Friday, February 21, 2014

ASEAN Integration Monitoring Report (English Edition)

Since the adoption of the ASEAN Economic Community (AEC) Blueprint in 2007 and towards its realisation post-2015, the Association of Southeast Asian Nations (ASEAN) has undertaken various efforts to monitor its implementation.

Building upon the AEC Scorecard, the inaugural ASEAN Integration Monitoring Report assesses the progress in four AEC-related dimensions: merchandise trade, trade facilitation, services trade and investment. It focuses on policy and market integration outcomes achieved in ASEAN Member States, as part of the first pillar of the AEC formation process.

Released by the ASEAN Integration Monitoring Office of the ASEAN Secretariat, together with the World Bank - East Asia Pacific Region, this report is the first component of the ASEAN Community Monitoring and Evaluation Program (AECMEP).

The ASEAN Integration Monitoring Report shows that ASEAN’s broader economic agenda has brought significant gains to the member states. As a trade-creating block, together with the improvement of trade facilitation, ASEAN integration has led to an increase in intra-ASEAN trade, parallel with an increase in ASEAN’s trade with the rest of the world. ASEAN also had modest contributions to the development of the services sector and the enhancement of foreign direct investment (FDI), both for extra- and intra- regional inflows.

AEC efforts have also helped in narrowing the development gap and accelerating development in Cambodia, Lao PDR, Myanmar and Viet Nam, whose share of GDP in ASEAN grew from 3.5% in 1990 to nearly 10% in 2011. This is further reflected in the implementation rate of 79.7 % of the AEC Scorecard as of August 2013.

Despite these achievements, there remain several areas where implementation has been limited. Although ASEAN’s gains came from enhancing trade facilitation, services and investments, efforts are still needed in these critical areas as well as in the transport sector. Domestic regulatory reforms, enhanced capacities, strong internal coordination and sufficient budgets are imperatives in order to address the implementation challenges.

The ASEAN Integration Monitoring Report further suggests priorities for future actions for the effective implementation of the AEC 2015 goals.

Download the report here

Saturday, January 11, 2014

Five free reports on ASEAN Economic Community, SMEs, investment, commercial opportunities, workskills

ASEAN Strategic is pleased to present five recent and detailed reports providing useful insights into the ASEAN Economic Community for private sector businesses and investors. Their publishers have kindly made digital versions available free-of-charge for a period of time:

Survey on ASEAN Competitiveness 2013 (December 2013) published by the ASEAN Business Advisory Council reports that the majority of businesses surveyed perceive ASEAN economic integration “more of an opportunity rather than a threat”.  However, ASEAN-BAC strongly urges ASEAN to strengthen the process of information dissemination and consultation with businesses, particularly SMEs, on AEC initiatives. Download the report here.

ASEAN Business Outlook Survey 2014 (August 2013) published by the US Chamber of Commerce reports on the views and expectations of US companies in all ASEAN countries. As the South East Asian single market, AEC 2015, approaches, 79% of respondents reported that their company’s level of trade and investment in ASEAN has increased over the past two years, and an overwhelming 91% expect it to increase over the next five years. Download the report here.

Investing in ASEAN 2013/2014 (October 2013) published by Allurentis 
reports on ASEAN’s economic performance and its progress towards regional integration. It features sectoral articles on business,  finance, legal, energy, industry, manufacturing, infrastructure, aviation, IT, telecommunications, mining, agriculture, healthcare, education, real estate, sport and tourism, and profiles on each of the 10 member countries of ASEAN. Download the report here.

ASEAN Workforce Skills – Employer Survey 2013 (August 2013)  published by the Australian Trade Commission reports on ASEAN employers’ skill needs, current training arrangements and extent of engagement with local and international providers.  It outlines the sectors of focus in Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam, and some of the high level findings of the overall survey project.
Download the report here.

SME Guidebook Towards the AEC 2015 (November 2013) published by the ASEAN Secretariat
to enhance greater awareness of small and medium enterprises to a wide range of financial facilities, financial and non-financial institutions available to them in all ten ASEAN member states as well as the market opportunities in ASEAN and beyond. It also details trade promotion centres and self-certification issuing authorities.

Download the report here..

Monday, December 23, 2013

Countdown to 2015: Creating ASEAN Champions through regional planning, M&A strategy and branding

With the ASEAN Economic Community to be formally constituted on 31 December 2015, business advisory firms JWT and A.T. Kearney recently collaborated in an in-depth study of the new bloc (representing 10 countries with a combined 600 million people and a regional GDP of $2.3 trillion) and its impact.

Through conversations with 50 corporate leaders, the majority from domestic companies across South East Asia, their study indicates the AEC is high on their radar screens: 64% say their organizations plan to enter new markets in the region once the AEC kicks in.

Most CEOs in the study cite “the need for scale to deal with more intense competition” as the main reason for increased M&A activities in their industry. Additionally, 60% will expand their current portfolio of brands and products, and 24% will create new brands or product lines altogether after 2015 in order to reach more consumers.

In a December roadshow through major South East Asian cities, the firms outlined their report’s conclusion that ASEAN companies “need to create a regional game plan, map out an M&A strategy, and start investing more in branding over the next two years if they want to emerge as regional champions.”

