Economic boom in Asia means that the ASEAN region, now perceived as the third emerging market in Asia after China and India, holds very good prospects for attracting foreign investments. On a global scale, Singapore is the most favored investment destination in Southeast Asia, followed by Indonesia and Malaysia.
But for Southeast Asians themselves, how do they view each others economies? To answer that, the Lee Kuan Yew School of Public Policy (LKY School), the National University of Singapore, and the Singapore Business Federation (SBF), in association with the ASEAN Business Advisory Council, conducted a survey on ASEAN Competitiveness.
The survey collected usable responses among businessmen, investors and executives across various industries from all ten ASEAN member economies. The Survey found that Southeast Asian businesses continue to view the ASEAN region’s competitiveness for investments favourably, with 88 percent of the businesses interviewed plan to invest or increase investments in at least one ASEAN country over next three-year horizon.
In fact, for companies based in Southeast Asia, ASEAN’s investment attractiveness was rated higher than China in both as a market for goods and services, and as a production location. 36.5 percent of respondents indicated that their businesses offshore direct investments would be focused on ASEAN over the next three years, compared to 27.9 percent for China, 5.7 percent for the USA, 2.9 percent for India, and 27 percent for Others.
Among companies in Southeast Asia, their top investment destination over the next 3 years is Indonesia, followed by Vietnam, Singapore, Thailand and Malaysia.
Various recent news articles have also reported that ASEAN countries such as Vietnam, Indonesia and Cambodia are increasingly being viewed as lower cost alternatives to China. Indonesia however, has the advantages in population. With over 238 million people, Indonesia is ranked the 4th most populous nation in the world after China, India and the USA.
The Indonesian economy has recovered from the 1997-1998 Asian financial crisis in 2004, and since undergone another period of rapid economic growth. By 2010, total Foreign Direct Investment into Indonesia surpassed Malaysia to be the second in Southeast Asia after Singapore.
Indonesia regains its investment grade rating by the end of 2011 from Fitch Rating and by early 2012 from Moody’s Rating, those ratings were lost in December 1997 at the onset of the Asian financial crisis which wiped out 70 percent of the Rupiah value. By regaining the investment grade ratings, Indonesia is again becoming an attractive destination for international investors.
In addition to the potentially vast market, Indonesia has extensive natural resources, including crude oil, natural gas, tin, copper, and gold. Indonesia’s major imports include machinery and equipment, chemicals, fuels, and foodstuffs. And the country’s major export commodities include oil and gas, electrical appliances, plywood, rubber, and textiles.
Labor cost remains relatively low, even as compared to investment magnets China and India, while productivity has risen in the past years due to increasing investment in infrastructure and industrial plants. The country has emerged as one of the world’s low-cost manufacturing base, however the growth potential is still hampered by rigid labor market, inefficient legal and investment regimes, political interference in the private, pervasive corruption and a weak judicial system.
While on the other hand, Southeast Asian companies ranked Brunei the worst performer and the least attractive investment destination in their list. This is a surprising result considering that Brunei has better prosperity and infrastructure than otherwise countries like Myanmar, Laos and Cambodia. The country’s economy however, has been stagnating for the past 15 years, putting it now the slowest growing among all the 10 ASEAN economies.
Investors generally do not understand Brunei’s economic policies and its forward direction, particularly the national goal of ‘Wawasan 2035 Negara Zikir’, which aspires Brunei to become the purest Islamic state in Southeast Asia by 2035. Businesses find the regulatory uncertainty and vague outlook from such goal unfavorable, and has therefore shunned further direct and indirect investments into Brunei.
The full report of the survey can be downloaded at: http://www.nationmultimedia.com/home/ad … F%20v1.pdf