A survey has found out that 23 per cent of European Union (EU) businesses said they are expanding in Brunei Darussalam while 19 per cent expect contraction and 58 per cent indicate uncertainty, a 2020 EU-ASEAN Business Sentiment Survey showed.
ASEAN-wide, 53 per cent of respondents see ASEAN as the region with the best economic opportunity but this is a contraction from 63 per cent in 2019 and the percentage of those planning to reduce business is 10 per cent. Indonesia, Thailand and Vietnam show the greatest level of intention to expand operations.
“ASEAN is not the only location being considered for supply chain relocations, 47 per cent of respondents are considering re-organising supply chains moving forward,” the study said.
The survey showed increased EU firms’ interest in other regions or countries such as India, North Asia and Africa. “Although the uptick is small, this may indicate the beginnings of further diversification,” the study added.
Contributing to the decline in interest in ASEAN are factors such as the slow progress of ASEAN economic integration, delay in proposed EU-ASEAN Free Trade Agreement, and increasing non-tariff barriers.
For instance, only two per cent of respondents feel that ASEAN economic integration is progressing fast enough compared to six per cent in 2019. Only 14 per cent of respondents found that the number of non-tariff barriers (NTBs) to trade in ASEAN have decreased from 17 per cent last year.
Only four per cent of respondents find ASEAN customs procedures speedy and efficient (eight per cent in 2019). Sixty-two per cent of respondents that use supply chains reported facing many barriers to the efficient use of supply chains in ASEAN from 78 per cent in 2019.
EU businessmen also feel the need for more private sector engagement. Fifty per cent of respondents feel they are often or sometimes consulted by national governments in ASEAN while 36 per cent of respondents believe they face unfair competition in the local/regional environment at least occasionally and 25 per cent feel that there is adequate EU engagement.
Ninety-eight per cent of respondents would like the EU to accelerate free trade agreement (FTA) negotiations with ASEAN and its member states.
Eighty-one per cent of respondents believe that an EU-ASEAN FTA would deliver more advantages than a series of bilateral FTAs (78 per cent in 2019). Seventy-one per cent of respondents believe the EU should pursue an EU-ASEAN FTA now before bilateral FTAs are concluded.
On the main factor that makes ASEAN important to their bottom lines, respondents cited economic recovery as the main factor, which has moved two places up to replace change in business strategy that took the top spot last year.
Improvement in infrastructure came third, while they see limited growth opportunities in other regions making it to second place for the first time in four years, reflecting ASEAN’s growing importance in global markets as a pathway to recovery.
For the top three factors motivating expansion were re-ordered this year compared to 2019, diversification of customer base continues to be the top reason, followed by reasonable production costs (including labour cost), while availability of trained personnel/efficient manpower entered third place for the first time in four years.