Despite the protracted US-China trade war and a fast growing compliance burden, 74% of Singapore-based executives say they expect their company’s international investment spend to increase by at least 10% over the next two years, and that the number one location they are targeting is Southeast Asia, followed by the Indian Subcontinent and the US.
The US-China Trade War is impacting in other ways however, with 59% of Singapore companies surveyed either completely transforming or at least making major changes to their production and supply chain as a result of this protracted dispute.
This data forms the basis of a new report from Baker McKenzie that finds Asia Pacific business leaders bullish on their companies’ international growth intentions, despite geopolitical upheaval around the world. Indeed, more than half of Asia Pacific executives say they are 'far more interested' in pursuing cross border listings, M&A and other offshore investments over the next two years than they were over the past two years, with another 35% 'somewhat more interested'. The report, titled "The Age of Hypercomplexity: Asia Pacific Business and Legal Macrotrends", provides a detailed survey of 600 business leaders in the world's fastest growing region, including 100 in Singapore, around the key macro trends impacting their businesses.
"Almost half of Singapore respondents are predicting that Southeast Asia will have much more economic influence in the Asia Pacific region in five years time, and I do see this reflected in the strong levels of interest in this part of Asia. Singapore's position as a key money centre at the heart of the region continues to attract regional and international decision makers with aggressive outbound investment intentions towards both Southeast and South Asia," said Andrew Martin, M&A partner in the Corporate & Securities practice at Baker McKenzie Wong & Leow.
The survey showed that 56% of Singapore respondents are far more interested in cross-border investments, listings and acquisitions in the next two years, and that these outbound activities would be driven by the desire to acquire new technology and expertise. Respondents also ranked compliance and regulatory scrutiny, economic uncertainty and environmental threats or pressures as the biggest macro economic challenges to their business.
As for areas which will likely be the greatest cost increase over the next two years, Singaporean business leaders cited regulatory compliance as their number one concern, with cost of materials and cost of manufacturing and production, followed by investments in new technology and innovation.
Asia Pacific remains bullish on intra-regional investments
Looking at the region as a whole, 60% of executives surveyed across Hong Kong, China, Singapore, Australia, India, plan to increase international investment by at least 10 percent over the next two years. In terms of where businesses wanted to invest, the survey shows a strong focus on Southeast Asia across the board. Conversely, the UK has fallen out of favour.
Ai Ai Wong, Asia Pacific Chair, Baker McKenzie, said: "We are entering a new era of multilateralism in Asia Pacific, one that no longer necessarily includes Western institutions. With macro plays such as the Belt and Road Initiative, the CPTPP, further ASEAN integration, Japan's outbound activities, India's Look East and Taiwan's Southbound policies, to name just a few, we see governments and large corporates in Asia increasingly working hand in hand to further geopolitical goals through trade and investment, often in consortia of small groups of nations with shared interests. Much of this interest now centres around Southeast Asia."
The US-China trade war is also having a major impact across the entire Asia Pacific region, with 48% of businesses surveyed making major changes to how they manage their production and supply chains, while a further 12% are completely transforming their supply chains. Unsurprisingly, this was being felt most acutely in Hong Kong and Mainland China.
Mrs Wong continued: "On the regulatory front, lawmakers in the Asia Pacific region continue to grapple with the consequences of rapid globalisation and technological advancement, with the wave of new regulation that followed the financial crisis now resulting in a spike in enforcement. This is starkly borne out in our research, in which regulation and compliance has shot to the top of the list of business challenges in every Asia Pacific jurisdiction we surveyed."