Bangkok--19 Feb--PwC Thailand
Chief executives in the Association of South East Asian Nations are more optimistic about the economy than their global counterparts even though the road to sustainable growth remains bumpy, PwC’s 18th Annual Global CEO Survey says.
The PwC survey of 1,322 CEOs in 77 countries showed that just 37% of executives worldwide believe the economy will improve this year. That’s down from 44% last year. Even worse, 17% of CEOs expect global economic growth to slow in 2015, more than double from a year ago.
In ASEAN, however, CEOs are more upbeat than their global counterparts, with 49% saying the economy will recover over the next 12 months. Some 47% are very confident about their revenue growth in that time.
Sira Intarakumthornchai, CEO of PwC Thailand, said the increase in confidence reflects strong business fundamentals and an attractive investment destination, despite recent cuts in the growth forecasts of many ASEAN countries and investor scepticism that emerging economies are losing steam.
“CEOs in Southeast Asia are taking a long-term view about the overall economy and about company performance,” Sira said. “Although growth has been slow in many places, CEOs believe rising urbanisation and an increasingly wealthy middle class will drive the region’s expansion.”
“With the region becoming more integrated as an economic community by year’s end, ASEAN is expected to make a comeback. There are tremendous growth opportunities with a lot of companies reporting sustained, strong earnings.”
This is in line with the survey’s findings that more than half (54%) of CEOs in the region are also more bullish than their global counterparts about their company’s turnover and 71% see growth opportunities over the next three years.
Reinforcing their business optimism, 67% of ASEAN CEOs expect to increase their headcount this year, compared with 50% globally. Only 13% plan job cuts, versus 21% across the world.
ASEAN chiefs also ranked China (46%), the US (38%) and Indonesia (21%) as the most important overseas growth markets for investment this year.
When asked which countries other than the BRICs offered the best prospects for growth in the next 12 months, three ASEAN nations—Indonesia, Thailand and Vietnam—all featured among the top ten emerging markets.
“Thailand—ranked fourth this year, up from sixth in 2014—remaining the favourite of CEOs thanks to the sound fundamentals of Thai listed companies, baht stability and a low inflation and interest rate environment,” Sira said.
Southeast Asia’s second-largest economy is still popular as a regional hub and export base for global manufacturers of automobiles and hard disk drives.
Investment applications submitted to Thailand nearly doubled in 2014, according to the Board of Investment data.
Investment projects approved by the BoI last year reached 3,469 projects worth a combined 2.19 trillion baht ($67.2 billion). Sectors granted most applications include service and utilities, chemical and plastics and automotive and supply parts.
CEOs’ top concerns
Three major risks that the ASEAN CEOs are expected to factor into their plans this year include concerns over geopolitical uncertainty, at 87%, tax burdens, at 82% and over-regulation, at 80%.
Of business threats, top concerns for CEOs include bribery and corruption and the availability of key skills.
Sira said that ASEAN companies would seek to develop and retain a broader mix of talent. This includes investing in learning and mobility programmes and recruiting staff with diverse skills through using multiple channels including online platforms and social networks.
More than 50% of graduates aged 25-34 are expected to be living in emerging markets by 2020, the survey showed.
This underscores the importance of talent management as the region continues to experience increasing out-bound and in-bound talent mobility over the long term, fuelled by continued expansion of multinational corporations and the forthcoming launch of the ASEAN Economic Community.
When asked about industries that could emerge as key competitors as a result of digital transformation, ASEAN CEOs cited technology (36%) and retail and wholesale distribution (25%).
Across the globe, CEOs from economies that are highly dependent on oil production have some of the most pessimistic views, as the drop in global oil prices hit their bottom line.
Russian CEOs—hit by falling oil prices and Western sanctions—went from being the most confident for revenue growth last year, with 53% expecting expansion, to the least confident this year, as only 16% expect growth. Confidence also slipped among CEOs in oil-producing nations including Nigeria, Venezuela and the Middle East.