65.7 % good, 0.0 % bad)
• Private consumption drives positive climate (74.3 % good)
• Companies have been doing well over the past 12 months (46.9 % better, 6.3 % worse) and expect to continue to do so (60.6 % better, 0.0 % worse) over the next year
• Increased staff numbers in coming 12 months (54.5 %), only 3.0 % see decrease in their workforce
• High scores for positive company situation (47.1 % good at present, 62.5 % each in comparison to last year and for the expectations over the next 12 months)
• Companies are hiring (81.3 % more than last year, 87.5 % over the next 12 months)
• Investments are picking up (37.5 % compared to last year, 58.8 % over the next 12 months)
• Access to public procurement an important factor to German companies (56.3 %)
• Overall satisfactory economic situation (44.8 % good, 51.7 % satisfactory)
• Little improvement of Singapore’s economy over the past 12 months (only 24.1 % better, 20.7 % worse), but a bit more optimistic outlook (35.7 % better, 21.4 % worse)
• Companies are satisfied with their situation (42.3 % good, 0.0 % bad) and are optimistic for the future (46.2 % better)
• Increased workforce (40.7 % more than a year ago, 38.5 % more in 12 months)
• Overall economy is doing fine (28.6 % good, 68.6 % satisfactory)
• Expectations for the next 12 months are slightly better than in the preceding period (good ratings: 41.2 over 32.4 %)
• Only few companies rate their current situation as bad (2.9 %), but quite a number are doing worse than compare to a year before (14.7. %)
• Looking forward many companies are optimistic that their situation will improve in the future (61.8 % better)
• Increase workforce (41.2 % have increase their staff over the last 12 months, 55.9 % plan to hire additional staff over the next 12 months)
• Current economic situation is given a low rating (50.0 % as bad), only 10.0 % see it as good
• Vietnam’s economy has deteriorated during the past year (65.0 %), 25.0 % see an improvement
• Positive outlook for the economy (30.0 % better, 55 % about the same)
• Companies are overall doing well (36.5 % good, only 10.5 % bad)
• German companies expect to do better over the 12 months ahead (50 %), only 5.6 % see their situation to decline
• Reduced workforce (27.8 % lower compared to a year ago), but hiring starts (44.4 % expect staff numbers to pick up over the next 12 months)
Source: AHK, Malaysia