Middle East companies focusing on ASEAN are positive about business growth in the region, a survey commissioned by Standard Chartered for its Borderless Business: Middle East-ASEAN Corridor report indicated.
All surveyed Middle East companies expect business growth over the next 12 months, with over 80 percent of them projecting an annual increase in both revenue (82 percent) and production (81 percent) of over 10 percent.
“ASEAN is a fast-growing trade bloc with increasing economic and financial influence. As Middle East countries look to diversify their economies away from oil, regional businesses are exploring new avenues of investments and ASEAN has emerged as the preferred option due to multiple regional and country-level alliances,” said Mohamed Salama, head, Client Coverage, head, Corporate, Commercial and Institutional Banking (CCIB), MENA, and head, CCIB, UAE.
“The region provides unparalleled trade and investment prospects across various sectors such as refinery and petrochemicals, real estate and infrastructure.
“ASEAN’s focus on becoming future-ready in areas such as digital and renewable energy offers Middle East companies and investment firms’ ample opportunities to invest, develop and provide solutions to meet their sustainability goals,” he added.
The most important drivers for expansion into the region are access to the ASEAN consumer market (60 percent), access to a global market enabled by a network of Free Trade Agreements (58 percent) and diversification of production footprint (51 percent), as per the report.
The Regional Comprehensive Economic Partnership (RCEP) is also expected to attract more investments into the 10-nation bloc with all respondents agreeing that the ratification of the RCEP agreement will lead to more investments from their company. Close to 70 percent expect their company to increase investments by more than 50 percent over the next three to five years.
Malaysia topped the list of ASEAN markets targeted for growth, following by Singapore at 69 percent and Indonesia at 67 percent.
Among the Middle East companies keen to tap Singapore for expansion opportunities, 94 percent consider the city-state a major regional R&D and innovation centre while 87 percent view it as a desirable hub location for regional procurement. The same number of respondents agreed that Singapore is an ideal place to set up their regional sales and marketing headquarters.
Middle East companies identified the Covid-19 pandemic or other health crises (69 percent) as one of the three top risks in the region, followed by understanding of regional regulations (49 percent) as well as geopolitical uncertainty and trade conflicts (47 percent).
Furthermore, the respondents agreed that adapting their business model to industry practices and conditions within ASEAN (64 percent), sourcing funds and managing liquidity (56 percent) and building relationships with suppliers and adapting supply chain logistics (51 percent) are the most significant challenges in the next six to12 months.
To mitigate these risks and challenges, the survey respondents considered executing digital transformation programmes (60 percent), driving sustainability and ESG initiatives (53 percent) and entering new partnerships / joint ventures to increase market presence (47 percent) as the most important areas for their companies to focus on.
To support their growth, these companies said they are seeking banking partners with foreign exchange hedging and comprehensive multi-currency settlement services (64 percent), extensive trade financing services (58 percent), and strong cash management capabilities (53 percent).
“The Middle East and ASEAN enjoy increasingly close economic ties. In 2020 alone, Middle East companies invested $700m into ASEAN, a three-fold surge from 2017. We continue to see a growing number of opportunities for Middle East businesses in the region. Apart from being a destination for energy exports, ASEAN is emerging as a promising economic partner for Middle East companies’ expansion into growth sectors such as refining and petrochemicals, infrastructure and real-estate, renewable energy, retail and consumer goods, and digital infrastructure and services,” said Rino Donosepoetro, vice chairman, ASEAN and president commissioner Indonesia, Standard Chartered.
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