IE Insights ASEAN Economic Community: Opportunities through Economic Integration in Southeast Asia
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INTERNATIONAL ENTERPRISE SINGAPORE IE Insights Vol. 22_May 2015 ASEAN Economic Community: Opportunities through Economic Integration in Southeast Asia The Association of Southeast Asian Nations (ASEAN) has promoted regional cooperation and deepened political and economic ties amongst its members. Further economic integration is underway to achieve the vision of the ASEAN Economic Community (AEC) by end 2015. This issue of IE Insights provides an update of the AEC and discusses how Singapore companies can fully tap the opportunities that the AEC will bring. By FOO May Yan, KOH Wan Ling, LAI Shu Ying, LAM Yin Yin Southeast Asia Group, Trade Group enquiry@iesingapore.gov.sg
Contents
03
Summary
04
Southeast Asia’s Strong Growth Potential
06
ASEAN Economic Community (AEC) 2015: Challenges and Opportunities
15
Current State of Play in AEC
18
How Singapore Companies Can Approach AEC 2015
21
Conclusion
Disclaimer
While every effort is made to ensure that the information in this document is accurate, the information is
provided by IE Singapore to you without any representation or warranty. Any reliance on the information in this
document is at your own risk. IE Singapore does not accept any liability for any errors, omissions or misleading
information. IE Singapore and its employees shall not be held responsible for any consequence arising from
your reliance on any information provided by us. You are advised to consult your own professional advisors.
2Summary
// ASEAN is Asia’s third largest growth engine after China and India and saw resilient
growth despite the global financial crisis. Favourable factors like rising foreign direct
investment, a young and large population and abundant natural resources will raise
local productivity and create a rising middle class, to transform Southeast Asia into the
world’s next consumerism and manufacturing hub.
// The ASEAN Economic Community (AEC) Blueprint, signed by ASEAN Leaders at the
Singapore Summit in November 2007, is the cornerstone of ASEAN’s efforts towards
deeper regional integration. The ASEAN Trade in Goods Agreement (ATIGA), ASEAN
Framework Agreement on Services (AFAS) and the ASEAN Comprehensive Investment
Agreement (ACIA) provide the foundation for a single market and production base.
// Progress of the AEC varies, with some areas seeing more progress than others. In
terms of trade in goods, most physical goods already flow without tariffs between the
ASEAN-61 economies and hence the focus has turned to identifying and eliminating
non-tariff barriers. In comparison, the free flow of services has seen slower progress
// In the long term, the AEC will increase the overall competitiveness and productivity of
ASEAN as a single economic region and make the region more attractive to global and
pan-ASEAN investors. Singapore companies used to operating in a highly liberalised
environment are poised to benefit.
// Singapore companies should adopt a pan-Southeast Asia perspective and focus on
economies and sectors that would gain the most from integration.
1 ASEAN-6 members are Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand
3Southeast Asia’s
Strong Growth Potential
ASEAN – with a combined GDP of US$2.4 trillion in 2013 –
is Asia’s third largest growth engine after China and India.
Annual growth is projected to average 5.4% from 2014 to
2018.
In 2013, 26% of Singapore’s total trade with the world was with ASEAN, Singapore’s
largest trading partner. ASEAN-Singapore trade has seen a general upward trend since
2007. Despite the short-term domestic and geo-political uncertainties in individual ASEAN
member states in 2014, global investors continue to recognise that the region’s strong
growth potential is anchored on solid economic fundamentals.
Southeast Asia is home to more than 600 million people (about 60% of its population is
under 35 years old). This young and large population translates into a large and dynamic
workforce. Growth is further supported by abundant land and natural resources, a wide
range production capabilities and good intra-regional connectivity.
The confidence that investors hold in ASEAN is reflected in the region’s strong FDI
inflows. In 2013, the region attracted US$122 billion of foreign investment, more than
China’s US$117.6 billion, an indication of the growing trend of global companies to
“look South” to hedge against the rising costs of doing business in China. Large MNCs
are increasingly adopting a “China-plus-one” strategy, benefitting the region due to its
proximity and relatively lower labour costs.
