Economic Strengths & Weaknesses

With Southeast Asian governments working toward stabilization and the United States enjoying good relations with these countries, American businesses and investors have been at the forefront of investment activity. This has helped fuel significant economic growth, as the 10 members of the Association of Southeast Asian Nations (ASEAN) experienced an average 5.0% increase in GDP since the start of the 21st century. The following table shows each country’s estimated economic growth in 2006:

The United States enjoys different types of trade agreements with Southeast Asian countries, including a Free Trade Agreement with Singapore and, currently, and FTA negotiation with Malaysia and Thailand. In August 2006, the United States and the 10 members of ASEAN signed a Trade and Investment Framework Arrangement (TIFA) in an effort to expand trade relations and reduce trade barriers between the U.S. and ASEAN members. The U.S. is the leading trading partner with the Philippines and Malaysia, and the second-largest trading partner with Thailand. The United States has also consistently been the largest foreign investor in Malaysia (over $30 billion) and the Philippines’ ($3.3 billion).

Indonesia

With over 220 million consumers, Indonesia represents Southeast Asia’s largest potential market. Now fully recovered from the 1998 Asian Financial crisis, Indonesia’s GDP is projected to grow 5.5% in 2006. Indonesia has made great progress in putting its macroeconomic house in order and transitioning to its first democratically elected government. From this base, Indonesia is now embarking on a major infrastructure improvement program and is liberalizing the economy to improve the business and investment climates. With continued progress of the Aceh Peace Accords and significant success in counter-terrorism operations, Indonesia has made great strides in creating a more conducive business environment for foreign investors. This progress has led to greater investor confidence and increased Foreign Direct Investment in 2005.

American products are well regarded in Indonesia, respected for their excellent quality and leading edge technology. U.S. exporters enjoy good markets for Medical & Dental Equipment, Wastewater Treatment Equipment & Chemicals, Oil & Gas Production & Exploration Equipment, Airplanes & Parts, Heavy Construction Equipment, Electrical Power Generation & Transmission Equipment, and Food & Business Services Franchises. The tsunami and earthquake reconstruction projects in Aceh Province also offer American companies good export opportunities for prefabricated housing and other building products. Indonesia also has very large geothermal resources that can be developed using U.S. alternative energy technology and equipment. For more information, please visit our site at Indonesia.

Malaysia

Capitalizing on its location, Malaysia has been able to transform its economy from an agriculture and mining base in the early 1970s to a high-tech competitive nation, where services and manufacturing now account for 80% of GDP. Malaysia’s reputation as an attractive destination for both trade and investment continues to evolve, as global interest in this dynamic economy has positioned Malaysia as one of the region’s premier markets. After several years of sustained growth, Malaysia continues to be an economic leader in Southeast Asia and an important market for the U.S., offering much to exporter and investor alike.

Though Malaysia’s per capita GDP is only $4500, its purchasing power is among the highest in Asia, as evidenced by the strong consumer market. U.S. branded products and franchises are popular, with the U.S. accounting for 70% of foreign franchises. Malaysia’s strong middle class also provides opportunities to U.S. organizations involved in the tourism and education sectors. The Government of a Malaysia encourages economic development as an alternative to militant Islam that affects Malaysia’s neighbors in the Islamic world. It is because of this stability that U.S. companies have found Malaysia so attractive that the $30 billion in American investment makes the U.S. Malaysia’s largest foreign investor, with significant presence in the oil and gas sector, manufacturing, and financial services. For more information, please visit our site at Malaysia.

Philippines

The Philippines, with its largely English-speaking population and energetic consumer culture, offers many opportunities for successful market entry to US firms. In economic terms, the country’s growth in 2005 slowed from 2004, which had been the country’s best performing year since 1990. However, despite the slip in the GDP growth rate from 6.1% to around 5%, the country saw a number of positive developments over the past year that bode well for foreign businesses. Following a difficult period of political unrest in mid-2005 leading to calls for the President’s resignation or removal, the administration of President Gloria Macapagal Arroyo redirected its energies towards strengthening the economy. With the introduction of an Expanded VAT in late 2005 and a focus on revenue collections, the government successfully narrowed the budget deficit and was rewarded with signs of renewed investor confidence, including the strengthening of the peso and a rebound in the stock market. Other good news included reforms in the banking sector and an important final ruling of the Supreme Court that opened the door for foreign investment in the mining sector. As the fifth most mineralized country in the world, this development bodes well for renewed growth in this promising sector.

