International Business & Economy Putrajaya's policies likely to impact business negatively in Malaysia

Putrajaya’s policies likely to impact business negatively in Malaysia




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Respondents to an Economist Corporate Network “Asia Business Outlook Survey 2017” indicated their belief that government policies in Malaysia and the Philippines (two Asean member states) are more likely to negatively affect business conditions.

Some 30-40% of respondents expected worsening conditions in Thailand, China, Hong Kong, Malaysia and the Philippines during 2017, when looking out to 2019, most of these countries were cited by only around 20-30% of respondents as likely worsening.

This, in the face of rising geopolitical and economic risks, while Kuala Lumpur and Jakarta were all regarded by 20% or more respondents as having deteriorated conditions for basing regional operations.
“Our 2017 survey asked participants to assess how the response of Asian governments to political and economic risks will likely affect their business outlook.

As shown in Figure 3, executives were most optimistic about Indonesia, Myanmar, Vietnam and
India. These countries were ranked by around 50-60% of those surveyed as having responded to risks in ways that will result in some kind of improvements for business.

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“Conversely, countries that stood out for responding in ways that will result some degree of worsening conditions for business were Thailand, China, Hong Kong, Malaysia and the Philippines. These countries were cited by 30-40% of respondents as having reacted to risks in ways that bode less positively for 2017,” said the survey.

In the Philippines, the erratic policies of the president, Rodrigo Duterte, will cause some uncertainty but we do not expect this to undermine the country’s solid macroeconomic fundamentals, it said.

But the survey said the range of negative assessments for China, Hong Kong, Malaysia and the Philippines is lower than the range of positive views towards Indonesia, Myanmar, Vietnam and India.

Tough news: KL base deteriorated

This suggests a generally more positive view about the overall impact of risks on the region.

Just as globally operating companies need to be positioned to respond to the risks and rewards posed by ongoing developments in Asia, Asian cities need to position themselves with world-class business operating environments to effectively draw in and foster globally leading industries, companies and talent.

Survey participants were also asked their views on various Asian cities as bases for regional management centres have changed throughout 2016.

“The tough news: Hong Kong, Beijing, Bangkok, Dehli, Kuala Lumpur and Jakarta all registered 20% or more respondents indicating that conditions for basing regional operations have deteriorated,” it said.

The survey also showed that South-east Asia will benefit from macroeconomic stability in the near term, but forecast that economic growth will be unexciting.

“We believe that South-east Asia will benefit from In 2017, real GDP in the economies of the Association of South-East Asian Nations (ASEAN) will expand by 4.6%, slightly higher than our estimate of 4.4% in 2016.

Indonesia will comfortably remain the bloc’s largest economy, with a GDP in cash terms around two-and-a-half times that of Thailand, ASEAN’s next-largest economy.

“Yet we remain skeptical about the ability of Indonesia’s president, Joko Widodo, to enact significant business reforms although robust private demand will lift corporate revenue streams”, Thailand’s shopping malls will see more traffic thanks to improved consumer sentiment in 2017, even as rising levels of private debt are acting to constrain household spending. Vietnam will remain a bright spot in ASEAN, particularly as its exports will continue to grow strongly in the years ahead.

Nevertheless, the firms’ expectations for revenue growth in Asia are looking up over expectations for revenue growth in 2017.

Over one-half of respondents in an Economist Corporate Network survey indicated that their firms’ expectations for revenue growth in 2017 have improved over the past year.

Whereas this optimistic outlook was held by less than 40% of respondents in the 2016 survey.

It says South-east Asia ranks first for revenue growth expectations in 2017, overtaking the top-ranked spot held by India in the 2016 survey.

This year’s standout areas for expected revenue growth are South-east Asia, India and China.

Defying risks, revenue expectations have rebounded

Strong economic growth across most of Asia’s major economies means that 2016 marked a positive year for firms operating in Asia, lifting sentiment among participants in ABOS 2017. Whereas at the end of 2015 only 37% of respondents stated that their firms’ expectations for revenue growth had improved, this figure had risen to 53% at end-2016, close to the five-year high of 54% recorded in late 2014 (see Figure 1).

Consistent with this trend, the share of companies expecting a decline in revenues halved compared with the ABOS 2016 survey, falling to 14%. Around one-third of all respondents reported that their firms’ expectations had not changed, slightly lower than the five-year average.

As shown in the adjacent map and Figure 2, South-east Asia, India and Greater China once again stand out for attracting the highest expectations for sales growth.

In contrast to last year, South-east Asia is now ranked first in revenue growth expectations pushing India to the second spot. An overwhelming proportion of respondents, 80.2%, indicated that they see South-east Asia headed for higher sales in 2017.

As many as one in twelve are forecasting increases of 20% or greater.

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