Crossroads (Toward Philippine economic and social progress)
Philippine Star, 7 August 2016


The American Chamber of Commerce in Singapore and the US Chamber of Commerce undertook its ASEAN business outlook for 2017. It is based on a survey of American business executives located in the ASEAN region.

A survey of American investors. My interest in reviewing this survey is to highlight the implications on the Philippines.

ASEAN has been a major recipient of foreign direct investments. American investments have been active in this region, and they cover all fields, from manufacturing to industry, agriculture and the services, including banking and insurance.

In general, the survey provides a window into the thinking of American business executives concerning development and prospects of ASEAN and its member countries.

A total of 517 executives of American businesses, or 17 percent of 3,154 companies comprising the membership of American chambers of commerce in different ASEAN countries responded to the survey which was conducted between April 26 to May 24 this year.

For the Philippines, 53 executives, or 26 percent of the 208 American companies in the country, were respondents to this survey.

All countries host American investments heavily, such as Thailand, Vietnam, Malaysia, Indonesia. Brunei and Singapore are represented as respondents in this survey. This is also the case with Cambodia, Laos and Myanmar, countries that are relatively recent hosts of American investments.

Overall findings. A large majority of survey respondents (87 percent of all respondents) indicate rising levels of investment and trade in ASEAN from their assessments of their business plans. These plans are based on their operations in 2014 to 2016.

They see their companies investing in ASEAN for several reasons: (a) economic growth (73 percent of respondents); (b) the rise of the middle class (46 percent); (c) regional integration (36 percent); (d) improvement in infrastructure (25 percent); (e) lack of growth opportunities in other regions.

Reasons for increasing American investments in ASEAN. Individually as enterprises, American investments are expanding in ASEAN for a variety of specific reasons: to diversify customer base, to leverage their trained personnel, to capitalize on their reasonable production costs.

Also, depending on circumstances and country situations, the investments have varied by country and by years.

Comparing host countries based on investment expansions in 2016, the leading recipients of such expansions were Vietnam (40 percent of respondents), Indonesia (38 percent), Myanmar (34 percent) and Thailand (30 percent). The Philippines scored well with Malaysia (both at 27 percent of all respondents). The opening of Myanmar to trade and investment in recent years has led it to attract more American capital.

A big majority of investors (63 percent) reported expansion of their investment in the country where they operate. In particular, executives in Myanmar (96 percent), Vietnam (80 percent), Laos (75 percent), the Philippines (70 percent), Indonesia (68 percent) and Cambodia (65 percent) led the rest of ASEAN.

ASEAN integration. American companies view the integration of the ASEAN as an opportunity that helps to shape their participation in the region and in particular countries. They also recognize some problems that need to be overcome to improve the prospects and effectiveness of the region as an integrated market. Yet they see the opportunities that loom ahead, although this might vary by country.

Most of the executives surveyed (93 percent of all respondents) believe their company’s future investment plans are intertwined with ASEAN integration. However, they would take advantage of the opportunities as they present themselves.

The survey tries to differentiate degrees of importance of ASEAN to the country locators: “highly important” or “fairly important.”

By doing so, it is possible to distinguish the main significance of ASEAN in various shades of meaning. Thus, ASEAN is “fairly important”(average response, 38 percent) among respondents from Malaysia, Singapore, Indonesia and Thailand. These are countries with much broader and larger trade exposures outside of ASEAN.

These countries derive economic strength from their open economies. American investors located in them participate in the benefits derived from the openness of their economies to trade and investment operations.

I dare to note that in the Philippines, the respondent executives view ASEAN as “highly important (53 percent).” It is also true that American companies located in the Philippines tend to be more associated with the Philippine domestic market and they tend to look at ASEAN as an expansion of their market presence.

What about Vietnam then, where respondents viewed ASEAN as “highly important” (50 percent)? American companies in Vietnam are anchoring their market expansion on ASEAN growth, even while a significant part of their market is penetrating market opportunities in the United States.

China’s rising costs and ASEAN countries. There is another important point to observe about happenings in ASEAN as an offshoot of structural changes in China’s industrialization.

Which countries benefit more from the diversification, rising labor costs and the consequent transfers of operations of investments from China? One table of responses is very instructive. In general, ASEAN countries made gains in 2015 and 2016 (respectively, 15 percent and 11 percent among respondents).

Based on the respondents to the investment survey, the following countries made the most gains during the two years (in the order of percentage responses): Vietnam, Cambodia, Malaysia, Indonesia, Singapore, Thailand. Where is the Philippines, here? Just behind Thailand. Vietnam and Cambodia are far ahead of the flock.

Impact of TPP. The Trans-Pacific Partnership will rearrange the global economy because the biggest traders in the Pacific and Asia regions (except China) will be represented.

The TPP treaty involving 12 countries, including four ASEAN members (Brunei, Malaysia, Singapore and Vietnam) was signed last year and is up for ratification in the US Senate.

But a rising anti-free trade sentiment is providing suspense to the ratification process. However, there is an even chance that after the US presidential election, it could be ratified.

The business survey asked respondents questions on the impact of TPP on investments. In general, respondents from TPP member countries have a high perception that investments would increase among the members of TPP compared to those that are not members. (The Philippines is not a member; restrictions on foreign investments currently found in the Constitution somehow inhibits its participation.)

There is much more to learn. There is much more that could be learned from this comprehensive survey of American investors’ opinion. It will help policy makers to study the implications of what the survey says.