Middle East companies focusing on ASEAN are positive about business growth in the region. This is according to a survey commissioned by Standard Chartered for its “Borderless Business: Middle East-ASEAN Corridor”, a strategic report that explores high-potential opportunities for cross-border growth in this corridor. All surveyed Middle East companies expect business growth over the next 12 months, with over 80% of them projecting an annual increase in both revenue 82% and production 81% of over 10%.
Mohamed Salama, Head, Client Coverage, Head, Corporate, Commercial and Institutional Banking – CCIB, MENA, and Head, CCIB, UAE said, “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. The region provides unparalleled trade and investment prospects across various sectors such as refinery and petrochemicals, real estate and infrastructure.”
He added, “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. Given our unique global footprint, Standard Chartered has the right mix of local knowledge and expertise across all ASEAN markets to better help our clients leverage these potential opportunities and strive for continued success.”
The report also revealed that access to the large and growing ASEAN consumer market 60%, access to a global market enabled by a network of Free Trade Agreements 58% and diversification of production footprint 51% are regarded as the most important drivers for expansion into the region, according to senior executives of the surveyed Middle East companies. The Regional Comprehensive Economic Partnership is also expected to attract more investments into the 10-nation bloc. All respondents agreed that the ratification of the RCEP agreement will lead to more investments from their company. Close to 70% expect their company to increase investments by more than 50% over the next 3-5 years.
Of the ASEAN markets targeted for growth, 69% of survey respondents said they are focusing on expanding in Singapore to capture sales and production opportunities. This comes after the top choice of Malaysia 78% and is followed by Indonesia 67%. Among the Middle East companies keen to tap Singapore for expansion opportunities, 94% t consider the city-state a major regional research and development, Innovation centre while 87% of the surveyed executives view Singapore as a desirable hub location for regional procurement. The same number of respondents 87% agreed that Singapore is an ideal place to set up their regional sales and marketing headquarters.
The survey also showed Middle East companies recognising a wide range of risks within the region. The top three identified risks are the Covid-19 pandemic or other health crises 69%, understanding of regional regulations 49% as well as geopolitical uncertainty and trade conflicts 47%. Furthermore, the respondents agreed that adapting their business model to industry practices and conditions within ASEAN 64%, sourcing funds and managing liquidity 56% and building relationships with suppliers and adapting supply chain logistics 51% are the most significant challenges in the next 6 to12 months.
To drive resilient and rebalanced growth in ASEAN and mitigate these risks and challenges, the survey respondents considered executing digital transformation programmes 60%, driving sustainability and ESG – Environment, Social and Governance initiatives 53% and entering new partnerships, joint ventures to increase market presence 47% 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%, extensive trade financing services 58%, and strong cash management capabilities 53%.
Rino Donosepoetro, Vice Chairman, ASEAN and President Commissioner Indonesia, Standard Chartered said, “The Middle East and ASEAN enjoy increasingly close economic ties. In 2020 alone, Middle East companies invested USD700 Million 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. As the only international bank with a presence in all 10 ASEAN markets, Standard Chartered is well-positioned to help our Middle East clients diversify into new non-oil sectors and leverage the tremendous opportunities the region has to offer.”