Southeast Asia is truly a pleasant place. Not content
with having paradise islands such as Pangkor, Phuket, Palawan and Pangandaran
in our midst, we are also gracious to a fault.
We're truly like the polite
kids waiting patiently for our turn at the swings in the playground, letting
others from the North, South, East and West have their go first. But no longer.
Now, it's our turn. Our turn to rise.
In fact, one day in June this
year, traders on Southeast Asian stock markets will wake up and be able to seamlessly
trade shares on each others' exchanges. The Asean Trading Link will initially
connect Bursa Malaysia and the Singapore Exchange, with the Stock Exchange of
Thailand joining in August. Hanoi, Ho Chi Minh City, Manila and Jakarta are
slated to join later. This is an unmitigated benefit. Investors will gain a
vast number of options, companies will get larger investor bases, and both
groups will enjoy lower costs.
How did this come to be? Asean
has sometimes been dismissed as a "talking shop", but as the trading
link indicates, regional cooperation has very tangible benefits.
Southeast Asian leaders have
long known that without political cooperation, their region would remain an
economic backwater. All Asean countries are more important to foreign investors
if they are considered as one node in a larger regional market of nearly 600
million people than as medium-sized economies with intricate and complex
cultures.
Asean leaders have been fairly
consistent in pushing for more regional cooperation. Successful implementation
of the Asean Economic Community will improve the scale efficiencies, dynamism
and competitiveness of Asean, as well as providing greater visibility and clout
for its member states.
Specifically, the AEC aims to
make progress on four fronts by 2015. First, a single market _ the Asean Free
Trade Agreement will be expanded to zero tariffs on almost all goods by 2015.
Second, the development of hard (e.g. roads) and soft infrastructure (e.g.
human capital) through the Asean Master Plan on regional connectivity is
particularly necessary given that Asean is estimated to require nearly $1
trillion in infrastructure investment between 2010 and 2020. Third, equitable
development will be prioritised through engagement with SMEs, which account for
96% of enterprises and between 50-85% of domestic employment across Asean.
Fourth, Asean plans to remain engaged with the global economy through
regional-level free trade agreements. Today, Asean has such agreements with
China, Japan, Korea, India, Australia and New Zealand.
These are vast and ambitious
pursuits, and 2015 is just three years away. At the moment, the AEC Scorecard
shows the region behind schedule, having achieved only 73.6% of Phase 1 goals.
This is the low-hanging fruit _ the remaining issues, such as agriculture,
non-tariff barriers, integration of the less-developed CLMV (Cambodia, Laos,
Myanmar (Burma), Vietnam) members, and financial integration, are more
challenging. Come 2015, the AEC vision will likely be only partially implemented.
However, momentum has been
established, and a more conducive commercial environment has already been
brought about. This is because businesses are being told that they can plan
investments and jobs in a region that is getting more tightly interlinked. As
major changes do come about, these firms will have real competitive advantages
against their rivals.
So it is no surprise that a set
of ambitious companies have emerged as poster children for regional
integration. They are seizing on the new opportunities that are being created
by deeper integration, such as new ways of coordinating supply chains, or
access to new markets for established products. (These pioneers will be
featured in a new report by The Boston Consulting Group on Southeast Asian
companies that are fast gaining on the world's largest companies.)
These companies share some
characteristics. Most strikingly, they have an international mindset, which
gives them the appetite and ability to make cross-border investments and
acquisitions. Singaporean and Malaysian banks and telecoms, for instance, have
invested heavily in the region. Siam Cement, Thailand's largest conglomerate,
is gearing up to spend 75% of its $5-billion investment budget for 2012-16 to
acquire assets, many in Asean countries _ and there are others.
Second, and this follows from
the first, these businesses are mindful of the risks of cross-border operations
and thus manage them effectively. They pursue sales opportunities across the
region while focusing relentlessly on cost efficiencies by integrating their
operations across it, managing through a lean but effective corporate centre.
For instance, the Philippine pharmaceutical company Unilab markets its
affordable analgesics and cough and cold mixtures all over Southeast Asia through
joint ventures, while the Axiata group of mobile operators is looking into
network-sharing.
Finally, these companies
navigate government relations to further their integration agendas. AirAsia,
Asia's largest budget airline, is opening a regional office in Jakarta to
engage with the Asean Secretariat there and work toward a single Asean sky and
aviation authority. Late last year, a group of business luminaries, including
the CEOs of CIMB Bank, AirAsia, Bangkok Bank and Ayala Group launched the Asean
Business Club, a private-sector initiative to engage in Asean's community
building efforts.
These flag-bearers are not
merely benefiting from an ongoing trend, they are helping to shape it. Their
participation is creating the conditions for a truly regional economic union,
in which economic activity increases exponentially by having access to a common
market and production base.
As these examples become clear,
other Asean businesses will no doubt recognise the opportunities and challenges
of the AEC to shape their business agendas.
It's truly our turn now. That
said, many businesses remain unaware, indifferent or sceptical about the AEC.
Its progress will take them by surprise. Let it not be our corporations.
Vincent Chin
Bangkok Post
Business & Investment Opportunities
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