Bangkok--23 Nov--PwC Thailand
- Financial market volatility dents business leaders' confidence
- But more than 50% of CEOs are looking at raising investments in Asia Pacific
- Thailand lags Indonesia, Vietnam, the Philippines as top destination for investments
- Cybersecurity, natural disasters, geopolitical tension top CEOs' list of worries
Asia Pacific CEOs are more downbeat about the prospects for business growth over the next 12 months as enhanced financial market uncertainty, slowing demand in China and greater risks in emerging markets take a toll on confidence.
The number of Asia Pacific business leaders who are 'very confident' in revenue growth over the next year has fallen to 28% from 46% a year ago, the PwC survey showed. It's also the lowest level since PwC started tracking 12-month confidence for the region in 2012.
China, the US, and Indonesia remain the main draws, but CEOs are allocating new investment more broadly. More than half of CEOs (53%) want to increase investments over the next 12 months. Most of that investment (68%) is planned for the APEC region, compared with 32% spread widely across the world.
Confidence also differs across the region. In the Philippines, for example, 51% of business leaders are very confident of revenue growth over the next year. This compares with 34% in the US and 20% in China.
APEC economies, which account for more than a third of the world's population and about 60% of global output, are in transition, Sira Intarakumthornchai, CEO of PwC Thailand, said while revealing the results of PwC's 2015 APEC CEO Survey.
"Confidence levels are falling across the region over the next 12 months as CEOs are more mindful of the risks given rising uncertainties," he said.
"But as APEC becomes more interconnected through deeper economic ties, we expect to see CEOs continue to take advantage of new opportunities for growth and expand into new geographies."
PwC's fifth annual report 'CEO confidence in Asia Pacific shaken but strong' surveyed 800 business leaders between June and August about the prospects for business, growth and free trade in the region. It was released at the start of the APEC CEO Summit held this year in Manila, Philippines.
According to the survey, Vietnam (52%), Singapore (46%) and the Philippines (45%) are among the most favoured countries for investments over the next 12 months. They were behind China (53%), Indonesia and the US, both at 52%.
Thailand (42%) ranked fifth among the top ten countries for investment, ahead of Malaysia (40%) and Japan (40%), the APEC 2015 Survey showed.
Sira said Thailand still places in the top ten thanks to its strategic location as one of the world's largest agricultural and manufacturing bases, and as an intra-regional trade and logistics hub.
A rebound in tourism and recent stimulus measures should help Southeast Asia's second-largest economy weather the storm despite the uncertain political environment and weak economic data.
"Thailand has shown resilience despite a series of negative shocks and disruptions," he said, noting that Thailand was among the nations slated tentatively for leadership changes during the next year according to the 2015 Survey.
"Although unresolved political factors and declining exports have weighed on recent economic activity, we believe that growing demand for infrastructure, increased use of digital technology and continued foreign fund inflows would continue to help draw investments to the country."
Thailand's economy grew 2.9% in the third quarter from a year earlier as government stimulus spending and rising tourist arrivals outweigh weak demand and exports, the National Economic and Social Development Board said on Monday.
"While any sign of recovery will be gradual, we need to look at raising the level of private investment and boosting competitiveness – including upskilling our workforce – in order to rekindle the economy."
Top threats and innovation
Cyber security, exposure to natural disaster risks and geopolitical tensions are the leading threats to business investment and growth, the report said.
Expanded broadband access and increased participation in the digital economy, however, hold the most promise for businesses from regional connectivity. This ranks ahead of regional trade projects or new infrastructure in underdeveloped areas of the region.
Some 63% of chief executives surveyed expect a new wave of business spending to modernise operations over the next five years. Robotics, the Internet of Things and 3D printing would be among the technologies that are likely to transform manufacturing in the region by 2020.
"We're also seeing that the stage has been set for wider sources of innovation," said Dennis M. Nally, Chairman of PricewaterhouseCoopers International Ltd. "The 'sharing economy,' as a proxy for new ways consumers and businesses can trade any number of assets over virtual platforms, is only just beginning."
In 2015, Asia accounted for 35% of corporate Research & Development (R&D) spending, surpassing North America at 33% and 28% for Europe, according to an analysis on R&D trends by Strategy&.
As regional integration proceeds on several fronts, the survey showed APEC CEOs seeing benefits from multiple trade pacts despite concerns over the re-emergence of protectionism.
While one in four of respondents believe the Free Trade Area of the Asia Pacific (FTAAP) would take shape by 2020, 35% of CEOs say the ASEAN Economic Community would be a game changer for growth. And 24% hope that the Trans-Pacific Partnership (TPP) will boost exports and fuel regional growth.
CEOs also have a stake in building the middle class in regions where they do business. Expanding access to education at all levels, and improved transport systems, are pivotal to fostering long-term prosperity.