45% of ASEAN CEOs very confident of Growth
90% of ASEAN CEOs concerned with availability of key skills – highest in the world
More than half of ASEAN CEOs plan to increase the size of their workforce
SINGAPORE, 22 January 2014 – 45% of ASEAN CEOs are very confident of growth in the next 12 months, with a whopping 96% confident of growth in the longer term over the next three years, according to PwC’s 17th Annual Global CEO Survey.
Twice as many CEOs around the world as last year believe the global economy will improve in the next 12 months, and 39% say they are ‘very confident’ their company’s revenues will grow in 2014.
Yeoh Oon Jin, Executive Chairman of PwC Singapore, comments on the ASEAN survey results,
“Confidence in ASEAN continues to be high, with 96% of ASEAN CEOs confident about growth over the next three years. While they also acknowledge that there continue to be challenges and threats, especially when dealing with changing conditions like slowing growth in developed economies, ASEAN CEOs are largely positive about growth prospects for both the short and longer terms.
However, worries continue to loom, with the top business threat listed by ASEAN CEOs being availability of key skills (90%). This percentage is the highest in the world, reflecting a pressing need to attract, develop and retain talent in the region.
For the future, ASEAN CEOs tell us they expect three major global trends – technological advances, demographic shifts and resource scarcity and climate change - will have a major impact on the future of their businesses. Finding ways of turning these global trends to their advantage will be the key to future success.”
Only 6% of ASEAN CEOs believe the global economy will decline in the coming year, with 48% anticipating it will stay the same, and 45% expecting an improvement.
Globally, the number of CEOs who see improvement in the global economy over the next 12 months leapt to 44%, up from only 18% last year. And just 7% predict the global economy will decline, sharply down from 28% in 2013.
Regionally, CEOs in Western Europe are the most confident about short-term global economic prospects (50%), in line with signs of improving conditions. They are followed by those in the Middle East (49%), Asia Pacific (45%), Latin America (41%), North America (41%) and Africa (40%). CEOs in Central and Eastern Europe show the lowest level of confidence at 26%.
By industry globally, CEOs in the Hospitality and Leisure sector are most confident about prospects for the next 12 months (46%), followed by those in Banking and Capital Markets (45%), Retail (44%), Financial Services (44%), Asset Management (44%), Communications (44%), and Engineering & Construction (41%). CEOs in the Metals industry are least confident at 19%.
For their own companies, globally, 39% of CEOs say they are ‘very confident’ of revenue growth prospects for the next 12 months. That’s up from 36% last year. Confidence in revenue growth reached a low of 21% in 2009.
CEOs in the Middle East, 69%, are the most confident of short term revenue growth, up from 53% last year. They are followed by those in Asia Pacific at 45%, up from 36% last year.
In Western Europe, confidence has risen 8% from last year’s trough to reach 30%. But in Africa confidence has continued to fall. Just 4o% of African CEOs are very confident of 12-month growth, down from 44% last year and 57% in 2012. Confidence has also dipped among Latin American CEOs, to 43%, down from 53% last year. Meanwhile, CEO confidence in North America remains flat
At an individual country level, confidence varies very widely: the highest levels of CEO confidence are found in Russia, where 53% of CEOs are very confident of revenue growth, followed by Mexico (51%) and Korea 50%. Korea has had a huge swing in confidence up from only 6% last year. They are followed by India (49%), China (48%), Switzerland (42%), Brazil (42%), US (36%), Germany (33%), UK (27%), Canada (27%), Japan (27%), Italy (27%), France (22%) and, finally Argentina where only 10% of CEOs are very confident of revenue growth in 2014. (see note 2)
CEO top concerns
The top potential economic and policy threats highlighted by ASEAN CEOs are exchange rate volatility (79%) , continued slow/negative growth in developed economies (77% ), over-regulation (77%), slowdown in high-growth markets (75%), and government response to fiscal deficit and debt burden (75%).
Of business threats, a massive 90% of ASEAN CEOs cited availability of key skills – the highest in the world, 80% say rising labour costs in high-growth markets, and an equal 68% deemed high and volatile raw materials prices and bribery and corruption as potential concerns.
Said Alywin Teh, Singapore Consulting Leader, PwC's Southeast Asia Consulting (Singapore),
"While interest in Southeast Asia continues to develop, it must be matched by available key talent, lest the growth might not reach its full potential. Moreover, with 65% of ASEAN CEOs indicating that they plan to boost headcount, the attraction, development and retention of talent in the region is essential to successful growth in the region."
Globally, as CEOs’ viewpoint on the economy slants upward, their major concerns have also changed. Government action, or the lack of it, tops the list of CEO worries. The level of concern about over-regulation at 72% and fiscal deficits at 71% are as high as they have ever been. Countries where CEOs are particularly worried about over regulation include France 88%, Australia 85%, India 82% and Germany 77% . In the US it is fiscal deficits that have CEOs most worried with 92% CEOs expressing concern, followed by Argentina at 90% and France at 84%.