While much of the country still has strong agrarian roots, with extensive plantation and fishing industries, it is rapidly developing its industrial and service capacities. As an important manufacturer and assembler of semiconductors and electronics, nearly 70% of the Philippine’s export revenues now originate from this sector. On the services side, another rapidly growing sector is Business Process Outsourcing (BPO), with over 60 call centers across the country carrying out a range of processes, including client contact, human resource, accounting and legal services. The Philippine market has a strong affinity for US products and technology, which it equates with quality and value. This English-speaking country of over 80m people is a natural fit for American products and services. For more information, please visit our site at Philippines.

Singapore

Beyond its important role as an entrépot, Singapore is also one of the most highly developed and sophisticated industrial, commercial, financial and consumer economies in the world. With a per capita GDP of $24,560, it is an excellent market (and test market) for U.S. products and services. Singapore's role as one of the principal gateways to Southeast Asia means that most American manufacturers can find either interested local buyers or regional ones as Singapore's distributors often sell to other Southeast Asian countries. The challenge is in competing with all the other suppliers from the world since it is virtually a free port.

The Singapore government has developed an outward-looking, export-oriented economic policy that encourages two-way flows of trade and investment. Singapore was the first country in Asia to sign a Free Trade Agreement with the United States that came into effect on January 1, 2004. The Agreement provides a secure, predictable legal framework for protecting U.S. businesses in Singapore, including a basic set of substantive protections that are similar to what Singaporean investors in the United States currently enjoy under U.S. law. There are more than 1,300 U.S. firms already operating in Singapore, many of which have their Asia Pacific overseas headquarters in the country. This reflects the fact that Singapore is a regional commercial hub and is considered by many to be the launching pad into the surrounding region – including China and India. For more information, please visit our site at Singapore.

Thailand

Thailand continues to be one of the faster-growing economies in Southeast Asia, with GDP growth rates of at least 5 percent from 2002-2004. Despite the effects of the tsunami at the end of 2004, the Thai economy is expected to have registered 4.7 percent growth in 2005. The Kingdom continues to benefit from political stability, growing exports, and strong domestic consumption. Per capita income exceeds $2,500, and there is a growing middle-class increasingly interested in higher-end products and services from abroad. Thailand has the largest automotive production base in Southeast Asia, and surpassed the one million vehicle production mark in 2005, with approximately 400,000 vehicles exported to other countries in the region.

Thailand is the second nation in Southeast Asia to embark on free trade negotiations with the U.S., and both sides hope to complete negotiations on an agreement in 2006. Through the FTA, the U.S. hopes to reduce high tariffs on a number of imported products as well as non-tariff barriers on both industrial and agricultural goods, restrictions on access to the services market, and deficiencies in Thailand’s intellectual property protection. Under a separate 1966 Treaty of Amity and Economic Relations, U.S. companies operating in Thailand are afforded national treatment, or an “equal playing field” with Thai companies, a privilege offered to no other trading partner. Over 1,400 U.S. companies have taken advantage of the Treaty’s privileges, and investment matters are currently being discussed as part of the FTA negotiations. For more information, please visit our site at Thailand.

Vietnam

With annual growth rates reaching 7-8 percent in recent years, Vietnam possesses one of the world’s fastest growing economies. This strong economic expansion, in combination with market access openings achieved as a result of the 2001 U.S.-Vietnam Bilateral Trade Agreement (BTA), is creating significant new export opportunities for American firms. Since the BTA came into force, American exports to Vietnam have increased by over 200%. Vietnam’s ongoing negotiations to join the World Trade Organization (WTO), possibly as early as 2006, should further bolster the country’s movement toward a more open economy.

Projects related to infrastructure development currently provide some of the most promising areas for U.S. exporters to Vietnam. American firms are particularly active in the aviation, power, oil and gas, telecommunications and IT sectors. As Vietnam fully implements its BTA commitments and assuming entry into the WTO, prospects for U.S. firms in the financial services sector should improve significantly over the next few years. For more information, please visit our site at Vietnam.