SUMMARY REPORT

SBF ASEAN OUTLOOK SURVEY

20182017

Commissioned by:

Foreword

SBF ASEAN Outlook Survey 2017/2018

Companies Expect Positive ASEAN Business Outlook Driven By High Growth Potential

Companies Are Keen To Expand Into ASEAN But Face A Mix Of Challenges

Low Awareness And Usage Of ASEAN Economic Community (AEC) and ASEAN Free Trade Agreements (FTAs)

Areas Of Support Needed In Expanding Into ASEAN

Key Survey Findings Takeaway

Information About The Survey Sample

About SBF

Index Pages

03

01

04

06

08

10

11

12

13

ForewordWe are pleased to share with you this summary report on the findings of the SBF ASEAN Outlook Survey 2017/2018. As Singapore assumes the role of the Chair of ASEAN in 2018, the Singapore Business Federation (SBF), in partnership with HSBC, commissioned the SBF ASEAN Outlook Survey 2017/2018 to gain deeper insights into Singapore-based companies’ interest in ASEAN.

The objective of the survey was to explore how Singapore companies are venturing into ASEAN, and as business partners, discover how both SBF and HSBC can support businesses navigate new markets and capture growth opportunities.

1,036 companies responded to the survey conducted from December 2017 to March 2018. 77% of companies indicated they are planning to expand in 2018-2019. Of these, 77% identified ASEAN as the target region, followed by China (22%) and South Asia (15%).

Within ASEAN, Indonesia and Malaysia are the priority markets to enter in 2018-2020, followed by Vietnam, Thailand and Myanmar.

The bulk of companies expressing interest to expand into ASEAN are from the wholesale and retail trade, manufacturing, financial and insurance, information and communications, and construction sectors.

More than 80% of the companies surveyed cited growth potential and ease of access to new markets as the top motivations for expanding into ASEAN. Customer proximity, cost efficiency and productivity, as well as brand development are complementary factors driving their internationalisation interest.

1. World Bank 2. OECD

Notwithstanding their interest, companies are also concerned about the uncertain economic and political conditions, difficulty in hiring Singaporeans for overseas jobs, lack of knowledge on market opportunities and customer requirements, difficulty in sourcing local operational support, and difficulty in getting permits and licences, as potential barriers to their internationalisation plans.

7 in 10 companies perceive that ASEAN Economic Community (AEC) integration will bring opportunities for them. Despite the general positive sentiment towards AEC, 2 in 5 companies feel they are inadequately informed.

It is promising to note that the ASEAN economy is projected to grow by 6.2%1 in 2018, as compared to the world GDP growth of 3.7%. ASEAN is also poised to maintain its growth momentum, averaging 5.2% per year from 2018 to 20222. 70% of the respondents indicated they are currently operating outside of Singapore. SBF is exploring how to bank on this extensive network of Singapore companies to help other Singapore companies to venture into ASEAN.

We hope that the findings from this survey will be useful to you. I would like to acknowledge HSBC who has sponsored this survey and all our member companies who have participated in this year’s survey. We have heard you through this survey. SBF will work closely with Government agencies and trade associations to step up our efforts to help companies venture into ASEAN through providing market entry advisory services, opportunities to garner business connections, as well as helping them better understand and leverage Singapore’s network of Free Trade Agreements.

Ho Meng KitCEO

SINGAPORE BUSINESS FEDERATION

01

03

SBF ASEAN Outlook Survey 2017/2018

Singapore assumes the Chair of the Association of Southeast Asian Nations (ASEAN) in 2018. To uncover key insights on Singapore companies’ sentiments towards ASEAN, the Singapore Business Federation (SBF), in partnership with HSBC, commissioned independent research advisory firm Spire Research and Consulting to conduct the SBF ASEAN Outlook Survey 2017/2018.

The survey, conducted from December 2017 to March 2018, collected views from 1,036 Singapore companies across all major industries.

Q: Outside of Singapore, which of the following markets is your company currently also present in?

Q: Outside of Singapore, which of the following markets is your company currently also present in?

Q: If your company currently has overseas presence in the ASEAN region, which market does your company have the following operations in?

