With 2015 just around the corner, few expect the initial vision of an Asean Economic Community (AEC) to be fully realised by the end of next year as targeted. But Singapore’s businesses – particularly small and medium enterprises (SMEs) – cannot afford to put off considering the impact of a common market on their future. By most accounts, the region has fallen behind AEC targets to lower and abolish non-tariff and regulatory barriers to the free flow of goods, services and investment.
Yet, the progress made so far is not to be sniffed at – at least 70 per cent of integration work is already done. Earlier this week, addressing the Asean Business Club Forum, Singapore Trade and Industry Minister Lim Hng Kiang noted that virtually all goods already move throughout the 10 Asean countries tariff-free. Companies can also look forward to cost savings from simpler and faster customs clearance of goods with new electronic links. Anyone doing business in this region should be aware of the unprecedented opportunity opened up by a common Asean market. It is already a consumption and production market of 600 million people and the seventh-largest economy globally, with a gross domestic product (GDP) of US$2.3 trillion – the third largest in Asia. Asean is also projected to grow at an average pace of 6.4 per cent a year over the two decades until 2030, the Asian Development Bank Institute says. Nominal GDP could reach US$6.6 trillion by then.
Amid the optimism over Asean’s growth prospects though, there has been a tacit acknowledgement by political leaders that AEC 2015 is now less a target to be met and more a milestone in a far longer journey. “The AEC 2015 journey will not be the end of the road for Asean.” Mr Lim said this week. The longer full economic integration takes, the more important it will be that businesses get involved in shaping the post-2015 economic agenda for the region. After all, as Mr Lim said, they know best where the barriers to trade, and labour and capital flows lie. But businesses would do well to consider the challenges the AEC presents too – heightened competition could hit SMEs hardest. One Boston Consulting Group survey of over 230 business leaders and government officials found that more than 80 per cent expect SMEs to lose out amid more intense competition after the AEC comes into force. When Singapore assumed the chairmanship of the Asean SME Working Group in June, one clear goal was to equip SMEs to take on the opportunities and challenges that will come with the AEC. This meant raising awareness of ongoing initiatives to improve access to financing and technology, strengthen export capacity, promote innovation and develop human resources for SMEs.