“ASEAN provides the possibility of optimizing your value chains and gives an attractive complement to the Chinese market.”
Peter Kompalla, Executive Director
of the German-Philippine Chamber of Commerce and Industry
and the German ASEAN Business Council from the Philippines
The large majority of respondents to the annual business confidence survey is in China, underlining the continued significance of the Chinese market for member companies. But as wages and labor costs are rising in China, some German companies are shifting part of their functions to the ASEAN region – be it for restructuring and tax purposes or to create additional sales hubs that are not too far off from their HQ in the Greater Shanghai region.
To that end and by maximizing the larger AHK network with 130 locations across 90 countries with about 45.000 member companies, the German Chamber of Commerce in China Shanghai had the pleasure of hosting four AHK chief delegates from across the Association of Southeast Asian Nations (ASEAN) countries to shed light on the opportunities and risks of investing in the region. Peter Kompalla Executive Director of the German-Philippine Chamber of Commerce and Industry and the German ASEAN Business Council from the Philippines, Dr. Tim Philippi Chief Executive Officer of the Singaporean-German Chamber of Industry and Commerce, Marko Walde Chief Executive Officer of the German Industry and Commerce Vietnam and Jan Rönnfeld Chief Executive Officer of the German-Indonesian Chamber of Commerce and Industry from Indonesia offered the exclusive group of sixty participants not only insights into the recently published AHK ASEAN Index (in cooperation with Ernst & Young) but also gave their personal view from across the region.
The panelists covered a wide range of topics, such as the composition of the labor force, special tax incentives and economic zones as well as recent political developments in their respective areas of expertise. The first piece of good news that all panelists agreed on was that Germany, and German business enjoy a very good reputation across the region. Coupled with relatively lower labor costs, high global competitiveness and high marks for ease of doing business, the stage is set for increasing engagement between German businesses in China and at the ASEAN region. But, of course, there are challenges – overall corruption is still perceived as quite high, while the overall infrastructure leaves room for improvement (for example, weekly power outages in the northern part of Vietnam are not uncommon).
The panelists also agreed that the ASEAN region is not a monolithic market – for one, this is evident in the key industries of the various locations represented at the ASEAN Breakfast – while Singapore is focused on financial services and trade, Indonesia is focused on electronics and the automotive industry, Vietnam is home to textiles and machinery, whereas the Philippines focus on Food & Agricultural business. This variety spreads also to the day-to-day realities on the ground: locations such as Singapore are naturally more advanced (with concurrent higher labor and property prices) whereas countries like Vietnam and Indonesia are thus far primarily engaged in simple manufacturing and will need time to transition to innovation-driven economies. There are currently plans underway to demarcate a single market in the ASEAN region, the ASEAN Economic Community (AEC), which would be an additional draw to the region, especially in light of the shifting global trade agreement landscape.
Following the presentations and a brief but lively Q&A round, the ASEAN Breakfast offered well-fed participants a chance to stretch their legs and partake in our exclusive one-on-one consultations with our ASEAN experts. The fully booked round of one-one-one consultations allowed company representatives from the financial, automotive, pharmaceutical and services industries the chance to discuss their future prospects across ASEAN.
Indeed, what is next for German companies in China? Judging from the ASEAN Breakfast and the high level of engagement of participants with the panelists, the opportunities across the ASEAN region have reached the shores of Shanghai and beyond. And the German Chamber of Commerce in China Shanghai will continue to foster exchanges, connect businesses and highlight opportunities for our members.
This text has been kindly provided by the GC Ticker Team in Shanghai - the leading, bimonthly Sino-German business magazine with a circulation of over 25.000 per issue