Forty two percent of chief executive officers (CEOs) in Asia Pacific are ‘very confident’ of revenue growth over the next 12 months and intend to increase their investments in the region, according to a study by PwC.
The study, 'Towards Resilience and Growth: Asia Pacific Business in Transition', surveyed nearly 500 business leaders on their attitudes towards doing business in the region. It was released at a meeting of the Asia Pacific Economic Cooperation (APEC) in Bali, Indonesia.
The survey found confidence among Asia Pacific-based executives on the rise.
Some 42% of executives say they are ‘very confident’ of revenue growth in the coming year, up from 36% last year. Longer term, 52% say they are confident of growth over the next three to five years, about the same as in 2012.
According to the survey, the trend towards urbanisation in many Asia Pacific economies, the emergence of the local middle-class, and the need for infrastructure development are the main reasons for driving the increase in confidence.
"Executives in the Asia Pacific region are in the midst of a major transformation taking place within the region driven by a gradual but steady rise in income and economic opportunity for millions of people," says Dennis M. Nally, Chairman of PricewaterhouseCoopers International Ltd. "While overall confidence in growth in Asia Pacific remains undiminished, APEC economies now also face many of the uncertainties of slower growth, previously limited to the more developed markets."
Business leaders identified key elements attracting them to China, and as a result are determined to increase their investment in the mainland.
“China has been recognised by global CEOs as a key destination for business investment in the future thanks to competitive production costs and growing technological skills,” says Frank Lyn, PwC China & Hong Kong Markets Leader.
“China understands the need for urbanisation and greater investment in infrastructure. This complements the desire for environmentally friendly and low-carbon projects outlined by the National Congress as part of the 12th Five-Year Plan,” Lyn adds.
In the survey, executives were also asked to identify their 'dark horse' pick – an economy that could surprise with more business opportunity than is currently expected. Indonesia was the top pick, followed by Myanmar, China, The Philippines, and Viet Nam. Among the most cited attractive qualities were expanding middle classes, ample natural resources, increasing transparency, infrastructure improvement plans and political stability.
The study also finds that nearly 90% of Asia Pacific CEOs say their growth strategies are influenced by the growing market of middle-income consumers. And nearly half of investment increases are focused on new products, services and distribution to serve the growing middle class.
About one in five CEOs is pursuing mobile-enabled products and services such as transactions.
Developing broadband network and urban transport will bolster economic growth, as will changes in regulatory and legal barriers and trade infrastructure.
Regulatory consistency could unleash additional investment. A fifth of CEOs say that if rules concerning intellectual property, corporate governance and
services are harmonised they are ‘highly likely’ to invest more.
The multiple trade discussions among APEC economies is welcomed by about 70% of regional CEOs, but 22% see them leading to uncertainty and administrative costs.
“Investment prospects are looking positive across Asia Pacific,” says Nally. “However, if governments use the APEC meeting in Bali to effectively tackle CEOs’ concerns about regulatory and legal barriers, and to speed up progress on trade negotiations, this could unleash an even greater wave of new investment and help secure CEO confidence in the region.”