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Results of JETRO's 2019 Survey on Business Conditions of Japanese Companies in Asia and Oceania

Feb 13, 2020

"Business confidence of Japanese-affiliated companies significantly worsened"

From August to September 2019, the Japan External Trade Organization (JETRO) conducted its latest survey on the business conditions of Japanese companies in 20 countries and regions in Northeast Asia, Southeast Asia, Southwest Asia, and Oceania. The results are as follows.

Survey outline:

Method Questionnaire
Period From August 26 to September 24, 2019
Destination of questionnaire Japanese-affiliated companies active in a total of 20 countries and regions including five Northeast Asian countries and regions, nine Southeast Asian countries, four Southwest Asian countries and two Oceanian countries. (Valid responses came from 5,697 firms with a valid response rate of 42.3%.)
Question items
  1. Operating Profit Forecast
  2. Future Business Plan
  3. Management Matters
  4. Procurement of Raw Materials and Parts
  5. Exports/Imports
  6. Impact of Changes in Trade Environment
  7. Productivity and Innovation
  8. Utilization of Personal and Corporate Data
  9. Efforts to Enter the Local Market
  10. Wages

Key points of the results

  1. Business confidence slowed down in almost all the countries/regions. Intention to expand business also decreased.
  2. The impact of changes in the trade environment, including the US-China trade frictions, are greater in Northeast Asia.
  3. The FTA/EPA use rate exceeded 50% for the first time.
  4. Increased wages continued to be the biggest management matter.
  5. The Philippines took the top position in the appropriateness of the minimum wage from the perspective of productivity.
  6. More than 70% companies recognized the necessity of trade facilitation measures.
  7. More than 200 companies work with local startups.
  8. Large enterprises utilize private information and manufacturing-related data more actively.

Summery points

1.Business confidence of Japanese-affiliated companies slowed down in almost all the countries/regions. Intention to expand business also decreased.

  • As a reason for this, many companies answered with “Sales decrease in local markets.” Business confidence turned negative in all countries/regions in Northeast Asia (China, South Korea, Taiwan, and Hong Kong/Macau) for the first time in 10 years. On the other hand, many companies (excluding companies in South Korea and Hong Kong/Macau, etc.) expect that their business confidence will improve in 2020.
  • Hong Kong: The confusion of protests continued. The business confidence of Japanese-affiliated companies worsened.
    After the Fugitive Offenders and Mutual Legal Assistance in Criminal Matters Legislation (Amendment) Bill was submitted by the government to the Legislative Council of Hong Kong in March 2019, while protest movements and demonstrations continued in Hong Kong, where the DI for 2019 was the second lowest, at -8.4 percentage points (pp) to the lowest in 2009 (-26.9 pp). As the reason for the decreased operating profit forecast, “Sales decrease in local markets” was cited. As a management matter, the proportion of “Sluggishness in major sales markets (consumption downturn)” rapidly increased. These results suggest that a consumption slowdown resulted from the deceleration of the Chinese economy and the local confusion resulting from the protests and demonstrations, etc.
  • South Korea: Business confidence declined most significantly in this decade.
    In South Korea, the DI for 2019 was the lowest in these 10 years at -15.7 pp, which was lower than -12.5 pp in 2009 when the economy slowed down on a global basis. As the reason for the decreased operating profit forecast, “Sales decrease in local markets” was cited. As management matters, “Sluggishness in major sales markets (consumption downturn),” etc., was cited. The deceleration of the economy of China (which is the largest export destination), the worsened market conditions for semiconductors (which is the biggest export item), and chilly Japan-South Korea relations such as a consumer boycott affected the situation in a complex manner.

2.The impact of changes in the trade environment, including the US-China trade frictions, are greater in Northeast Asia.

