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Assessing Foreign Investment Prospects in ASEAN Through the Business Optimism Index

Published: 24 Jul 2015 03:03:55 PST

By: Dezan Shira&Associates


In recent years, ASEAN has become a hotbed for foreign investment. In 2014, ASEAN member states combined for over US$2.3 trillion in total GDP. Each ASEAN nation, however, present their own unique advantages and challenges for foreign investment. The ASEAN Business Optimism Index, released each quarter by Dun & Bradstreet, provides in-depth insight into business sentiment for the quarter ahead as measured by sales volume, net profit, selling price, new orders, inventory, and employment across sectors and industries.

In this article we provide an overview of business optimism in the six biggest ASEAN nations by GDP based on this Business Optimism Index.


Vietnam, while only contributing six percent of ASEAN’s total GDP in 2014, is notably the star performer in the region for the coming quarter, with overall confidence rising sharply from 27 percent to 43 percent. Five of the six optimism parameters have risen for Q3 of 2015, led by sales volume, net profit and new orders, each increasing nearly 30 percentage points. Vietnam’s strong growth and optimism is driven primarily by its construction and manufacturing sectors. Manufacturing is expected to grow by over 8 percent year-on-year for the first half of 2015, driving Vietnam’s GDP to an expected 6.1 percent over the same period.


Business confidence in Singapore remains consistently optimistic and extends the positive gains made during Q2 through to Q3. Optimism growth overall was very respectable across most of the optimism parameters, led by the service sector. The service sector in Singapore was the most hopeful sector last quarter and continues apace to lead in growth. Both the construction and manufacturing sectors picked up strongly, with manufacturing in particular staging a drastic turnaround in confidence from last quarter.

The Philippines

Business confidence in the Philippines has generally retreated from the smooth-sailing highs of previous quarters. However, growth momentum in the republic, which accounts for 12 percent of ASEAN’s total GDP, has not yet run out of steam. Despite some quarter-on-quarter declines, optimism levels for sales volume, net profit, and new orders are still noticeably higher than the other countries surveyed, and private demand, credit expansion and public spending remain positive overall. Despite some slowdown, the Philippines is still expected to be the fastest growing economy for 2015, not just in ASEAN but in the whole of Asia.


At almost US$88 billion, Indonesia accounted for over 38 percent of ASEAN’s total GDP in 2014. However, business confidence overall in the republic continues to be dampened by weak commodity prices and sluggish exports and has hence become increasingly reliant on private consumption and investment for growth. Business optimism in Indonesia registers at 35 percent, still relatively high overall. However, Indonesia’s quarter-on-quarter optimism is down for each optimism parameter except for inventory levels.


Similar to its export-driven neighbors, Thailand’s economic fortunes are somewhat dependent on the global recovery. Despite a slower growth forecast for 2015 due to weakness in global demand for the Kingdom’s exports, investment in the private sector is increasingly buoyant and is expected to carry to the economy in the latter half of 2015. According to the Index, although all optimism parameters have decreased slightly quarter-on-quarter, most have increased year-on-year. This shows some promise for the nation, with the majority of respondents still expecting sales volume, selling price, new orders and employment to pick up in Q3.


Malaysia, while accounting for 13 percent of ASEAN’s total GDP in 2014, has seen business confidence plummet to historic lows, with the overall index hovering around near-contractionary levels of 2.5 percent. Malaysia has faced an almost perfect storm in the last two years from flight tragedies to natural disasters, forcing the Ringgit down to a ten-year low against the U.S. Dollar. One silver lining amidst Malaysia’s struggling economy is the boost Malaysian exports may see from the weak Ringgit in the coming years.

This article was first published on ASEAN Briefing

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.

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