Among ASEAN countries, Philippines, Malaysia and Vietnam received the biggest increases in trade and investments from Australian firms for the period 2019-2021, according to the latest survey on Australian firms doing business in the region.
This sixth edition of the AustCham ASEAN Australian Business in ASEAN Survey 2021 showed that 44 percent of respondents report increased trade and investment since 2019, highlighting the potential buffering effect ASEAN’s economic dynamism offers Australian businesses as the region’s economy recovers. While 2021’s trade and investment figures are favorable, not unexpectedly they are less impressive than those recorded in 2020. This year’s trade and investment results are an 11 percent deterioration (in absolute terms) from the 55 percent reported in last year’s survey. Similarly, 22 percent of firms reported declining trade and investment over the last two years, compared with 3 percent in 2020.
Specifically, the survey showed that Australian businesses investments were highest in Malaysia (62%), Vietnam (59%) and the Philippines (54%).
For the Philippines, the survey showed that Australian business community in the Philippines is majorly focused on serving the local market, with more than 73 percent of respondents focused exclusively on the Philippines.
Services firms were the most represented industry sector in the Philippines, with particularly concentration amongst financial and professional services firms.
The survey also showed that Australian business in the Philippines comes in all shapes and sizes, although the proportion of small businesses employing less than 10 staff has increased. 43% of firms employ more than 200 people.
In terms of profitability, the survey showed that 40 percent of firms showed growth in the last 12 months, with only 25 percent of firms reporting a decline in profit – a relatively good result compared with its ASEAN peers.
The Philippines continued to attract new investment from the Australian business community, with 32 percent having entered the market within the last two years. A significant portion of Australian businesses are well established, with 23 percent having operated for ten years or longer.
The survey also showed that government bureaucracy in the Philippines continues to be a high impact business constraint for a majority of respondents, while traffic congestion has lessened significantly in intensity, slipping to become the second most cited business constraint.
The survey also noted that while long-term fundamentals in the Philippines maintain strong promise, recent economic activity has been challenged by the COVID-19 pandemic and strict community quarantine measures. Growth in 2020 contracted significantly, driven by significant declines in consumption and investment growth, exports, tourism and remittances. With GDP growth of 5 percent forecast for 2021, the Filipino economy is forecast to return to its pre-pandemic (i.e. 2019) size by 2021
Respondents were asked about revenue variance since the onset of COVID-19 to gain insight into pandemic induced demand shifts. Overall, 27 percent of respondents reported revenue growth since COVID-19, whereas 52 percent reported revenue deterioration. Laos (44%), Vietnam (38%) and the Philippines (34%) experienced the largest revenue growth, whereas Indonesia (73%), Cambodia (60%) and Thailand (59%) experienced the greatest revenue deterioration.
The survey also touched on Australian firms’ understanding of ASEAN integration and its impact.
For the first time, nearly half of respondents have a self-sufficient understanding of what ASEAN integration is and what it means for their businesses. Close to half of respondents have a sufficient understanding of ASEAN integration, with 12 percent possessing a detailed understanding and 36 percent with a sufficiently high level understanding. By contrast, a similar but slightly smaller proportion of respondents have insufficient knowledge of ASEAN integration, with 23 percent having a high-level or no understanding and wanting more knowledge
Just over three-quarters of respondents (76%) prioritize ASEAN markets, similar to last year’s figure of 79 percent. Sixty-eight percent of firms also believe that their head office / board possess a deep understanding of ASEAN business issues, with a notable strengthening of 9 percent amongst those who ‘strongly agree’ this is true when compared with 2020 figures. Similarly, 74 percent of firms believe ASEAN experience is highly valued by their company.
In general, few respondents report actively using the five Australian Free Trade Agreements (FTAs) available within the ASEAN region. The ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) continues to be the most widely used FTA with 19 percent of respondents reporting they have made use of it, consistent with 2020’s figures.
When asked how their firm’s operations adapted to COVID-19 induced changes, 55 percent of respondents are now operating with minimal business impact. However, 45 percent of respondents noted they are still adapting their operations and continue to experience disruption. Australian business in Indonesia continues to experience the worst disruption in ASEAN with 72 percent of respondents continuing to report minor or major ongoing business disruption.
Respondents were asked to identify up to three of the greatest business challenges faced since the arrival of COVID-19 across ASEAN. The ASEAN Australian business community struggled most with the sudden decrease in demand for goods and services (43%), followed by increased logistical challenges (39%), and regulatory uncertainty about lifting of trading restrictions (e.g. lockdowns).
Respondents were asked to identify up to three of the greatest business challenges faced since the arrival of COVID-19 across ASEAN. The ASEAN Australian business community struggled most with the sudden decrease in demand for goods and services (43%), followed by increased logistical challenges (39%), and regulatory uncertainty about lifting of trading restrictions (e.g. lockdowns).
On non-tariff measures, 37 percent of respondents said they are not affected by non-tariff measures, the remaining 63 percent are affected by 1.4 NTMs on average. Export related controls impact upon 16 percent of respondents, followed by intellectual property measures (14%) and distribution restrictions (13%).