In addition, all CEOs surveyed say they are worried almost as much about a slowdown in emerging economies, (65%), as they are about sluggish growth in developed markets (71%). Other top concerns include increasing tax burdens (70%), as well as availability of key skills (63%), exchange rate volatility (60%) and lack of stability in capital markets (59%).
But such topical subjects as cyber threats – including lack of data security – and the speed of disruptive technological change are named as threats by less than half of all CEOs.
Talking in more detail about regulation, nearly 80% of CEOs say it has increased costs, while 52% say that regulation makes it more difficult to attract skilled workers. And 40% say regulation has inhibited their efforts to pursue a new market opportunity or to pursue innovation. On the positive side, over half of CEOs credit regulation for helping to improve service delivery and quality standards.
Preparing for the future
When asked what would drive future growth, 39%of ASEAN CEOs see opportunities in the next 12 months coming from increasing their share in existing markets, 28% say from product/service innovation, and 13% cited mergers and acquisitions.
ASEAN CEOs also named China (41%), Indonesia (24%) and India (21%) as the countries most important to them for their growth in the next 12 months.
Globally, new product or service development leads the list of opportunities, cited by 35% of CEOs compared with 25% last year. Those planning mergers and acquisitions or strategic alliances in the next year have risen to 20%, up from 17% a year ago. CEOs also say they are exploring growth in countries beyond the BRICs (Brazil, Russia, India and China), and see good growth prospects over the next three to five years in Indonesia, Mexico, Turkey, Thailand and Vietnam. The US, Germany and the UK are also ranked highly.
CEOs are also more positive about hiring plans for the coming year, with an encouraging 65% of ASEAN CEOs expecting to boost headcount, and only 11% say they are likely to shed jobs.
Globally, half of CEOs say they expect to add to staff in the next 12 months, compared with 45% who had such plans last year. Industries where job prospects look most positive are technology (63%), business services (62%) and asset management (58%) (see note 3).
The international tax system has fallen short in the eyes of CEOs around the world, the survey finds. Nearly two-thirds (65%) of all CEOs surveyed say the international tax system is in need of overhaul, with the ASEAN percentage standing at 66%. Notably, 85% of ASEAN CEOs say that being seen as paying their ‘fair share’ of tax is important to their company, notably higher than the global 75%.
Said Alan Ross, Tax Leader, PwC Singapore,
"The majority of ASEAN CEOs continue to agree that tax policies and competitive tax regimes are key factors in decision making. Given the uncertainties and inadequacies in the current international tax environment, there are also encouraging indicators from the survey that ASEAN CEOs are supportive of the G8/G20 and OECD reform initiatives. At the same time, they are also worried about over-regulation, which could possibly stem from these reforms. However a surprising number of ASEAN CEOs agreed that multinationals should be required to publish revenues and tax paid for each territory where they operate. Again compliance procedures and related cost burdens created by such requirements need to be carefully evaluated by authorities and regulators."
Most CEOs surveyed globally (59% globally and 58% ASEAN) say tax policies and competitiveness of tax regimes are key factors in corporate decision making, and agree that multinational companies should be required to report revenues, profits and taxes paid for each country in which they operate. However, when asked if tax authorities around the world should freely share information about companies, only about half of ASEAN CEOs (49%) agreed, compared with the global percentage of 58%.
While only about a quarter (27%) of all CEOs surveyed say current OECD attempts to reform the international tax system will be successful in the next few years, 34% of ASEAN CEOs believe that the attempts will be successful.
Dealing with Governments
The top three priorities that ASEAN CEOs think the government should be are to create a skilled workforce (61%), ensuring financial sector stability (55%) and improving the country’s infrastructure (49%).
Encouragingly, 66% of ASEAN CEOs thought that their government has been effective in achieving financial sector stability.
Globally, CEOs say that government priorities should be to ensure financial stability (53%); improve infrastructure (50%); and help to create a more internationally competitive and efficient tax system (50%). But less than half (46%) of CEOs say the government in their home country has effectively ensured financial stability, and just 37% give high marks for improved infrastructure. More than half (51%) of CEOs say their government has been ineffective in improving the tax system.
|Very confident of short-term revenue growth|
3. List of CEOs planning job increases by industry.
|Percentage of CEOs expected to boost headcountin next 12 months (by industry)|
|Entertainment & Media||53%||43%|
|Banking & Capital Markets||52%||44%|
|Engineering & Construction||51%||52%|
|Hospitality & Leisure||51%||33%|
|Consumer & Industrial Products Services||46%||N/A|
|Forest, Paper & Packaging||45%||32%|
|Pharmaceuticals & Life Sciences||44%||38%|
|Transport & Logistics||40%||43%|
|Power & Utilities||36%||41%|