Among the companies surveyed, 70% have overseas operations and of which, 75% are present in ASEAN (outside of Singapore). The top five ASEAN countries (outside of Singapore) where the companies currently operate in are Malaysia, Indonesia, Thailand, Vietnam and Philippines. The two most common modes of operation across ASEAN by these companies are distributor network and subsidiaries/ joint ventures (more than 60%).

n=1,036 n=728

n=548

Singapore

Outside of Singapore

30%

70%

ASEAN

China

North Asia(excl. China)

South Asia

Europe

Americas

Oceania

Middle East

Africa

75%

40%

30%

29%

26%

20%

17%

16%

7%

Malaysia

Indonesia

Thailand

Vietnam

Philippines

Myanmar

Cambodia

Brunei

Lao PDR

Markets Penetration of ASEAN Mode of Operations

87%

81%

80%

76%

74%

68%

63%

61%

57%

33%

40%

39%

40%

47%

43%

45%

49%

43%

31%

24%

28%

23%

25%

24%

18%

23%

8%

10%

7%

13%

14%

9%

7%

7%

6%

4%

2%

6%

6%

7%

8%

9%

4%

6%

6%

13%

12%

11%

9%

10%

12%

12%

14%

11%

Distributor / Client

Representative Office

Other Alliance / Partnership

Subsidiary / Joint Venture

Manufacturing Facility

Others

Current Operational Presence Regional Presence

Modes of Operations in ASEAN

8%

9%21%

10%

7%

3%

9%

13%

2%

04

COMPANIES EXPECT POSITIVE ASEAN Business Outlook Driven By High Growth Potential

Q: How important is the rest of the ASEAN region, excluding Singapore, for your company’s overall global strategy over the next 2 years?

Q: What is the outlook for your company’s overseas sales next year, specifically to the rest of the ASEAN region, excluding Singapore, as compared to this year?

ASEAN’s market of more than 600 million people, and almost US$3 trillion in combined GDP, represents vast opportunities for Singapore companies.

86% of the companies surveyed view that ASEAN is important for the company’s overall global strategy in 2016/2017. Looking ahead to 2018/2019, this proportion grows to 91%.

Moving forward, companies are also generally more optimistic about the business outlook in ASEAN. While 29% of companies expect an increase in ASEAN turnover in 2017/2018 as compared to 2016/2017, this proportion grows to 41% when it comes to expecting an increase in ASEAN turnover in 2018/2019.

Importance of ASEAN to Overall Global Strategy

n=1,036

2018 and 2019

2016 and 2017

9%

14%

9%

11%

32%

32%

29%

34%

14%

16%

Current and Outlook for ASEAN Business Performance

n=1,036

27%

32%

33%

30% 2%

6%

29%

41%

2016/17 versus 2017/18

2017/18 versus 2018/19

Very Important

Quite Important

Important

Slightly Important

Not Important At All

Increase

Decrease

No Sales in ASEAN

No Change

05

Q: Which of the following markets did your company in Singapore generate most of its sales / incur most of its expenses from in the past 5 years?

Q: Which of the following factors are your company’s motivations for expanding into the rest of the ASEAN region excluding Singapore?

83 Unsurprisingly, the top 5 sources of sales come from Malaysia, Indonesia, Thailand, Vietnam, and Philippines.

An overwhelming majority (92%) cites the growth potential of ASEAN as the top motivation for expanding into the region.

of the Singapore companies surveyed generate most of its sales from ASEAN as compared to the other regions.

%

Source of Sales by Region

Source of Sales and Expenses, by Country

Motivation(s) for ASEAN Expansion

% o

f Sin

gapo

re C

ompa

nies

Sur

veye

dAv

erag

e Ra

nk

n=1,036 n=614

Select up to the top 5 factors and rank

them accordingly with ‘1’ being the most

important factor and ‘5’ being the least

important factor” .

Q: Which of the following ASEAN markets did your company generate most of its sales / incur most of its expenses from in the past 5 years?

n=1,036

1.3 1.9 2.4 2.2 2.5 2.5 3.0 2.8 3.5

83% 24% 18% 17% 15% 10% 9% 7% 2%

ASEA

N

Chin

a

Sout

h As

iaNo

rth A

sia

(exc

l. C

hina

)Eu

rope

Amer

icas

Oce

ania

Mid

dle

East

Afric

a

2.3 2.6 2.7 3.2 3.6 3.1 2.9 3.6 4.11.2

96% 45% 38% 31% 22% 18% 10% 5% 5% 1%

Sing

apor

e

Mala

ysia

Indo

nesia

Thail

and

Viet

nam

Philip

pine

s

Mya

nmar

Cam

bodi

a

Brun

ei

Lao

PDR

2.1 2.7 2.7 3.3 3.3 3.5 3.1 2.3

92% 83% 40% 40% 38% 33% 19% 18% 5%

1.7

Grow

th P

oten

tial

Acce

ss to

New

Mar

kets

Cust

omer

Pro

ximity

Cost

Effi

cienc

y & P

rodu

ctivi

ty

Bran

d De

velo

pmen

t

New

Supp

liers

and

/or R

esou

rces

Bene

fits f

rom

ASE

AN In

tegr

atio

n

Hedg

e Do

mes

tic B

usin

ess S

lowd

own

Oth

ers

Most Sales Generated

Tapping on market/ cultural similarities; Moving away from competitors; Market Diversification

Most Sales Generated

COMPANIES ARE KEEN TO EXPAND Into ASEAN But Face A Mix Of Challenges

Q: Which of the following markets is your company planning to expand into/further within the next 2 years?

