European firms betting big on Vietnam, Malaysia and Thailand for growth: report

NINE in 10 European companies that do business in Asean expect growth in the year ahead, with Vietnam, Malaysia and Thailand tipped as the top markets for expansion.

That's according to a report on Monday from Standard Chartered (StanChart), which polled senior executives at 40 Europe-based companies on views of the Europe-Asean trade corridor.

Some 88 per cent of respondents expect business to go up in the next 12 months, on drivers such as a growing consumer market; free trade agreements; and a reliable supply base.

Vietnam was a star destination, with 60 per cent of respondents planning to expand sales and production there, followed by Malaysia (53 per cent) and Thailand (48 per cent).

The Europe-Asean corridor could enable growth in six high-potential sectors, the report said.

Firstly, pharmaceuticals production is expected to grow on the market for affordable generics, especially in Indonesia, Vietnam and Thailand. Such demand should boost European companies that export active pharmaceutical ingredients to regional manufacturers.

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Secondly, European fast-moving consumer goods brands such as Unilever and Nestle stand to gain from a growing middle class and higher consumption. In particular, the food and beverage segment will be a driver in major markets such as Indonesia, Thailand and the Philippines.

Thirdly, Asean's automotive industry is set to focus on production and export of electric vehicles in the post-pandemic rebound, which could benefit European manufacturers and suppliers.

Fourthly, European construction and engineering companies are well-placed to offer green and digital solutions as South-east Asia invests in smart city, transport and logistics infrastructure.

Fifthly, renewable and clean energy initiatives are an opportunity for European firms that provide green financing or technical assistance. That's as Thailand, Vietnam and the Philippines are doubling down on solar energy, with Vietnam also focusing on wind power, the report noted.

Lastly, StanChart flagged how e-commerce in Asean is "poised to be one of the fastest-growing sectors, with sustained momentum even in a post-Covid-19 scenario". The report cited a tie-up between Italian fashion retailer YOOX NetA-Porter Group and Singapore-based e-commerce platform BlinQ as an example of how European and Asean partners can expand market reach.

The optimistic outlook came even as 75 per cent of respondents cited their understanding of regional regulations, payments and infrastructure as a significant medium-term barrier.

Meanwhile, 65 per cent said that adapting business models for the region was a challenge, while 58 per cent fretted over adjusting their supply-chain logistics and supplier relationships.

Said Robert Newell, managing director for Europe global corporates at StanChart: "The Asean markets continue to offer huge opportunity for European companies, both for those looking to diversify and expand their investment and trade activities, and those who are well aware of the deep technological expertise and significant consumer base across the markets."