News & Updates
Results of JETRO’s 2016 Survey on Business Conditions of Japanese Companies in Asia and Oceania
Recovery of business confidence in 2016, expectation for expansion in 2017
Dec 21, 2016
From October 11 to November 11, 2016 (September 1 to 25 in mainland China), the Japan External Trade Organization (JETRO) conducted its latest survey on the business conditions of Japanese companies in 20 countries and regions in Asia and Oceania: Northeast Asia (mainland China, Hong Kong, South Korea, Taiwan and Macau), ASEAN (Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam and Laos), Southwest Asia (Bangladesh, India, Pakistan and Sri Lanka) and Oceania (Australia and New Zealand). The survey received valid replies from 4,642 companies (a 42.3% response rate).
Increased operating profits for 2016 expected by 42.9%, business confidence in emerging countries improving
Regarding the operating profit forecast for 2017 as well as that for 2016, over 40% of companies expect an increase. Companies predicting a downturn for 2017 came to 11.1%, a decrease of 13 points from the outlook for 2016 (24.1%). The diffusion index (DI) in 2017—the proportion of businesses reporting increased operating profits minus those reporting decreased operating profits compared to the previous year—marked 36.0 points, a 17.3-point increase compared with 2016. Among reasons for improvement, "sales increase in local markets" ranked first, followed by "improvement of production efficiency" and "sales increase due to export expansion." Looking at the results by country and region, all countries except Laos saw an improvement of business confidence. In emerging countries such as Myanmar, Cambodia Bangladesh, India and Vietnam, the DI exceeded 50 points, indicating a significant improvement in business confidence.
Low intention to expand business in China and Southeast Asia likely to bottom out, continue decreasing in Southwest Asia
Among respondents, 52.2% expect to expand business in the next one or two years, a 1.0-point increase from the 51.2% marked in the 2015 survey. Looking at the results by country and region, companies in China answering with "expansion" was 40.1% (up 2.0 points), while those answering with "reduction" was 5.3% (down 3.5 points). The rate of "expansion" in China rose for the first time in three years. In Southeast Asia, the response rate for "expansion" rose to 55.4% (up 1.2 points), indicating a recovery. Comparing the rate of "expansion" between Southeast Asia and China, Southeast Asia has consistently come out on top since 2012 when China showed a sudden decline, and the gap was 15.3 points in 2016. By country, strong intentions of expanding business were especially seen in Myanmar (79.7%), Cambodia (72.5%), Pakistan (71.0%) and India (70.7%).
Companies expecting surplus slightly increased, while those expecting deficit slightly decreased
Companies expecting operating profits for 2016 to be a surplus accounted for 62.8%, a 0.6-point increase from the 62.2% marked in the 2015 survey. Those expecting a deficit came to 21.8%, a 1.0-point decrease from the 22.8% in the 2015 survey. Looking at the rate of companies expecting a surplus by country and region, Korea (81.0%) and the Philippines (77.5%) marked the highest, closely followed by Taiwan, New Zealand and Australia. Meanwhile, the rate was below 40% in countries where many companies have comparatively shorter operational histories such as Myanmar (25.7%), Cambodia (30.3%) and Bangladesh (35.2%).
Rate of increasing wages biggest operational issue, but year-on-year rise coming to end
Among operational issues, increased wages was the most commonly cited at 65.3%. Indonesia (82.2%) ranked first overtaking China (77.8%), followed by Vietnam (75.5%) and Myanmar (75.3%). Regarding the average rate of increase in wages for all industries on a year-on-year basis for 2016, a 10-percent level growth was recorded in the following four countries: Pakistan, Myanmar, Indonesia and India. Meanwhile, the rate for China has been slowing down by single digits since 2013 and is predicted to decline to 5.7% in 2017. Among almost all countries and regions, the rate of increase in wages is expected to be smaller than results in the recent past.
Local procurement rate in Vietnam increases significantly, while that in China approaches 70%
Material costs accounted for approximately 60% of production costs. When asked about how they planned to reduce material cost, 72.0% of companies answered with "raising the local procurement." Looking at the results by country and region, China’s local procurement rate (67.8%) was the highest (58.3% in 2010), especially for motor vehicles/motorcycles, which came to 72.3%. The local procurement rate in China, Thailand, India, Vietnam and the Philippines increased compared to their levels in 2010, with significant growth in Vietnam. Meanwhile, looking at the results of ASEAN major countries, Thailand, Indonesia, Malaysia, Vietnam and the Philippines saw an increase in rate of procurement from China compared to 2010. With the exception of Indonesia and Malaysia, all of these countries also saw a decrease in procurement from Japan.
Regarding impact of TPP on operation
When companies located in Trans-Pacific Partnership (TPP) countries were asked about the impact if the TPP came into force, 22.9% answered that they would be affected while 22.0% said they would feel no impact. While the rates of both sides were almost the same level, over half of companies answered with "not sure." Among TPP countries and regions, Vietnam and Malaysia had the highest rates of those expecting an impact, while Singapore and Oceania had the highest rates of those expecting none. Looking at the results among all countries and regions by industry, a higher proportion of companies expected to be affected in the fields of food, textiles and transport, while those in precision machinery, motor vehicles/motorcycles, electric machinery and communication/software tended to anticipate no impact. Those in the category of finance/insurance had high rates of both answers. Companies in TPP countries were more likely to expect a positive impact on export, sales and production than those in non-TPP countries. Companies in non-TPP countries such as China, Taiwan and Thailand largely anticipated a negative impact from the TPP.
Asia and Oceania Division
Mr. Hideki Fujie
Tel: (03) 3582-5179
China and North Asia Division
Mr. Hideki Shimada
Tel: (03) 3582-5181