  • The impact of changes in the trade environment, including US-China trade frictions, was greater in China and other Northeast Asian countries/regions. Only 10% of the companies took specific measures. In general, the proportion of procurement from and exports to China and/or the US is smaller among Japanese-affiliated companies in Asia and Oceania. Of the companies that answered as having been impacted, only 10% of the companies actually implemented “Transfer of production site,” “Change of procurement source,” or “Change in sales destination” (including plans). Many companies answered “No” for such transfer or change.
  • The proportion of negative impact was higher in China and other Northeast Asia countries/regions, at 30% or more, while the proportion was 20% or less among companies in ASEAN, etc. Major factors of negative impact included: (1) sluggish sales to foreign-affiliated companies in China and local companies exporting to the US, (2) decreased sales to companies exporting to China, and (3) the spreading impact of the decelerating Chinese economy.

3.The FTA/EPA use rate exceeded 50% for the first time.

The FTA/EPA use rate of Japanese-affiliated companies in Asia was 52.4%, up 4.1 pp from the previous year, exceeding 50% for the first time. By company size, the use rate was higher among large enterprises (55.8%) than among SMEs (47.2%), but 11.0% of the SMEs (large enterprises: 8.1%) were “Considering using,” suggesting that understanding regarding FTAs/EPAs is deepening. Continuous support is required to further increase the FTA/EPA use rate with a focus on SMEs.

4.Increased wages continued to be the biggest management matter.

  • As in the 2018 survey, most companies cited “Increased wages” as a management matter. By country, “Increased wages” was pointed out most commonly in Indonesia (84.0%), followed by Cambodia (75.7%) and China (73.7%). By industry, “Increased wages” was more serious in the manufacturing sector (74.6%) than in the non-manufacturing sector (59.1%).
  • Comparing the manufacturing sector and the non-manufacturing sector, however, it should be noted that the non-manufacturing sector pays higher salaries than the manufacturing sector. Comparing “Manufacturers/Worker” with “Non-manufacturers/Staff” in each country, using the (monthly) base salary in the 2019 survey as the standard, salaries are higher in the non-manufacturing sector in all countries/regions. In many countries where the monthly base salary of the manufacturing sector is less than 1,000 dollars, in particular, salaries in the non-manufacturing sector were higher by approx. two to four times than in the manufacturing sector.

5.The Philippines took the top position in the appropriateness of the minimum wage from the perspective of productivity.

“Productivity” was added in the 2019 survey. The proportion of companies that answered that the minimum wage in the country/region was appropriate from the perspective of productivity was the highest in the Philippines (74.2%), followed by Laos (66.7%) and Myanmar (60.9%). The proportion was the lowest in Indonesia (23.7%), followed by Cambodia (24.2%) and Australia (27.3%).

6.More than 70% companies recognized the necessity of trade facilitation measures.

  • “Necessity of trade facilitation measures required in order to improve trade” was added in the 2019 survey. 75.9% of the companies selected “Yes” to the question. The proportion of such companies exceeded 80% in nine countries, including Pakistan (96.0%) and Indonesia (88.5%).
  • By type of measures, “Enhancing information on trade systems and procedures” (42.1%), “Making port authorities and customs officers share a common interpretation about the assessment of tariff classification” (33.0%), and “Applying an advance ruling system and making it accessible” (32.8%) were selected by many companies.

7.More than 200 companies work with local startups.

Regarding the new question about “Collaborating with local startups,” 203 companies were already working with local startups, while 152 companies were planning to work with local startups. The number of companies that were already working with or that were planning to work with local startups was the largest in Vietnam (56 companies), followed by India (55 companies) and Singapore (46 companies). By industry, the number was the largest in Wholesale/Retail (83 companies), followed by Finance/Insurance (32 companies) and Communications/Software (31 companies).

8.Large enterprises utilize personal information and manufacturing-related data more actively.

Regarding the sharing of personal information owned by the company, “Within the company only” (48.5%) and “Sharing with the headquarters in Japan” (45.6%) accounted for larger proportions. Regarding manufacturing-related data, on the other hand, “Sharing with the headquarters in Japan” (49.2%) was more frequently cited than “Within the company only” (43.5%). Some companies share information/data with related companies in the operating country/region, although the number of such companies was small.

China and North Asia Division, JETRO
Tel: 03-3582-5181

Asia and Oceania Division, JETRO
Tel: 03-3582-5179