Q: Which of the following markets is your company planning to expand into/further within the next 2 years?

Q: Which of the following markets is your company planning to expand into/further within the next 2 years?

Q: Which are your company’s top 5 major challenges when expanding specifically into the rest of the ASEAN region, excluding Singapore?

Expansion Plans over 2018 - 19

n=1,036

Plans To Expand

No Expansion Plan

23%

77%

Targeted Region(s) for Expansion Targeted Country(s) for Expansion

Major Challenges When Expanding Overseas in ASEAN

n=793 n=614

n=1,036

ASEAN

China

South Asia

North Asia (excl. China)

Europe

Oceania

Americas

Middle East

Africa

Indonesia

Malaysia

Vietnam

Thailand

Singapore

Myanmar

Philippines

Cambodia

Lao PDR

Brunei

Uncertain Economic & Political Conditions

Difficulty in Hiring Singaporeans for Overseas Job Scope

Lack of Market Knowledge

Difficulty in Sourcing Local Operational Support

Difficulty in Getting Permits and Licences

Lack of Information on Regulation & Tax Policies

Cultural & Language Differences

Unable to Find Suitable Partners/ Contacts

77%

22%

15%

11%

8%

7%

7%

6%

4%

37%

36%

30%

29%

27%

26%

21%

12%

5%

32%

25%

24%

23%

21%

19%

16%

16%

3%

06

77% of companies have plans to expand their businesses beyond Singapore in the next two years. Among these companies, 77% are keen to expand into ASEAN.

Q: Please rate each ASEAN country on the following attributes, with 10 being the most attractive and 1 being the least attractive.

Indonesia and Malaysia are identified as the top priority markets to enter, followed by Vietnam, Thailand and Myanmar.

Within these markets, potential customer demand, overall investment climate, ease of relationship-building and business costs are ranked among the top five attractive attributes.

Specifically for Indonesia, Vietnam, Thailand and Myanmar, favourable and transparent foreign investment regulations ranks amongst the top five attractive attributes. The availability of skilled labour is also the top attractive attribute in Malaysia. Singapore, Malaysia and Thailand score the highest in the level of digital infrastructure within ASEAN.

In venturing into ASEAN, uncertain economic and political conditions in ASEAN appear to be the biggest challenges for companies.

They are also concerned with key issues such as difficulty in hiring Singaporeans for overseas job scope, lack of market knowledge, and difficulty in sourcing local operational support.

n=1,036

INDONESIAMALAYSIA VIETNAMTHAILANDSINGAPORE MYANMARPHILIPPINES CAMBODIA LAO PDRBRUNEI

Presence of Singapore Com-panies (By Ranking)

Targeted Countries for Expansion (By Ranking)

Potential Customer Demand

Overall Investment Climate

Favourable & Trans-parent Foreign Invest-ment Regulations

Ease of Relation-ship - Building With Customers, Suppliers & Partners

Availability of Skilled Labour

Business Costs

Level of Safety & Stability

Level of Physical Infrastructure

Level of Digital Infrastructure

Ease of Dealing with Bureaucracy

-

5

1

2

55%

30%

14%

21%

9%

13%

22%

8%

10%

7%

2

1

3

4

52%

40%

22%

32%

13%

18%

28%

18%

18%

21%

4

3

52%

31%

16%

20%

11%

12%

21%

11%

9%

11%

5

7

42%

26%

15%

22%

11%

24%

19%

6%

8%

11%

6

6

34%

20%

9%

13%

6%

9%

17%

9%

5%

5%

7

8

22%

17%

11%

13%

7%

5%

22%

8%

5%

4%

8

10

21%

19%

14%

14%

11%

7%

13%

21%

11%

8%

9

9

18%

16%

14%

11%

6%

5%

16%

7%

5%

3%

49%

36%

22%

35%

15%

25%

25%

13%

22%

22%

37%

45%

58%

56%

53%

36%

20%

66%

65%

59%

T3B: Ratings 8 - 10 (out of 10) Top 5 Attractive Factors

07

08

LOW AWARENESS AND USAGE Of ASEAN Economic Community (AEC) And ASEAN Free Trade Agreements (FTAs)

Q: Looking ahead, how do you think the ASEAN Economic Community or the ASEAN regional economic integration will impact your company?

