The biggest winners across the 21 Asia-Pacific Economic Cooperation (APEC) for foreign investment will be Vietnam, China, the US, with the former holding the top position for the second consecutive year, according to PwC's latest survey.
Top APEC economies to receive increased cross border investment over the next 12 months (net increase) (Source: PwC’s APEC CEO Survey 2018).
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“With major trade deals like the CPTPP, EU-Vietnam FTA and ASEAN-Hong Kong FTA on the horizon, Vietnam has the potential to attract even more investment and generate new cross-border business opportunities,” said General Director of PwC Vietnam Dinh Thi Quynh Van.
“However, additional regulatory reforms, continued domestic investment and improvements in manufacturing and labour standards are needed to fully capture the benefits from these and other trade agreements,” Van added.
Commenting on the general attitude towards trade in APEC, taking account the recent imposition of further tariffs between the US and China, Chairman of PwC China Raymund Chao said: “While business leaders do not like uncertainty in any aspect of business, let alone flows of trade, they are learning to adapt to the new reality and finding ways to grow and thrive”.
“While around a fifth of the business leaders we spoke to had experienced new barriers to trade this year, the number of CEOs who are seeing new opportunities coming out of the new trade arrangements has doubled over last year. While there are winners and losers in any trade war, our research clearly shows that businesses are uncovering new paths to growth,” added Raymund.
In its latest survey of 1,189 business leaders across the 21 APEC economies, PwC found that 35% were very confident of revenue growth, down slightly from 37% a year ago, while a net 51% plan to increase investments over the next year.
Business leaders in the US and Thailand were among the most confident, with 57% and 56% ‘very confident’ of revenue growth while respondents in China and Mexico - two of the largest trading partners with the US - showed below average confidence at 25% and 21%.
In comparison, 33% of respondents in Vietnam indicated that they are "very confident" of their companies’ short-term growth prospects, with another 48% being "somewhat confident".
International trade is likely to continue being a source of growth for Vietnam-based firms: 40% expect an increase in revenue opportunities thanks to new bilateral trade agreements and 34% anticipate such opportunities to arise from new multilateral agreements.
Moving forward by going digital
APEC business leaders are also very well aware of the need to invest more in becoming digital. With the internet economy projected to reach over US$200 billion in Southeast Asia alone by 2025, the top two investment priorities for business leaders are digital customer interactions and digital skills for their workforce.
“When asked what policies are needed in order for Vietnam to advance in the digital economy, Vietnam-based CEOs ranked ‘improvements to the digital infrastructure’ at the top. While businesses need to determine their infrastructure requirements and communicate them, the government's role is to understand these requirements and introduce policies and regulations for the sustainable development of digital infrastructure,” said Dinh Thi Quynh Van.
But while technology can provide part of the answer to sustainable growth, it is also presenting challenges in the new trade environment with moving data across borders identified as the area where businesses have experienced the biggest increase in new barriers in the last year - 20% - up from 15% in 2017.
“As APEC’s businesses become more digital and embrace new technologies such as AI, data flows will increasingly become the fuel that will drive global trade. Dealing with concerns about increased barriers to data flow will remain a priority for business for some time,” added Raymund Chao.