Looking forward, the ASEAN economies are expected to enjoy strong sustained growth
over the next few years. ASEAN’s annual growth is projected to average 5.4% from 2014
to 20182. Furthermore, the upside potential for ASEAN is tremendous; intra-ASEAN trade
was only 24.2% of ASEAN’s total trade in 2013, growing only five percentage points from
19.2% in 19933. In contrast, 65% of EU merchandise exports went to EU countries in
20104. Rising foreign direct investment coupled with the region’s large, young population
and abundant natural resources will raise local productivity, creating a rising middle class
that will transform Southeast Asia into the world’s next consumerism and manufacturing
hub.
2 Source: “Economic Outlook for Southeast Asia, China and India”, OECD Development Centre, 2014
3 Source: ASEAN Secretariat
4 Source: World Trade Organisation
4Southeast Asia’s
Strong Growth
Potential
Figure 1: Strong Growth Potential of ASEAN Members Based on Projected Economic Indicators
Myanmar Vietnam
56.4b 171b
$1,740 $4,012 Laos
60.4m 89.7m 10b
$3,068
6.0 7.4 5.6 8.9 6.58m
Thailand 8.4 9.3
387b Cambodia
$9,875 15.6b
64.4m $2,576
15.1m
5.5 7.0
6.2 10.3
Malaysia
312b Philippines
$17,748 272b
30m $4,682
99.6m
4.4 8.1
4.2 7.1
Singapore
296b
$64,584
5.3m
2.7 4.5
GDP Growth (%)
2012 Indonesia
870b
2012 – 2016 $5,214
247m
GDP 2013 (US$ billions) 6.1 14.5
Brunei
GDP (PPP) per cap 16.2b
$53,431
Population 2013 (millions) 0.393m
3.2 0.4
Source: International
Monetary Fund, 2012
5ASEAN Economic
Community (AEC) 2015:
Challenges and
Opportunities
The ASEAN Economic Community (AEC) Blueprint, signed
by ASEAN Leaders at the Singapore Summit in November
2007, is the cornerstone of ASEAN’s efforts towards deeper
regional integration. It comprises four key pillars and ASEAN
has been focusing on creating a single market and production
base. This will lay the foundation for the other pillars to be
built on and presents opportunities for Singapore companies.
On the trade front, the elimination of tariffs on physical goods
trade has largely been realised, though non-trade barriers
remain a key impediment. In terms of investments, AEC is
expected to liberalise more sectors for foreign participation.
Singapore companies should however be aware that each
country is still allowed to exercise some flexibility, and that
implementation progress also differs.
6ASEAN Economic
Community
(AEC) 2015:
Challenges and
Opportunities
The blueprint outlines four key pillars
// A single market and production base
Barriers to trade in goods and services will be brought down or kept to a minimum.
Flows of investment, capital and skilled labour will be facilitated and co-operation in
sectors designated as priority integration sectors will be promoted.
// A competitive economic region
To foster a culture of fair competition and develop or strengthen institutions and laws
that can allow businesses to compete on an even playing field.
// Equitable economic development
ASEAN member states will develop policies aimed at SME development and narrowing
the development gap between members.
// Integration into the global economy
ASEAN strives to integrate itself better as a bloc into the global economy through
various agreements, including the “ASEAN plus” Free Trade Areas (FTAs) and Closer
Economic Partnerships (CEP) Agreements with major trading partners.
In line with our mission of driving external trade and promoting overseas growth of
Singapore companies, we focus our attention on the first pillar – a single market and
production base – in this issue of IE Insights, which will lay the foundation for the growth
of the other pillars. The core areas covered under the first pillar are the liberalisation of
trade in goods, services, labour and investment in the region. The ASEAN Trade in
Goods Agreement (ATIGA), ASEAN Framework Agreement on Services (AFAS) and the
ASEAN Comprehensive Investment Agreement (ACIA) provide the foundation for a single
market and production base.
