Photograph by Nic Walker
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ASIA: Nothing will stop the juggernaut that is Business Asia.
This was the prevailing sentiment at the recent APEC CEO Summit held in Vietnam and attended by more than 2000 leaders and delegates.
Corporate confidence is high. Interest in doing business in the Asia-Pacific Economic Cooperation (APEC) region is increasing. Projected GDP growth rates are still mind bogglingly high (compared to Australia’s and other advanced economies) and CEOs are more optimistic about the region than they have been in two years.
But plans are changing, reveals PwC’s 2017 APEC CEO Survey, which surveyed 1400 CEOs and was presented at the conference. CEOs intend to change operations in response to fears the international trade environment is becoming more restrictive.
Already 23 per cent of the APEC CEOs have experienced an increase in barriers to employing foreign labour and 14 per cent in moving goods across borders over the past year. The CEOs see this trend increasing in 2018. Over the next year, 30 per cent expect an increase in barriers to employing foreign labour and 25 per cent in moving goods.
This has not dented plans, with about 37 per cent of CEOs saying they are “very confident” of their prospects for revenue growth in the next 12 months, up from 28 per cent in 2016, and 63 per cent expecting their global footprint to expand over the next three years.
Instead the APEC CEOs will change their game plan by relying more on foreign partnerships and upping activity in markets with established bilateral ties. A majority (71 per cent) expect to rely more on business partnerships/joint ventures, of which 22 per cent are planning to do so to a “great extent” in response to perceptions of a more restrictive global trade environment. Calvin Yeoh, who attended the summit as part of the PwC delegation, says there was a clear understanding from the leaders and CEOs that they need to transform as part of globalisation. “The overwhelming sentiment was, ‘let’s push on with it’.”
Yeoh, PwC digital marketing and strategy operations lead, says APEC CEOs are keen to see the Asia-Pacific region become more economically linked, despite recent trade frictions. Many were pleased with the initial outcome, where it was agreed at the summit to push ahead with a free trade deal (Trans-Pacific Partnership).
There was such a feeling of optimism about the growth of Asia at APEC and a lot of business people in deep conversation, with deals being done. Everyone was talking about using partnerships to leverage local strength.
“PwC research shows that 68 per cent will increase business activity in economies with established bilateral ties, so we expect the TPP could be a real boost.” He says there was widespread recognition of the summit’s value, with Malaysian Prime Minster Najib Razak commenting that no head of state should miss it given its growing importance for the region.
The APEC region is the world’s fastest growing region, with eight member countries projected to be in the top 20 economies by 2030. APEC includes 12 Asian countries, three North Amercian, Russia, two South American, Australia, New Zealand and Papua New Guinea, which is hosting APEC next year. “There was such a feeling of optimism, particularly about the growth of Asia, and a lot of business people in deep conversation, with deals being done,” he says.
“The potential of host Vietnam was a big focus of the conference.” Yeoh says that in line with the findings of PwC’s APEC CEO Survey, there was a lot of talk and case studies about the success of partnerships to leverage local strength and “reaching out their hands for assistance”. For example, take the chopsticks you get with your takeaway sushi, he says. “Everyone assumes they are made in China but we heard they are actually made in Vietnam and shipped to China for packaging.”
Another case study used was the Japanese government helping to clean up Vietnam’s polluted rivers in Hue. And France, Germany and Italy helping to restore century-old ruins in My Son, destroyed in the Vietnam War.
Yeoh says there weren’t a lot of Australians at the APEC summit.
A PwC survey shows growing confidence of Australia’s C-suite when it comes to expanding operations in Asia-Pacific economies outside of Australia, with 29 per cent more confident in 2017, up from 18 per cent in 2016. However, while Australian companies are confident when it comes to investing in other APEC countries such as Canada, the US and New Zealand, they are unsure about managing the risks associated with Asian countries, especially emerging economies. “Walking around Vietnam’s streets – you see the change with tourism, now a key revenue stream for the locals,”
he says. “When you see the opportunities just in one country and their willingness to do partnerships you do wonder why more Australians aren’t jumping on planes.”
1. WHAT TO WATCH:
Vietnam’s GDP, expected to reach 5.1 per cent a year, making it one of the world’s fastest-growing economies and projected to surpass more advanced economies, such as the Netherlands in 2030 and Australia in 2040.
2. WHAT’S THAT BASED ON:
A youthful population, rising middle class and a cost competitive and skilled workforce that offers an alternative to China. Add a predictable, pro-investor policy orientation. And Vietnam CEOs expect new growth from trade agreements.
3. WHAT’S NEW:
The appetite for global expansion. The majority (net 86 per cent of Vietnam CEOs) expect their organisation’s global footprint to expand over the next three years compared to 63 per cent of all APEC CEOs. Also, Vietnam is moving up the global value chain with increased electrical and electronic products for export and a growing number of IT and software companies.
4. HOT OPPORTUNITIES:
Business process outsourcing, solar and wind energy, luxury hotels, agribusiness, food and retail banking.
The Press is a publication by PwC Australia, aimed at sharing expertise, capturing insights and working together to solve important problems.
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This article first appeared in Edition 4 of The Press
By Amanda Gome Editor, The Press
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