Perceived Impact of AEC/Integration

n=1,036

Q: Is your company a small-or-medium enterprise (SME) or a large company/ enterprise?

Awareness of AEC/Integration amongst Small and Medium-Sized Enterprises (SMEs)

Awareness of AEC/Integration amongst Large Enterprises

Q: How well-informed is your company about the ASEAN Economic Community or the ASEAN regional economic integration?

Perceived Outcome from ASEAN FTAs

Q: Has your company used or benefitted from any of the following free trade agreements (FTAs) under the ASEAN Economic Community (AEC)? If so, which of the following benefit(s) has your company gained using the aforementioned ASEAN FTAs?

n=1,036 n=232

56%

14%

4%

14%

12%

Some Opportunities

Significant Opportunities

Some Challenges

Significant Challenges

No Impact At All

Adequately Informed

Not Adequately Informed

Quite Well Informed

Not Informed At All Very Well Informed

23%

20%

36%

44%

21%

11%9%

15%

SMEs Large Enterprises

Have Not Used FTA/ Unclear about FTA Benefits

Benefitted from FTA

23%

77%

More Business Opportunities

Tariff Savings

Efficient & Cost Effective Procedures & Controls on Goods MovementOther Benefits

Copyright & Intellectual Property Protection

Labour Mobility

Ease of Technology Transfer

Access to Government Tenders

Mutual Recognition of Standards

68%

51%

38%

29%

24%

23%

21%

15%

13%

More competitive prices for customers; Higher income; Greater Investments

n= 887 n= 149

56%

14%

14%

4%

12%

5%16%

Q: Is your company planning to take advantage of the aforementioned ASEAN FTAs for future business operations in the region over the next 2 years?

Q: What are the challenges hindering your company from taking advantage of the various ASEAN FTAs?

70% of companies perceive that the ASEAN regional economic integration will bring at least some opportunities. 18% view that it poses some or significant challenges while 12% perceive that it has no impact at all.

Despite the overall positive sentiments towards AEC, only 57% of SMEs claim to be at least adequately informed about it. 43% are either not adequately informed or not informed at all.

Only a small proportion of companies (23%)

claimed to have benefitted from

ASEAN FTAs.

A lack of awareness and understanding of the ASEAN FTAs remains as the biggest challenge that hampers the majority of companies (67%) from using them.

In the next two years, half of the companies are unsure if they would use ASEAN FTAs and nearly 30% do not have plans to use the FTAs.

Among companies who have benefitted from ASEAN FTAs, the growth in business opportunities (68%), tariff savings (51%) as well as the efficient and cost-effective procedures and controls on goods movement (38%) are the top 3 most commonly cited benefits.

Plans to Use ASEAN FTAs in 2018 -19

Challenges Hindering Usage of ASEAN FTAs

n=1,036 n=1,036

Yes Not Sure

No

50%

29%

21%

23%09

Lack of Awareness & Understanding of ASEAN FTAs

Unclear FTA Rules & Procedures

Inaccessibility of ASEAN FTAs Information

No/ Little Benefits

Tedious/ Complex FTA Compliance

67%

% of Singapore Companies Surveyed

Other Challenges

36%

26%

22%

17%

7%

Q: When expanding into new ASEAN markets, which of the following areas do you think your company will require support in?

Q: How do you think SBF can support your company’s expansion into ASEAN?

Compliance with local regulations stood out as the top area in need of support during ASEAN business expansion.

Manpower also surfaced as a key area in need of support. 1 in 5 companies is looking for support in manpower issues, staff recruitment, and availability of skilled workforce for their ventures into ASEAN.

As one of the challenges in ASEAN integration involves raising awareness among companies, more can be done to provide information on ASEAN integration, regulations, FTAs and market knowledge to plug the gaps in awareness.