7ASEAN Economic
Community
(AEC) 2015:
Challenges and
Opportunities
Figure 2: Four Key Pillars of the AEC Blueprint
ASEAN Economic Community 2015
Key Pillars of the AEC
Competitive Economic Equitable Economic Integration into the
Single Market
Region Development Global Economy
Core Elements of Each Pillar
// Free flow of goods // Competition policy // SME development // Coherent approach
// Free flow of services // Consumer protection // Initiative for ASEAN towards external
// Free flow of // Intellectual Property integration economic relations
investment Rights (IPR) through FTAs/CEPs
// Free flow of capital // Infrastructure // Enhanced
// Free flow of skilled development participation in global
labour // Taxation supply networks
// Ecommerce
Actions to be taken
• Eliminate tariffs and • Introduce • Promote participation • Enhance
non-tariff barriers competition policy in of SMEs in the coordination towards
• Harmonise trade and all member states building of regional a common position
customs procedures • Establish networks production and in ASEAN’s external
and standards of national distribution networks economic relations
• Investment enforcement and best practices in • Enhance adoption
protection and agencies to SME development of international
liberalisation facilitate information • Enhance platforms best practices
• Facilitate mobility exchange for to identify and and standards in
of skilled personnel consumer and IPR implement technical production and
through Mutual protection assistance and distribution
Recognition • Improve physical and capacity building
Agreements ICT infrastructure programmes,
• Identify Priority • Lay policy and legal to narrow the
Integration Sectors infrastructure for development gap
to catalyse the ecommerce within ASEAN as
integration process well as between
ASEAN and the
world
Source: AEC Factbook
8 8ASEAN Economic
Community
(AEC) 2015:
Challenges and
Opportunities
Free flow of goods
The ATIGA, which entered into force in 2010, contains the full tariff liberalisation schedule
amongst ASEAN Member States (AMS), as well as more liberal rules of origin (ROO)
for products to qualify for tariff concessions. The implementation of ATIGA is on track.
ASEAN-6 has eliminated tariffs on 99.2% of tariff lines, whereas 77.6% of tariff lines from
Cambodia, Lao PDR, Myanmar and Vietnam (CLMV) have been reduced to 0% – 5%.
Figure 3: Tariff Reduction or Elimination Schedule under ATIGA
Product categorisation in Tariff reduction/ elimination schedule under ATIGA
each ASEAN member state
ASEAN-6 (Brunei CLMV (Cambodia, Lao PDR,
Darussalam, Indonesia, Myanmar and Vietnam)
Malaysia, the Philippines,
Singapore and Thailand)
Unprocessed agricultural Import duties were reduced to Vietnam: Import duties were
products (e.g. sugar, rice, 0% – 5% in 2010. reduced to 0% – 5% in 2013.
pineapples, etc.)
Lao PDR and Myanmar: Import
duties will be reduced to 0% –
5% by 2015.
Cambodia: Import duties will
be reduced to 0% – 5% by
2017.
All other products Import duties were eliminated Import duties will be eliminated
in 2010. by 2015, with flexibility of up
to 2018.
General exceptions Import duties are not subject to reduction or elimination.
Source: IE Singapore
9ASEAN Economic
Community
(AEC) 2015:
Challenges and
Opportunities
Apart from the reduction and elimination of tariffs, the ATIGA also commits AMS to
facilitate trade by tackling barriers faced by businesses as a result of burdensome
customs procedures, technical barriers to trade (TBT) and sanitary and phytosanitary
(SPS) measures. Key initiatives include eliminating Non-Tariff Barriers (NTBs), establishing
the ASEAN Self-Certification System and the ASEAN Single Window (ASW) to reduce
customs administrative burden, and the ASEAN Trade Repository (ATR), a one-stop
website containing trade related information of all AMS.
