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AmCham Execs Foresee Asian Expansion

Corruption, inadequate laws, local protectionism some major barriers

by Jeannie Chan

Given the extreme ups and downs East Asian economies have experienced over the last 20 years, business leaders worldwide are watching development in the area rather carefully.

A new survey that Gallup conducted for the American Chamber of Commerce in Singapore (AmCham) indicates most American firms based in the Association of Southeast Asian Nations (ASEAN) region intend to expand their operations in Asia within the next two years, even though they continue to encounter difficulties in conducting business in the region. Economic recovery and the potential for business growth there are the most common reasons that executives cite for this Asian expansion.

Now in its fourth year, the annual survey of senior executives working with companies held by American majority interests (AmCham members) seeks to understand American business outlook and sentiment in the ASEAN region (collective feedback was received from members in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam).

The study's 2005 results show that corruption, local protectionism, and inadequate laws and regulations are some of the major barriers executives say are hampering the conduct of business in ASEAN.

Economic Performance in ASEAN

Expectations for economic performance at the local level are subdued and disparate, with survey respondents in different countries providing a spectrum of opinions. Members from Vietnam appear to be the most upbeat in their expectations of local economic performance (78% feel the Vietnamese economy will perform better this year); while a noteworthy proportion of members from the Philippines (47%) and Thailand (45%) are expecting local economic performance to decline. Indonesia, Malaysia, and Singapore remain ambivalent about local performance, with many responding that performance will either equal or exceed last year's levels. Perceptions of local government institutions (such as local customs and taxation/revenue offices) are poor, although dissatisfaction levels have mitigated somewhat since 2004.

Despite these shortcomings, there is still consensus among the executives surveyed that Asian markets will continue to be vital to their companies' operations and revenues, and that they will continue to grow in significance over the next two years.

However, about one in five AmCham members in the region plan to relocate to another country/countries in Asia; members from Singapore lead the pack in this sentiment (35%). China (62%) and India (37%) continue to be popular choices for relocation.

A majority (61%) of those surveyed are optimistic about their companies' profit expectations for 2005. Profit expectations for 2006 are even more robust, with 80% expecting an increase.

Bottom Line

While AmCham members remain dissatisfied on a number of counts with business conditions in ASEAN, by no means does it appear that dissatisfaction will translate into business contraction in the region. On the contrary, AmCham members are maintaining their intentions to expand operations further within the region and in Asia as a whole.

Survey Scope:

Voting members of AmChams in 6 ASEAN countries, namely Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Sample Size:

A list of AmCham voting members with e-mail contacts was provided by each AmCham:

Indonesia - List of 169 members (Response rate = 24%, n=41)

Malaysia - List of 318 members (Response rate = 16%, n=51)

Philippines - List of 245 members (Response rate = 25%, n=62)

Singapore - List of 415 members (Response rate = 23%, n=95)

Thailand - List of 248 members (Response rate = 29%, n=73)

Vietnam - List of 164 members (Response rate = 28%, n=46)

Overall - List of 1,559 members (Response rate = 24%, n=368)

Data Collection Method:

Web-based, self-administered survey was adopted.

Data Collection Period:

April 19 - May 10, 2005

Results are weighted to the actual proportion of each country's voting members' population. With a sample size of 368, sampling error is ±4% at the 95% confidence level.

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