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ASEAN CEOs Worried as Era of Uncertainty Looms: PwC

ASEAN CEOs see revenue fall, economic outlook grim

Exchange rate volatility, social instability, geopolitical uncertainty rank among top economic and policy concerns.
Thailand still among world’s top investment destinations.

BANGKOK, 24 February 2016 – Chief executives in South-East Asian nations are losing confidence in revenue growth as a gloomy global economy affects sales in ASEAN, according to PwC’s 19th Annual Global CEO Survey.

The PwC survey of 1,409 CEOs from 83 countries, including seven from South East Asia, revealed that only 39% expect global economic growth to improve over the next 12 months, down from 49% in 2015. Growth is slowing in China’s powerhouse economy due to declining exports and manufacturing, while plunging oil prices are also a factor.
Sira Intarakumthornchai, CEO for PwC Thailand, said that business leaders are more pessimistic about growth than this time last year.

“Most CEOs in the ASEAN region see more threats to growing their companies today than three years ago,” Sira said. “This is largely due to the rising tide of threats surrounding geopolitical risks, as well as currency and the stock market volatility amid China’s economic slowdown and falling oil prices.”

ASEAN CEOs ranked exchange rate volatility as the biggest threat to the region’s economy at 86%, followed by social instability at 84% and geopolitical uncertainty at 81%, according to the PwC Survey.

The International Monetary Fund (IMF) cut its global economic growth forecast for 2016 to 3.4% in January, down from an estimate of 3.6% in October as risks to the global outlook continue to weigh on the world’s biggest economies.

Just 38% of ASEAN CEOs in the PwC survey said they were “very confident” of growing their company’s revenue in the next 12 months, down from 47% in 2015 and the lowest reading since 2013.

CEOs in the region also ranked the availability of skilled labour as the biggest threat to business at 88%, followed by bribery and corruption at 80%. Another 75% stated lack of trust in business and new market entrants.
This ominous outlook is impacting hiring plans in the region. The PwC survey, which was conducted in the fourth quarter of 2015, found that only 59% of ASEAN CEOs expect to increase headcount in the next 12 months, down by 8 percentage points from last year.

Even so, the brightest individuals can still find work, Sira said.
“Talented people with a wide range of skills–technical, digital and people–are in the front row.”

Thailand still a darling among investors

One silver lining for Thailand: It still ranks among the world’s top investment destinations. The survey showed investors prefer China (49%), US (42%), Indonesia and Vietnam (19%), India (13%) and Thailand (12%).

As South East Asia’s second-largest economy after Indonesia, Thailand is strategically placed to become a regional hub for logistics and tourism. It also has relatively good quality agricultural raw materials and a skilled talent pool.

Thailand’s economy grew 2.8% in the fourth quarter, fuelled by the government’s stimulus measures to boost local demand amid weak exports, according to the National Economic and Social Development Board (NESDB).

Sira said the pace of the economic recovery is likely to be gradual, given the backdrop of continued political uncertainty and high household debt.

“The country would still need to manage its weaknesses, whether it be boosting production capacity efficiency, improving high-quality education and managing income disparities.”

According to the survey, 94% of CEOs in the region see technological advancement as an important tool to assess and meet wider stakeholder expectations of customers, clients, employees and communities in which businesses operate.
Asked which technologies can generate the greatest return in terms of engagement with wider stakeholders, 68% of CEOs said data and analytics, followed by customer relationship management systems (65%) and Research & Development (R&D) and innovation (53%).

Environmental and social issues get more focus

ASEAN CEOs are also intent on doing more to assess environmental and social impacts.

A majority of ASEAN CEOs (80%) agree that financial profit isn’t the sole focus for measuring business performance. Today, CEOs are seeking to operate businesses that focus more on non-profit goals such as Corporate Social Responsibility.

According to a recent PwC Survey, 87% of South-East Asian residents believe it’s crucial for businesses to adopt the United Nation’s Sustainable Development Goals (SDGs), and 97% of businesses plan to address them within the next five years.

Launched in September last year, the SDGs present a roadmap for good business growth for the next 15 years (2015-2030). Covering 17 goals and 169 targets, the Goals shine a spotlight on some of the world’s biggest issues, including gender inequality, poverty and climate change.

“It’s truly a welcoming sign that there’s already widespread awareness of the importance of the Goals across the region,” Sira said.

“To further achieve long-term growth, it’s important that both the government and private sector understand the impact of their operations, integrate issues into their practices and commit to work together to achieve these mutual Goals."

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