BUSINESS OUTLOOK SURVEY
Despite Asia’s robust economies, a less lively business environment may be in the offing.
By Don Durfee

Asia’s economies continue their vigorous growth, but how long before the region’s businesses start to look less lively? According to the results of the latest Duke University/CFO magazine Business Outlook Survey, the turning point may be close at hand.

First, CFOs are suffering one side effect of years of strong expansion: it’s getting harder (and costlier) to fill empty jobs. A shortage of skilled labor and the rising cost of labor ranked as the first and third concerns for CFOs in Asia. Respondents predict that their labor costs will jump nearly 10% over the coming year.

Slackening consumer demand is another concern. For example, Kumar Ramu, CFO of Tioxide Malaysia, a subsidiary of US-based chemical maker Huntsman, expects moderate growth in the specialty chemicals business for the coming year. In response, he has trimmed his capital spending plans: the company plans process improvements but not greenfield projects. Tioxide Malaysia isn’t alone. Overall, CFOs have revised their spending plans downward. The average planned increase in capital expenditures has fallen from 16% last quarter to 11%. Also, technology, marketing, and hiring are all forecast to grow more slowly.

While optimism isn’t quite as buoyant today – 66% of Asia’s CFOs are more optimistic this quarter compared with 72% last quarter – it remains remarkably strong and higher than either in the US or Europe. And there are indeed bright spots: the Chinese and Indian economies continue to boom, Japan’s is growing, and that of the Philippines looks healthy, too. Liza Glodoviza, CFO of Wyeth Pharmaceutical’s Philippine consumer products business reports that business is as strong as ever.

But, as less ambitious spending plans show, CFOs are becoming realistic about their optimism.