Asean companies expect business to stabilize in Q2

·3 min read

MAJORITY of foreign companies with operations in the Association of Southeast Asian Nations (Asean) have been adversely affected by the Covid-19 pandemic, with most anticipating business activities to stabilize in the second quarter of 2021 or beyond.

This is among the key findings of a survey on the impact of the Covid-19 disruption on foreign firms in Southeast Asia as well as on their plans moving forward.

Some 264 foreign firms from 24 chambers and business organizations responded to the survey conducted by the American Chamber of Commerce in Indonesia and think tank Economic Research Institute for Asean and East Asia.

Majority of the respondent companies had Indonesia as their principal domicile, followed by the Philippines and the United States. Other countries of operation included Singapore, Malaysia and Thailand.

The report found that almost all foreign firms in Southeast Asia felt the negative impact of the pandemic on their output, revenue, and/or sales across all countries of operation, mainly due to lack of demand. On average, companies experienced a “moderately adverse” impact, noted the survey report.

Findings

Overall, the dairy and meat sector was hit the hardest with 100 percent reporting some degree of negative impact, followed by electronics and healthcare. The trade and logistics sector was the least negatively impacted (50 percent) with 28 percent of firms experiencing some positive impact.

At the same time, 72 percent of firms experienced supply chain interruptions to some degree, with most reporting difficulties obtaining imported inputs.

Measures taken in response to the pandemic included the introduction of remote working or working from home, which is the most common followed by hiring freezes and reductions in the number of employees and in wages and salaries.

Forty-three percent of firms said they have already reduced operations or production or are considering doing this while up to 27 percent said they may reshore operations due to the pandemic.

Moreover, 48 percent of the respondents said they may move operations from China to another country, with Vietnam as the most frequently cited alternative. Other countries eyed were Thailand, Malaysia and the Philippines.

The pandemic has also prompted swifter adoption of new technologies, with 46 percent of respondents saying they plan to make new investments in Fourth Industrial Revolution technology.

Certain innovations such as increased video conferencing and working from home are expected to become permanent. Other changes expected to take hold include increased e-commerce, decreased office space and less travel.

Stability

Most companies believe it will take at least a year for business to stabilize. Nearly 72 percent anticipate that the pandemic will continue to have an impact until the second quarter of 2021 or even later before business activities stabilize in the “new normal.”

To support their business recovery, the firms said top issues Asean policymakers need to address include immigration rules relating to visas and work permits, tax incentives, free movement of people, information and communication technology and corruption.

Tackling concerns about non-tariff barriers, infrastructure, open skies policy, skilled workforce and supply chains is also crucial, the survey found. (PHILEXPORT NEWS AND FEATURES)