European firms expect their trade and investment activities in Southeast Asia to grow over the next five years, but this may have to depend on how countries in the region secure their trade deals and hasten their economic integration.
The 2019 European Union-Asean Business Sentiment Survey reported firms from the Western economic bloc maintained their growth expectations in Southeast Asia at a high. The survey showed 53 percent of EU firms project high economic progress in the Asean, compared to 27 percent in China, 11 percent in India and 4 percent in hometown Europe.
Their expectations of growth also improved to 88 percent, from 75 percent last year, which was the height of the tariff war between the world’s largest economies.
However, there was less confidence from EU-based investors that Asean economies will be able to conclude its proposed trade deals in the near future. For one, fewer European firms at 94 percent, from 98 percent, said the economic bloc should accelerate its trade negotiations with the Asean.
There was also an increase to 28 percent, from 13 percent last year, in the belief that bilateral trade deals with Southeast Asian economies will bring more benefits to both parties than pursuing an arrangement with the region as a whole.
Further, 57 percent of EU companies lamented the slow progress the Asean is taking in integrating its economy, resulting to a much slower pace in trade between Southeast Asia and Europe. Under the planned integration, Asean is targeting to reduce cost of trade transaction by 10 percent by 2020 and double intra-Asean trade by 2025.
European firms also took a swipe at the increasing number of nontariff measures Asean economies are placing on their goods, making it difficult for their products to enter markets belonging to the regional bloc.
EU-Asean Business Council Executive Director Chris Humphrey said the Asean should hasten its integration to be able to attract more investors from without, particularly those coming from Europe. He explained investors are being compelled to adjust their expansion and investment plans due to the slower than expected development of the move to merge the region’s economy.
“The message from the survey is clear: Asean economic integration appears to be at a standstill. Asean and its constituents need to pick up the pace to meet the Asean Economic Community Blueprint 2025 goals. European businesses are now adjusting their business strategy according to local environments, rather than waiting for substantial progress in regional economic integration,” Humphrey said in a news statement.
“European businesses are also very concerned about the lack of progress on further free trade agreements with the Asean region, and in particular the long talked about region-to-region FTA which nearly three quarters see as potentially delivering more benefits than a series of bilateral FTAs. European businesses clearly want the European Commission to step up the pace of negotiations with Southeast Asia,” he added.
Merchandise trade by the Asean amounted to $2.2 trillion in 2016, of which 23.1 percent was between the regional bloc’s member-states.