S-E Asia appeals more to US businesses as trade war bites: Poll

An American Chamber of Commerce survey released on June 26 found that nearly 90 per cent of respondents saw this region as a more attractive place to do business compared with 75 per cent a year ago.
An American Chamber of Commerce survey released on June 26 found that nearly 90 per cent of respondents saw this region as a more attractive place to do business compared with 75 per cent a year ago.PHOTO: AFP

The trade war that is forcing an increasing number of American firms with operations in the region to delay or cancel investments or even exit China entirely could end up benefiting South-east Asia.

An American Chamber of Commerce Singapore (AmCham) survey out yesterday noted that 88 per cent of respondents saw the region as a more attractive place to do business, against 75 per cent a year ago.

"That's a great vote of confidence for South-east Asia because it could mean companies are raising investments and relocating their supply chains or manufacturing to this region," said Mr Gerry Mattios, expert vice-president at Bain & Company, which partnered AmCham Singapore to analyse the results of the May survey.

"But we don't think South-east Asia will become the factory of the world, in the way China did. Overall the tendency is for companies to bring manufacturing and supply chains closer to where they sell products or to markets they are serving."

While more firms are looking to shift manufacturing to Vietnam, Singapore could be an indirect beneficiary as key corporate decision-making processes could move here, said AmCham executive director Ann Yom Steel.

The survey polled 144 respondents, 90 per cent of which were firms with a global footprint across the Asia-Pacific or Asean. About 61 per cent were US-based firms, and 84 per cent were from the services, manufacturing or tech industries

There is a significant number of American businesses with Asia-Pacific headquarters in Singapore overseeing investments and supply chains associated with China, so it has become "mission-critical to explore sourcing options from elsewhere in the Asia-Pacific region for their US markets", said AmCham chairman Dwight Hutchins.

AmCham first conducted a survey of its members' perceptions of the United States-China trade war last September. Last month's poll was to ascertain how the trade war affected business strategies.

It found the trade war has been negative for almost half of the firms surveyed, with American manufacturers with more than 1,000 workers in South-east Asia and operating at a global or regional level being the most affected.

It noted that 54 per cent of companies are delaying or cancelling investment decisions in China or other parts of Asia, up from 49 per cent last year.

Yet, there are signs US firms are becoming "more comfortable with the trade war's implications for their business as they have put in place certain processes to alleviate the impact", Mr Mattios said.

As a result, only 49 per cent said their business strategy has been affected compared with 67 per cent a year ago.

More firms are recognising they need a more flexible supply chain: 37 per cent are considering moving sourcing from the US, up from 29 per cent; 42 per cent may move sourcing out of China, 5 per cent more than last year.

And 28 per cent of firms may relocate manufacturing out of China, nearly double the 15 per cent last year, while 13 per cent are considering relocating manufacturing out of the US compared with 10 per cent a year ago.

Also, 11 per cent may exit China altogether, up from 5 per cent.

This concerns Ms Daphne Au, AIG's regional head of Apac regulatory and government affairs, one of four panellists speaking on the poll findings yesterday.

She said: "We insure those trade businesses, in the event trade continues to slow down, it will impact our clients and the business of risk."

A version of this article appeared in the print edition of The Straits Times on June 27, 2019, with the headline 'S-E Asia appeals more to US businesses as trade war bites: Poll'. Print Edition | Subscribe