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Southeast Asia has promising trade prospects amid global protectionism



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HSBC: Southeast Asia has promising trade prospects amid global protectionism
The IMF's version of the Asian economic growth projection of 2018-2018. – Business / Radityo Eko

Bisnis.comJACARTA – Based on HSBC global reports, despite concerns about protectionism, corporations in Southeast Asia still have the most promising trading prospects in the world.

With the hope that more production will lead to the region, corporations will invest in technology supply chain or supply chain, so that the tensions of global trade can be seen as opportunities rather than as threats.

The results are summarized by HSBC Navigator – a global survey involving 8,500 companies in 34 countries. In Southeast Asia, HSBC Navigator involves more than 1,000 respondents in ASEAN's five largest markets, namely Singapore, Malaysia, Thailand, Indonesia and Vietnam.

Business prospects at ASEAN are promising amid growing protectionism ASEAN is one of the regions with the highest level of optimism about the prospects of trade and business activity, although many companies have seen an increase in protectionist sentiment.

The report noted that 86% of ASEAN corporations are optimistic about the prospect of foreign trade – more than other trading blocs and above the global average of 77%. In addition, 75% of ASEAN companies believe that many countries are becoming more protectionist in their main export markets, the highest among all trading blocs and well above the global average of 63%.

Indonesia's PT Bank HSBC CEO Sumit Dutta said that corporations in Southeast Asia are currently very optimistic about facing future business prospects. He believes in the supply chain or supply chain will move to the area.

"This seems at first glance counterintuitive and certainly raises the question whether they underestimate the risks of trade due to increased protectionism or try to see opportunities amidst trade disputes. Whatever it is, the supply chain will shift to ASEAN and the company should be ready, "he said in a press release received. BusinessMonday (5/11).

HSBC Navigator points out that China and the US have so far been the focus of protectionist trade policies, but there may be an indirect impact on the ASEAN bloc given the region's high level of exports to both countries. At the same time, the report found that tariffs also opened up opportunities for ASEAN markets in various fields such as electronics, textiles and automotive.

ASEAN countries, such as Thailand and Malaysia, already have electronic production networks, especially in the assembly of hard disks (HDD). Thailand exports the same amount of final storage units to the US as China, which would make it relatively easier to change the assembly there, mainly because sending Chinese HDDs to the US is now subject to at least 10% USA.

Other members of blocks like Singapore, Philippines and Vietnam also produce various electronic components, while Vietnam and Indonesia have become increasingly competitive in light manufacturing and textile exports.

In textiles, Malaysia, Thailand, Indonesia, the Philippines and exports of Vietnamese textiles and clothing almost tripled from US $ 24.4 billion in 2001 to US $ 71.8 billion in 2014. In 2016, textile exports reached 42 billion. The next ASEAN country, Indonesia, exports goods worth 16 billion.

In the automotive sector, Frost & Sullivan predicts ASEAN will become the 6th largest automotive market globally by 2018. The automotive sector is one of the main sectors of the Thai economy, which continues to grow at around 8.1% of GDP4.

Dutta said the choice of transferring the production base to a low-cost country in Southeast Asia was not a new phenomenon. According to him, change is a continuation of the current trend.

"Tension in trade relations can accelerate this trend in the short term, which will positively affect countries with production capacity, such as the Philippines and Vietnam, but large-scale supply chain change is not something that can happen overnight. long ago, Thailand, Malaysia and Vietnam will enjoy selective benefits from the transfer of exports, "he said.

With increased production in the hands of ASEAN member countries, technology will be a key element in managing the capacity increase that occurs. It seems that improving technology will be a focus for many ASEAN companies.

According to HSBC Navigator, 37% of ASEAN respondents focused on increasing the adoption of digital concepts and technology in their business (compared to 28% in the world). For 34% of ASEAN respondents, the increasing use of technology is the main change plan in the next 3 years, above the global average (27%).

He said that at this point his side was still waiting for a resolution to the ongoing protectionist war between the US and China at this time. On the other hand, Southeast Asian companies are expected to start preparing for tensions in the medium term.

"Companies that are thinking of moving their supply chains to the region should ask themselves many questions: Is there local capacity, how will factories receive raw materials, do they have enough human resources if they build new plants? "Will they be allowed?" Technology will be a common thread between the issues that arise and will be the key to increasing competitiveness and attractiveness, "he explained.

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