According to Chua Soon Ghee, A.T. Kearney’s Southeast Asia Managing Partner, “South East Asian companies that map out a regional strategy now and start investing in building solid brands are poised to emerge as winners in the AEC. Those that don’t have a regional game plan risk becoming their competitor’s lunch.”

Daniel Siswandi, Strategy Head, JWT Indonesia, believes ASEAN consumers aware of the integrated market are excited about the prospect; but regional institutions, businesses and marketers are undervaluing the role of branding.

“Companies have to make the switch from manufacturing products to selling brands. The region’s consumers are moving fast into the middle class and are much more sophisticated, in terms of what they buy and what they expect,” said Bob Hekkelman, JWT’s Southeast Asia CEO.  “It’s time to get out of the commodity game, move up the value curve and form a long term relationship with consumer through brands.”

"Everyone in the region is buying into ASEAN but we’re not aware of any effort to clarify the ASEAN brand," added Lulut Asmoro, CEO, JWT Indonesia.

In Jakarta, panelists provided additional background and perspective to the historic formation of the ASEAN Economic Community.

V. Raman Narayanan, Group Head ASEAN Affairs, AirAsia, described the AEC as returning the region “to what we were before Portuguese arrived in 1500s." However businesses need to adopt an ASEAN mindset – similar to AirAsia’s positioning as a regional airline in 2001 – to take advantage of their location within Asia's “South East sweet-spot” of “geography, demography and economy.” He also opined that if business didn't proactively back the AEC, governments may turn it into "swiss cheese."

John Riady, Executive Director, Lippo Group, emphasised four critical issues that still needed to be addresses for the successful introduction of the AEC:  (1) political stability, (2) regulatory coherence, (3) competitiveness and (4) equal treatment.

For businesses expanding across borders, Albert Tan, Chief Strategy Officer, PT Telkom Indonesia added the importance of a "human capital transformation strategy" including value chains, pre-planning and retention.

In their report, JWT and A.T. Kearney provide 10 ways for South East Asian companies “to capture an immediate impact” before the launch of the AEC:

  1. Recognize the larger market. The region's economies are growing, and the population is becoming more affluent thanks to rising income, greater employment, and more credit. Collectively, ASEAN countries have more than $2 trillion GDP, making it the fifth largest market in the world. Consumers, although diverse, are connected by culture and values and take pride in local products. Create a clear brand proposition and deliver on quality, and there will be plenty of scope to build a strong following across the region's consumers.
  2. Appreciate and embrace change. The push toward the AEC will only hasten progress toward a more open and unhindered market, which will increase integration in the region. The focus so far has largely been on home markets, where many have enjoyed minimal competition, years of profits, and rapid growth—and are cash rich. Now the push to expand beyond national boundaries is inciting strong regional players. (Outward FDI from the region increased more than fivefold from $84.5 billion in 2000 to $495.7 billion in 2011.)
  3. Understand that regional champions will rule. The writing is on the wall. More than half of the M&A deals in 2011 were cross-border transactions. With a level playing field, it will soon be an eat-or-be-eaten world. In our ASEAN study, most leaders cited the "need for scale to deal with intensified competition" as the main reason to engage in M&A. Build solid brands with regional reach to be in the best position to grab a dominant share of this newly enlarged market.
  4. Prepare a regional game plan. The old world of simply appointing a distribution line will not be enough to become a regional player. Operating in new countries will require making complex choices on marketing and branding, products, supply chain, and manufacturing.
  5. Increase scale through M&A. Integration will happen. Companies will move fast to acquire competitors to gain access to new markets, technologies, brands, and resources or as a defensive maneuver. To build scale through M&A, adopt a methodical approach.
  6. Build marketing muscle. Now is the time to create a regional brand, as consumption is about to surge and local consumers are feeling positive about the region's outlook and about ASEAN. Being first or selling cheaply doesn't mean you'll remain a market leader. Become more savvy and sophisticated in your marketing and branding.
  7. Move up the value chain. ASEAN consumers are spending more on higher value items. Products cannot command a higher premium unless they have a clear brand idea.
  8. Take a page from the winner's book. Global companies and big regional players spend half of their communications budget—if not more—on brand campaigns. Start investing more in brand communication, and stop focusing solely on tactical ads.
  9. Don't get lost in translation. As we head toward the AEC, approach product innovation and brand development from a wider perspective, beyond your own territory.
  10. Next stop, the world. Forward-thinking players that capture the region will have a strong foothold to go global.

Download the report here

Monday, December 16, 2013

ASEAN's business leaders propose solutions to single-market bottlenecks and barriers to regional free trade

The launch of the ASEAN Business Club’s Lifting-The-Barriers Reports in Jakarta on 29 November is a benchmark for the business sector’s contribution to policy solutions for the forthcoming ASEAN Economic Community and expanding channels of engagement. The six reports outline bottlenecks and barriers hindering free trade in the region as well as highlighting possible solutions to accelerate integration efforts to meet the AEC’s 31 December 2015 deadline.

