US businesses confident of continued success in Asean

“I do not think American companies anywhere in the world would fear competition. We rise to the challenge and if that challenge is Chinese competition, we would rise to that challenge too” DARREN BUCKLEY Thailand country head, Citibank photo: Pornprom Satrabhaya

Despite some dramatic shifts in foreign policy under US President Donald Trump, US businesses operating in Southeast Asia remain firmly confident of their foothold and welcome growing competition from their Chinese counterparts, say American executives.

As Southeast Asia is considered its back door, China has been investing significantly in Asean countries to reap benefits from close geographical proximity and a growing, young middle class, said Alexander Feldman, president and chief executive of the US-Asean Business Council.

Chinese investments flowing into Asean tend to be government-led, as exemplified by the One Belt, One Road infrastructure programme, but private Chinese enterprises have also begun to make their presence felt, he said.

"Alibaba and Tencent are changing that, but they have got a long way to go before they get to what we [American businesses] are sitting today," said Mr Feldman, referring to the e-commerce and messaging giants. "I do not see any real challenge from Chinese investment for American businesses [in Asean]."

The investment pie in Asean is growing bigger and bigger, he said, as that the region's young population presents an opportunity for greater business expansion.

"The opportunity is for everyone, [be they] Thai, American or Chinese entrepreneurs. This region is going to be on the upswing for the next several next decades."

Major US multinational enterprises such as General Electric, Coca-Cola, Citibank, Procter & Gamble, and Dow Chemical have been in Southeast Asia for decades. US companies use Asean as a production platform and a base to sell their products regionally and globally, with the region's low minimum wage attracting continuous inflows of foreign direct investment (FDI).

But the rivalry between Chinese and US businesses is building up, particularly in Asean's online sphere. Alibaba and its US counterpart Amazon, which dominate the online retail domain in their respective countries, are now looking to establish unassailable regional e-commerce platforms.

Alibaba bought Lazada Group for US$1 billion last year, bringing Asean's biggest e-commerce website under its umbrella. Central to Lazada's strategy is building a system that can deliver goods into Southeast Asia from merchants in other countries, a cross-border model akin to Alibaba's.

Amazon, meanwhile, has not yet voiced its intentions for Southeast Asia -- its main focus in the region at the moment is India -- but industry expectations are that its constant quest for growth will lead it there by 2017.

Business competition is, however, healthy as it compels companies to deliver better solutions for customers, said Darren Buckley, the Thailand country head for Citibank and chairman of Association of International Banks.

"I do not think American companies anywhere in the world would fear competition. We rise to the challenge and if that challenge is Chinese competition, we would rise to that challenge too," he said.

The US was the third largest investor in Asean in 2015 with commitments totalling $13.65 billion, accounting for 11.3% of total FDI inflows.

China, at $8.26 billion or 6.8%, was the fourth largest source of FDI in Asean, behind the European Union, Japan and the US, according to Asean Investment Report 2016.

On the diplomatic front, there are concerns about how Trump administration policies could sour longstanding US-Asean relations. Mr Trump's trade protectionist rhetoric, withdrawal from the Trans-Pacific Partnership trade pact, and abandonment of the Obama administration's "pivot to Asia" have raised eyebrows among policymakers and entrepreneurs.

In stark contrast to Mr Obama, Mr Trump is unlikely to press Asean countries on human rights issues as his foreign policy centres on a shift toward interests from values, said Thitinan Pongsudhirak, director of Institute of Security and International Studies at Chulalongkorn University.

"It is not as if human rights and basic freedoms will be abandoned altogether in favour of American interests in Asia, but the ordering sequence and policy nuances will follow a different track," he said.

"The rebalancing of Mr Trump's preference for interests over values chimes with last year's election victory of Filipino President Rodrigo Duterte, whose strongman instincts, strongarm tactics in his deadly war on drugs and overall governing style have violated human rights and fundamental freedoms."

Essentially, Mr Trump's treatment of the Philippines and Thailand, America's notable security allies in the region, shows how he will deal with individual countries and Asean as a whole.

"Mr Trump's telephone calls to [Thai Prime Minister] Prayut [Chan-o-cha], Duterte and [Singaporean Prime Minister] Lee [Hsien Loong] were designed to rally US allies and partners in Asean as Washington further isolates North Korea and weighs its options to respond Pyongyang's nuclear and missile programmes."

As Mr Trump's foreign policy continues to unfold, some Asean countries are evidently leaning closer toward China for economic gains and security arrangements in spite of territorial disputes on the South China Sea.

Besides Cambodia, a major recipient of Chinese funds, the Philippines has declared itself open to exploring the South China Sea's resources with China and Vietnam, while Thailand's military government recently purchased 34 armoured vehicles worth 2.3 billion baht from China in addition to procuring a S26T Yuan-class submarine worth 13.5 billion baht.

"Before, most Southeast Asian states wanted to benefit from Chinese regional economic initiatives and from American pushback against China," said Malcolm Cook, a senior fellow at the Institute of Southeast Asian Studies in Singapore.

"The second part of this balance is now in question. Hence, the pressure to acquiesce to China diplomatically and on security issues is stronger."

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