Business contacts and business-to-government relations are viewed as the next areas of priority where SBF can render support to companies.

n=1,036

Regulation Advisory

Financing

Business Partnership

Manpower Issues

Taxation

FTA Knowledge

Marketing

Compliance

Evaluating Alternatives

Choosing Destination

33%

26%

23%

21%

19%

18%

17%

16%

12%

9%

Planning & Conceptualisation

Business Registration

Staff Recruitment

Bank Account Opening & Other Admin Tasks

Securing Office Space

31%

20%

13%

9%

Setup & Operational Process

Compliance with Local RegulationsAccess to Customers

Availability of Skilled WorkforceSupply Chain & Logistics

Data & IP Protection

Access to Suppliers

35%

27%

22%

15%

13%

12%

Day-to-Day Operations

More/ Better Information on Impact of ASEAN Integration

Access to Information on ASEAN Regulations

More Information on ASEAN FTAs

Access to Business Partners

Facilitation of Better Busi-ness-to-Government Relations

Contact with Singapore Companies in ASEAN

Exposure to Markets by Organising Relevant Missions

Development of Skilled Employees

Championing Company’s Business Cause

Areas Where SBF Can Support Companies’ Expansion into ASEAN

More/ Better Information on Individual ASEAN Markets

n=1,036

58%

57%

55%

54%

43%

36%

28%

26%

19%

17%

8%Other Support

10

AREAS OF SUPPORT NEEDED IN Expanding Into ASEAN

Key Survey FINDINGS TAKEAWAY

- 9 in 10 companies perceive the importance of ASEAN for their overall global strategy, particularly when looking at 2018 and 2019.

- Looking ahead, companies are generally more optimistic about the ASEAN business outlook.

Positive Expectations for ASEAN Business Opportunities

- Top 5 ASEAN markets for overseas expansion are Indonesia, Malaysia, Vietnam, Thailand and Myanmar.

- The top 5 markets are perceived to be attractive due to their potential customer demand, favourable investment climate, ease of relationship-building and lower business costs, amongst other factors.

- The growth potential and opportunities for new market access are the biggest motivating factors for expanding into ASEAN.

Companies are Keen to Pursue ASEAN Expansion for New Growth Opportunities

Companies Face Critical Barriers to Entry

- Companies face a myriad of manpower, regulatory and business / industry-related challenges when expanding overseas into ASEAN. - The uncertain economic and political conditions in ASEAN stand out among the most commonly cited top 5 major challenges for expanding into the region.

- Despite the general positive sentiment towards the AEC / ASEAN regional economic integration and the perceived benefits of the ASEAN Free Trade Agreements (FTAs), the lack of accessible, clear information about these initiatives is a major obstacle to the companies’ usage.

More Can Be Done to Help Companies Take Advantage of Business Opportunities in ASEAN

- Local regulations and manpower stand out as the top areas in need of support.

- Key areas where SBF can support the expansion of companies into new ASEAN markets include the provision of information on the impact of ASEAN Economic Integration, ASEAN regulations, ASEAN FTAs and individual ASEAN markets.

- SBF can also render aid in the form of business partner matching and facilitation of B2G relations.

11

INFORMATION ABOUT THE SURVEY SAMPLECompany Characteristics

17%

Breakdown by Company Size

Breakdown by Local Shareholding

Breakdown by Annual Sales Turnover in SGD

86%

14%

36%

64%

32%

37%

14%

SMELarge

EnterpriseLess than 30%

Local Shareholding

At Least 30% Local Shareholding

<5 Mil.>100 Mil.

5 - 10 Mil.

10 - 100 Mil.

Breakdown By Global HQ Location

Singapore 67%

ASEAN (excl. Singapore) 3%

North Asia (excl. China) 11%

China 3%

Europe 9%

Americas 4%

Oceania 1%

South Asia 1%

Middle East 1%

Africa 0%

Breakdown by Singapore Standard Industrial Classification (SSIC) Code

Wholesale & Retail Trade

Financial & Insurance Activities

Manufacturing

Professional, Scientific & Technical Activities

Transportation & Storage

Information & Communications

Administrative & Support Service Activities

Other Service Activities

Others

Construction

21%

13%

12%

8%

7%

4%

4%

4%

1.3%

1.3%

1.4%

n=1,036

Real Estate Activities

23% of companies did not indicate their SSIC code.

12

n=1,036

n=1,036

SBF is the apex business chamber championing the interests of the Singapore business community in the areas of trade, investment and industrial relations. It represents 25,800 companies, as well as key local and foreign business chambers.

In July 2001, the Minister for Trade and Industry introduced a Bill in Parliament to establish the SBF Act, which was passed by Parliament and became law on 5 Oct 2001. The Federation was established on 1 April 2002, with the aim of representing the business community’s interests both locally and overseas. Under the SBF Act, all Singapore-registered companies with share capital of S$0.5 million and above are members of SBF.

About SBF

http://www.sbf.org.sg/ If you need any clarifications, kindly contact All_MarketAsean@sbf.org.sg. All Rights Reserved.

Survey conducted by

Commissioned by: Conducted by: