October 10, 2014
– SINGAPORE – Companies regard Indonesia, Myanmar and Vietnam as the best prospects for expansion once ASEAN’s economic integration takes effect next year (2015), according to a new report.
These three nations have long been regarded as the most difficult markets to penetrate but firms hope the ASEAN Economic Community will open new opportunities.
The Boston Consulting Group (BCG) survey found 40 to 50 per cent of the 230 business and government leaders it polled from within and outside ASEAN saying conditions in Indonesia, Myanmar and Vietnam are challenging due to issues such as protectionism and limited infrastructure.
But the three nations are also seen as having attractions such as growing numbers of affluent households and abundant natural resources.
About 19 per cent of respondents expect to expand in Indonesia and Vietnam, while 18 per cent will expand in Myanmar.
South-east Asian companies also expect to ride on regional economic integration to become more global in their outlook.
The survey found that 51 per cent of companies expect to have a strong presence in at least five regional countries in five years, up from 25 per cent now.
Only 14 per cent expect that they will be confined only to their home markets by 2019, down from 21 per cent now.
Many companies are already preparing for the changes ahead by studying ways to improve their services and product offerings.
Multinationals are already working on boosting their understanding of regional markets and looking for ways to adapt their business models to local conditions, said the report.
Bigger South-east Asian firms are exploring ways to build their capabilities, including recruiting foreign talent and improving their regional supply chains.
“Whether they plan to compete across the region or to just defend their turf, most South-east Asian companies will have to raise their game,” said BCG partner Michael Meyer.
“They will need to upgrade their organisations and acquire new capabilities.”
BCG also noted that some companies in countries like Singapore and Malaysia are gaining a competitive advantage and are more optimistic than their regional peers about integration.
About 90 per cent of companies in the two nations expect to expand regionally over the next five years.
One reason cited was that the governments of Singapore and Malaysia have implemented more measures – tightening intellectual property rights, for example – to help domestic firms stay competitive.
BCG added that companies and governments that actively promote integration will be those most likely to benefit from the free flow of goods, capital and labour envisaged under the ASEAN Economic Community.
(By Mok Fei Fei – The Straits Times)