By Alithea De Jesus
European businesses still see the Association of Southeast Asian Nations (ASEAN) as the region with the best economic opportunity, but their optimism is tempered not just by the COVID-19 impact but also the delay in regional integration.
This is among the key findings of the latest Business Sentiment Survey, a barometer for European business outlook in Southeast Asia published by the EU-ASEAN Business Council (EU-ABC), the primary business body for European businesses in ASEAN.
The survey found that 53% of respondents see ASEAN as the region with the best economic opportunity, down from last year’s 63%.
Some 73% of respondents also expect to expand their current levels of trade and investment in ASEAN in the next five years, but this is significantly lower than the 84% recorded in last year’s survey.
The reduced optimism should be a cause for concern among the region’s leaders, especially with the rising interest in other regions, Donald Kanak, chairman of the EU-ABC, said.
“There is a small but growing proportion of respondents who see regions such as North Asia and Africa as areas with good economic opportunities in the next 5 years,” said the report.
Moreover, while ASEAN topped the regions in the post-COVID-19 era that would most attract more investment in supply chains, others such as Europe and China also received many votes.
“Respondents are looking to source more from ASEAN post-pandemic but are also considering Europe and China at the same time. ASEAN faces stiff competition from other regions/countries for investment and creation of new manufacturing jobs,” said Kanak.
Another major insight is that faith in ASEAN’s economic integration, which appears to be at a standstill, has waned.
Fewer respondents believe the ASEAN Economic Community (AEC) has made a positive impact on their business in the region, the report said. Furthermore, only 2% feel that ASEAN economic integration is progressing fast enough.
Only 14% find that non-tariff barriers to trade in ASEAN have decreased, and only 4% find ASEAN customs procedures to be speedy and efficient, down from 8% last year.
“Overly complex and burdensome customs procedures, the continuing prevalence of non-tariff barriers to trade and the slow speed in which ASEAN is achieving these goals are obstacles for the region’s economic development,” said the report.
“As such, there is a perceived lack of need to put in place strategic plans based on the AEC-local business strategies that are already sufficient,” it continued.
“Overall, European businesses show continued optimism towards ASEAN. However, ASEAN must also address the underlying concerns expressed by respondents in a time of heightened competition for trade, investment, and jobs post-pandemic,” the report recommended.
Kanak stressed that more than ever, ASEAN “needs to drive forward economic integration, sweep away the intra-ASEAN barriers to trade and investment, and make itself the go-to region for post-pandemic supply chain redistribution.”
At the same time, the survey found that calls for a region-to-region free trade agreement (FTA) remain high.
European businesses are “very concerned” about the lack of progress on further FTAs with the ASEAN region, particularly the region-to-region FTA which eight out of 10 see as potentially delivering more benefits than a series of bilateral FTAs.
“European businesses clearly want the European Commission to step up the pace of negotiations and engagement with Southeast Asia,” said the report.
The EU-ABC survey was conducted online from April 2020 to July 2020 and garnered 680 responses.