Confidence among APEC CEOs lowest in 3 years
MANILA, Philippines – Volatility in financial markets took a toll on chief executive officers' (CEOs) confidence this year, a survey done by multinational professional services network PricewaterhouseCoopers (PwC) showed on Monday, November 16.
Among 800 CEOs and industry leaders representing 52 nations interviewed for the PwC 2015 APEC (Asia-Pacific Economic Cooperation) CEO Survey, only 28% are "very confident" their organization will see revenue growth over the next 12 years.
This is down by 46% from a year ago and is the lowest since PwC started in 2012 the tracking of the year-long confidence for the region's CEOs.
Only 34% of US CEOs and business leaders are "very confident" about the global economy.
Only 20% of those surveyed in China are "very confident" about their economy's growth prospects during the survey period.
But China CEOs are focused more on working with the government in alleviating poverty in the country, said David Wu, PwC senior partner for Beijing and North China markets and China government and regulatory affairs leader.
Wu added that China also wants to focus more on structural reforms and economic issues.
"We're beneficiaries of the
because before, others are going to for investments," noted Alexander Cabrera, PwC Philippines chairman and senior partner, in a press conference held Monday at the International Media Center in Pasay City.
Top survey findings
A third of CEOs or 33% are now less confident in increasing their margins than they were a year ago.
While China, Indonesia, and the US remain the main draws, CEOs are now allocating new investment across the region, with 68% saying that planned new investment will be allocated to APEC economies compared with 32% spread around the world.
Geopolitical and disaster risks are also sources of concern for CEOs, with 14.5% of them saying they would hold back investment to "a great extent" if tensions in the region escalate.
Cabrera said that if people affected by cyber attacks or disasters will not be able to recover from these, then "risk-proofing is a must."
"The ever-expanding web of Asia-Pacific supply chains has put more assets at risk from natural disasters as well," the survey noted.
More investments in tech
61% of CEOs think high-value manufacturing will spread to more APEC economies during the next 5 years.
Technology investments are expected to accelerate, with 63% of CEOs foreseeing a new wave of business spending to modernize operations by 2020. At least 22% of them think "very likely" that manufacturing in the region will be transformed by the likes of robotics, connected sensors, and 3D printing during the same time.
"If broadband connectivity is expanded [in the region], it will be the great equalizer," Cabrera said.
Services are also becoming more important to APEC economies, with 34% of them seeing demand for technology design and integration in their organization growing in the next 3 to 5 years. CEOs are now also more efficient in utilizing big data to their businesses' advantage, Cabrera said.
About 57% of CEOS expect innovation leaders will rise from developing economies in the next 5 years, with multinational corporations globalizing research and development (R&D). "Asia has become the number one location worldwide for corporate R&D, surpassing both North America and Europe," the APEC CEO Survey 2015 noted.
Free trade in Asia-Pacific to take shape by 2020
A majority of CEOs, or 60%, think that APEC is on the right track in deepening economic integration in the region.
The results showed that one in four CEOs believe a free trade arena in the Asia-Pacific is "very likely" to take shape in 2020, "despite the fact that while there has been some progress, this reality is still some ways off."
"Even today, in a region with over 100 free trade [agreements] (FTAs), there remain gaps between what's on paper and what happens in practice, resulting in higher costs and uncertainties in international trade," the survey noted.
Respondents are not pinning their hopes on greater access on just one trade agreement, with 34% of them seeing that the ASEAN (Association of Southeast Asian Nations) Economic Community offers greater promise at the moment for 35% of CEOs.
The survey showed that 24% of respondents said that if the Trans-Pacific Partnership (TPP) – the broad agreement spearheaded by the US which aims to lower trade barriers and create uniform market standards – will be fully implemented, "it will create more opportunities" for their organizations than other regional trade projects.
Cabrera said the country is not yet a signatory to TPP, citing constitutional restrictions like rules on foreign ownership in the country.
But as one technology executive from New Zealand (one of the 12 TPP economies) put it in the survey, 'the lower the tariffs, the more trade will increase.'"
Healthy middle class, high-quality education
CEOs also recognize that expanding the middle class becomes much more important to APEC economic growth, and that policy prescriptions will have to adjust to better support small businesses. (READ: Why APEC trade repository will benefit small businesses)
For CEOs in businesses that can be considered mid-sized or those with annual revenue from $500 million to $2.5 billion, 50% of them think that lowering barriers to trade and foreign investment does more harm than good.
But, "free trade doesn't automatically mean 'inclusive growth.' A sizeable proportion of CEOs think free trade could significantly harm small- and medium-sized enterprises," said PwC International Ltd chairman Dennis Nally in the survey.
Also, CEOs and business leaders said that expanding access to education at all levels and investing in infrastructure to unclog the region's congested roads, ports, and airports will enable more people on the margins of society to participate in economic growth.
"Public-partnership efforts are helpful to address some concerns to improve business operations in the Philippines," Cabrera said.
The release of the survey results comes ahead of the APEC Economic Leaders' Meeting on November 18 to 19, and also coincides with the opening of the 3-day APEC CEO Summit. – Rappler.com