Slowing growth in China, uncertain US interest rates, regional geopolitical tensions and growing concerns around cyber security have combined to make it a challenging six months for Asia Pacific business leaders. Not surprisingly, the results from PwC’s 2015 APEC CEO Survey reveal CEO confidence in 12 month revenue growth declining sharply. Nevertheless, APEC CEOs are still looking to expand into new APEC geographies – a testament to their ability to balance volatility against opportunity. This investment is central to supporting inclusive growth in the region.
The over 800 CEOs and industry leaders in our 2015 APEC CEO Survey – launched at the APEC CEO Summit in Manila this week – were polled between June and August. At the start of our work, confidence levels were similar to 2014, but this quickly changed as the US Federal Reserve prepared to raise interest rates and China devalued its currency. Almost 90% of the CEOs also said a rise in regional geopolitical tension would have a negative impact on their business. The survey results are a timely window into how these events are influencing CEO decision making.
When identifying current concerns, cyber security tops the CEO list. Not surprising, given some of the major cyber events we’ve witnessed recently. The CEOs I spoke with no longer see cyber security as a matter left to the IT department or risk management office. Confidence in data security is a worldwide issue – one that sits at the top of the CEO agenda.
So with all these risks amplifying volatility and creating new uncertainties for APEC CEOs across industries and economies, how are they responding?
1. Investing in the region
Although down from 67% last year, I’m glad to see the majority of CEOs (53%) still plan to increase investments in the APEC region over the next 12 months. There’s also a clear reallocation and diversification of investments within the region. While China, the US, and Indonesia remain the main draws for CEO business investments, the Philippines, Viet Nam and Singapore economies are attractive to APEC CEOs and where half of CEOs plan to increase investments in the year ahead. And across the Pacific, Chile and Peru are also attracting more investors.
2. Focusing on emerging tech and R&D
The business leaders we interviewed are also focused on the opportunities new technologies can bring to their business, with 63% expecting a new wave of business spending to modernise their operations. Most CEOs point to expanded broadband access and increased participation in the digital economy as holding the most promise to foster regional connectivity, surpassing trade agreements and transport corridors. In PwC Strategy&’s Innovation 1000 Study, our researchers found that Asia has now become the number-one location worldwide for corporate spend on R&D.
3. Supporting inclusive growths
When we ask CEOs which factors are key for inclusive growth in the region, almost all of them point at expanded access to high-quality education and the upgrade of transport systems. Other important areas include greater economic incentives for savings and access to financial services, better access to health care and more reliable access to power and electricity. Businesses can and should play a key role in addressing all these challenges, and real progress needs businesses working collaboratively with governments, universities and NGOs to spur global competitiveness and continual innovation.
This is just a sample of the interesting results coming out of the PwC APEC 2015 CEO Survey. You can explore the full report and more APEC research on our website at pwc.com/apec.
Dennis Nally leads the global network of PwC firms. He has extensive experience serving large multinational clients in a variety of industries, principally focusing on technology and life sciences. Dennis is also a frequent speaker and guest lecturer on issues affecting the professional services profession and the global capital markets. Read Dennis Nally's full biography.