The Philippines ranked fourth as potential location site for EU businesses among countries in ASEAN, which also lost steam as EU favorite with new regions also being eyed as good sites for global supply chain relocation, a 2020 EU-ASEAN Business Sentiment Survey showed.
According to the survey, 56 percent of EU businesses said they are expanding in the Philippines while 10 percent expects contraction, and 35 percent indicate uncertainty or to maintain operation.
ASEAN-wide, 53 percent of respondents see ASEAN as the region with the best economic opportunity but this is a contraction from 63 percent rate in 2019 and the percentage of those planning to reduce business reached 10 percent. 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 percent of respondents are considering reorganizing 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 progress of the ASEAN economic integration, proposed EU-ASEAN Free Trade Agreement, and increasing non-tariff barriers.
For instance, only 2 percent of respondents feel that ASEAN economic integration is progressing fast enough versus 6 percent in 2019.
Likewise, only 14 percent of respondents found that the number of NTBs to trade in ASEAN have decreased from 17 percent last year.
Only 4 percent of respondents find ASEAN customs procedures speedy and efficient (2019 – 8%).
A significant 62 percent of respondents that use supply chains reported facing many barriers to the efficient use of supply chains in ASEAN from 78 percent in 2019.
EU businessmen also feel the need for more private sector engagement. Fifty percent of respondents feel they are often or sometimes consulted by national governments in ASEAN while 36 percent of respondents believe they face unfair competition in the local/regional environment at least occasionally and 25 percent feel that there is adequate EU engagement.
The survey also showed widespread support, 98 percent of respondents would like the EU to accelerate FTA negotiations with ASEAN and its members.
Eighty-one percent of respondents believe that an EU-ASEAN FTA would deliver more advantages than a series of bilateral FTAs (2019 – 78%). Seventy-one percent of respondents believe the EU should pursue an EU-ASEAN FTA now before bilateral FTAs are concluded.
When asked for the main factors 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 we 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.