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Tuesday, December 10th, 2019

Trade and business uncertainty 'won't hold back investment' for APEC

by November 17, 2016 General

Over half the businesses in APEC’s 21 economies (53%) surveyed by PwC, plan to increase their overseas investments. This is despite reporting fragile confidence in the broader economic outlook and disappointment with progress on free trade.

PwC surveyed over 1,100 CEOs in 21 APEC economies, in the run up to the APEC CEO Summit in Lima, Peru (17-19 November).

Long term, it is good news for APEC economies, with over two thirds (69%) of the increased investment expected to stay within APEC economies. China, the US, Singapore and Indonesia are set to attract the most. On average, APEC businesses surveyed invest in seven other APEC economies.

Overall, just 28% of all APEC business leaders remain very confident about revenue growth over the next 12 months. It’s the second year in a row CEOs have had a subdued outlook for revenue growth. Business leaders in APEC’s youthful, faster-growing economies have higher levels of confidence in near term revenue growth than before. These include the Philippines (65% very confident in revenue growth), and Viet Nam (50% very confident).

While more CEOs reported seeing significant momentum on free trade than before (22% significant vs 15% in 2015), the majority (53%) still see progress as slow.

At the same time, competition in APEC economies is intensifying. CEOs say the threat is rising from multinationals in emerging economies, and regional leaders in APEC economies. The biggest competitive threat remains multinationals from developed economies.

Roger Kerr, PwC Treasury Advisory, says:

“The US election outcome has resulted in greater uncertainty and concern for us around international trade deals. Our ongoing relationship with one of our biggest trading partners is up in the air and we don’t as yet know the full extent of the shift in their trade policies. Early indications are that trade policies will suffer from a more inwards looking Trump administration and New Zealand businesses exporting to the US will want to watch this space very carefully.”

“However, I wouldn’t worry too much just yet. To put our current growth prospects into perspective, the New Zealand findings in the last Annual CEO Survey showed that local CEOs think Australia will still be their most important trading partner, followed by China and then the US. The recent political changes in the US will most likely mean that our exporters to the US will have higher risks associated with market access and tariff costs,” says Mr Kerr.

CEOs’ outlook on China is mixed. Almost half of APEC CEOs surveyed believe China’s GDP growth in the next three years will be at or below 5 – 6% a year. Despite this, even pessimistic CEOs are not ignoring its growth potential. Over a third of business leaders want to build their brand, expand and work in partnerships within China.

Mr Kerr says: “It’s significant that APEC business leaders are looking to the long term story of China. This could turn into an opportunity with even greater benefit for New Zealand. China is transitioning the focus of its economic growth from infrastructure capital spending to more consumer-based products and this is good news as well as a low risk option for New Zealand.”

In a warning sign for the APEC economies’ leaders, CEOs point to continued uncertainty around policy-related costs.

APEC businesses are turning to wider strategies for revenue growth. CEOs report that digital upgrades are helping them target results in operational and cost efficiency, improving customers’ experience and asset optimisation.

Over the next three years, the findings suggest that real-time or near real-time data collection in logistics, equipment, and point of sale devices will become ubiquitous in the region.