By the end of 2015, the 10-member nations of ASEAN will be united in a common market where the long-formulated idea of a single regional market, otherwise known as the ASEAN Economic Community (AEC) 2015, is set to be realised.
The idea of an ASEAN single market and production base is based on the free flow of goods, services, investment, capital, and skilled labour among ASEAN member nations.
As stated in its blueprint, AEC 2015 envisions a single market and production base, a highly competitive region, a region of equitable economic development, and a region fully integrated into the global economy.
There are doubts however, if countries in the region are ready for the AEC. Thai SMEs, for example, have requested for a fund to be set up to ensure that they have adequate resources to explore opportunities in other countries. Small Philippine businesses have expressed that they feel left out by the promises offered by the AEC 2015.
Although the AEC envisions the free flow of labour, professionals have to ensure that they must pass licensing tests in certain countries so that they can practice their professions in those territories. Observers believe that the changes that AEC plans to bring may not happen overnight, much less in 2015.
Still, Singapore businesses can consider the AEC a potential game-changer. Under the AEC scheme, Singaporean businesses will find greater ease operating in a more integrated production base. Besides having lower trade barriers and increased trade flows, Singaporean businesses can access larger markets and enjoy the same incentives as local businesses. Singaporean businesses can expect more doors of new investment opportunities opening thanks to this free trade scheme.
The entire purpose of establishing AEC and the most tempting outcome from the regional integration is the full elimination of both tariff and non-tariff barriers (NTBs) for its members. The full elimination of NTBs for AEC will create a major relief for Singaporean businesses which are seeking business expansion within the region.
However, while opening up to the market is highly encouraged for the ten-member nations, adapting to the AEC may become a double-edged sword for Singaporean businesses. With AEC targeted to take effect in a little more than a year, there is now a greater sense for businesses in the entire region to step up protection.
The most common rationale to start thinking about protecting goods is the explosion of new competition in ASEAN’s future market. Singaporean businesses can expect a sudden flood of other players competing against them locally. At the same time, nationalist groups are worried about the idea of a surge of foreign goods invading their country. Resistance to changes which will be brought by the AEC is growing.
Singaporean businesses will also need to gain a better understanding of their potential overseas market, to ensure seamless market entrance and stronger foothold. Not only do they need further guarantee that their trade is protected, but they also need to be equipped with valuable market intelligence on the financial viability of the buyers – or, in the case of buyers in foreign countries, the trading risks peculiar to the country itself.
The AEC is definitely still a work in progress, with each member state being challenged to counter its own internal issues. Still, the future potential remains clear for AEC and the opportunities it offers for business can stretch beyond imagination.
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Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994.