The launch was attended by the ASEAN Secretary General, H.E. Le Luong Minh, who delivered a keynote address highlighting progress towards the AEC through government-to-government processes and acknowledging the critical importance of increased private sector engagement through various platforms such as the LTB Initiative.

Le Luong Minh, Secretary General of ASEAN, addressing the launch of Lifting-The-Barriers Reports in Jakarta,

Representing the ABC, Mr Nazir Razak, CEO of CIMB Group, expressed optimism in the future of ASEAN economic integration, but warned that there was a "high risk of a disorderly start" to the AEC. He noted that a joint statement by the ASEAN Economic Ministers during 2013 indicated that the AEC Blueprint was in its final stages and had a completion rate of 79.4%. On closer inspection however, “although we have made good progress in eliminating most tariff lines (99.65%), Non-Tariff Barriers (NTB) between ASEAN countries remain high.”

Identifying economic nationalism – protecting vested interests - as the AEC’s “greatest challenge”, he observed that the AEC Blueprint does not clearly define what an NTB is, “so many trade-distorting measures persist despite specific deadlines. Also, there remain substantial exclusions to free trade even among the ASEAN 6 as states have made use of an extensive ‘exclusion system’ for products and services.”

Mr Razak reiterated three key elements of a set of initiatives he argues will help spur economic integration:

  • More power and funding to the ASEAN Secretariat.
  • An ASEAN minister in each member government to promote ASEAN domestically.
  • Iconic projects such as the development of an ASEAN Exchange, ASEAN Ratings Agency and even an ASEAN [FIFA] World Cup to capture the ASEAN public’s imagination and sense of common identity.

“We cannot solely depend on governments to push forward the ASEAN agenda,” he said. “The business community must step up and take the lead in pushing forward the ASEAN agenda – in the long run we all stand to win from a truly integrated ASEAN.”

Later during the launch, Mr Razak also called for “open talk” on “who may lose” through integration, to ensure the preparedness all stakeholders.

Dr Munir Majid, Advisor to the LTB initiative, provided an overview of the reports. He began by quoting a survey conducted by the US Chamber of Commerce (with AmCham Singapore) during 2013 which indicated that 54% of American companies in the region responding “had an ASEAN strategy and looked forward to the full implementation of the AEC.

In comparison, he said, “local firms and SMEs” have just been learning more about the AEC and are “scrambling to find footing.” The difference is, he said, is that the foreign companies had the capacity to formulate strategy “and even propose policies that would improve the business environment” and held consolations with ASEAN ministers to present their concerns and discuss solutions.

The Lifting the Barriers initiative is the ASEAN business equivalent, he said, to engage with the ASEAN and National Secretariats and to push outcomes. “Although there is already an existing architecture of engagement with the policy makers, we believe we have to expand the channel and intensify this level of engagement with substance and actionable policy recommendations, as we become an ASEAN Community.”

Patrick Walujo (Co-chair ASEAN Business Club Indonesia), Le Luong Minh (Secretary General of ASEAN), Nazir Razak (CEO, CIMB Group), Dr Munir Majid (Advisor to Lifting-The-Barriers Initiative) 

The LTB process began with the ASEAN Business Club - a fully private sector driven initiative of ASEAN’s leading businesses - organising the inaugural Network ASEAN Forum with the support of the CIMB ASEAN Research Institute (CARI). The Forum convened the region’s top industry leaders to discuss pertinent integration issues and oversaw six sector-based roundtables. The key discussion points were then combined with sector research, with assistance from international consulting firms, into the final reports.

The six reports – aviation (with assistance from the Aviation Sector, Centre for International Law), financial services (Boston Consulting Group), capital markets (Oliver Wyman), healthcare (Accenture), connectivity (Bain & Company), and infrastructure/power/utilities (McKinsey & Company) – generally identified economic nationalism, human resource constraints, regulatory congestion and underdeveloped infrastructure as the major obstacles.

Each of the detailed reports provides extensive background information and new ideas and solutions, many of which are interchangeable between sectors.

Aviation: an “ASEAN Community carrier” approach; United stand on traffic rights; Movement of professionals and mutual recognition of qualifications; Assisting lesser developed member states through an alliance model.

Financial Services: Pan-ASEAN Banking Pass; Free talent mobility; ASEAN Alliance; ASEAN Credit Bureau; ASEAN Rating Agency; Free data flow; Standardisation of document requirements.

Capital Markets: Clarifying the benefits to stakeholders, particularly SMEs; Increasing transparency; Simplifying listing requirements; Use of English in document submission across ASEAN; Uniform response time; Single tax payment point; Coordination of investor education.

Healthcare: ASEAN-wide medication approval process; Easing requirements for medical tourists; Mutual recognition of clinical qualifications;

Connectivity: Coherent transparent regulatory framework for international roaming, mobile advertisements and payment systems; Sufficient upfront investment in and review of project preparation; mechanisms for long term financing;

Infrastructure, Power and Utilities: Improved project selection; Optimising infrastructure portfolios; Streamlining project delivery approval and land acquisition; Making the most of existing infrastructure assets.

Any or all six of the LTB Reports can be downloaded in PDF format via online application to the Network ASEAN Forum.

Download the reports here.