What this means for Singapore companies
// Singapore manufacturers can export to ASEAN without having to pay tariffs for
most products. The increased access to ASEAN’s markets improves Singapore
manufacturers’ access to the rapidly growing demand in ASEAN.
// With freer flow of goods within ASEAN, manufacturing and production costs should
be reduced due to lower costs for regionally-sourced raw materials or inputs. This
increases the competitiveness for Singapore-produced goods.
ASEAN has also placed significant emphasis on the elimination of NTBs. Nonetheless,
discriminatory practices or “behind-the-border” issues remain an obstacle. To address
these issues, the following initiatives have been developed to help companies tackle such
barriers:
// Launch of a publicly available ASEAN Non-Tariff Measures (NTMs) database
This database will feature the range of NTMs that companies will likely face whilst
trading in each AMS. This is to enhance transparency to traders and serves as a
surveillance mechanism.
// Harmonisation of national standards and technical regulations via the
implementation of Mutual Recognition Arrangements (MRAs) by sector
Many measures have been developed to harmonise standards across ASEAN. The
establishment of MRAs for products (like electrical and electronics, pharmaceutical,
automotive, prepared foodstuff, building and construction) will eliminate the need for
duplicative testing when such products are exported to ASEAN, reducing the time-
to-market. Harmonising technical requirements for products in specific sectors (like
medical devices, cosmetics) will also make it easier for Singapore exporters to comply
with the regulations when exporting to ASEAN.
10ASEAN Economic
Community
(AEC) 2015:
Challenges and
Opportunities
Free flow of services
The AFAS has several objectives:
• liberalise trade in services,
• eliminate substantial barriers to trade in services,
• enhance cooperation in services, and
• provide mutual recognition of qualifications and experiences.
ASEAN aims to finalise the 10th and last package of commitments in 2015. Under the
AFAS, 12 broad sectors have been identified for liberalisation and five are earmarked as
priority integration sectors.
Figure 4: Liberalisation Timeline under the AFAS
ASEAN Framework Agreement on Services (AFAS)
Priority Integration Sectors (5) Other Sectors (7)
Air transport, e-ASEAN, healthcare, hospitality and Business services, construction and engineering, education,
tourism and logistics services finance, environmental services, culture and others
By 9th Package (2014) By 10th Package (2015)
70% equity participation in priority integration sectors 70% equity participation in all sectors
Source: IE Singapore
The 12 broad sectors should allow at least 70% foreign (ASEAN) equity participation
by 2015. However, each member state can exercise flexibility in implementing the
commitments set out in the AFAS.
11ASEAN Economic
Community
(AEC) 2015:
Challenges and
Opportunities
What this means for Singapore companies
The AFAS will provide more opportunities for Singapore companies to participate in
previously closed sectors. The five priority sectors for services integration have been
identified as most crucial to ASEAN integration and offer potential opportunities for
Singapore companies in the following areas:
// e-ASEAN
Increased consumer protection and standardisation of ecommerce laws would reduce
the costs of overseas expansion for Singapore companies. Firms have the option of
setting up a strong local online presence first, before physically entering the market.
// Logistics
ASEAN officials are committed to improving connectivity – with approximately US$4
billion5 lending commitment through the ASEAN Infrastructure Fund till 2020. Singapore
companies would be able to export their expertise in supply chain management
and build up strong networks necessary to support other businesses including food
services, retail and even ecommerce. In countries that impose foreign land ownership
restrictions, Singapore companies could partner local players with nationwide reach.
// Air Transport
Southeast Asia’s airline industry has enjoyed robust growth over the past ten years
fuelled by the entrance of low cost carriers. The AEC aims to create a single aviation
market characterised by open market access and a more flexible operating environment
for the air transport industry. Airlines would be able to pick up and drop off passengers
at more locations and explore different transit combinations. Companies that provide air
transport-related services should face fewer roadblocks in operating across borders. It
would make more routes commercially feasible and reduce operating costs for airlines
and air freight operators. The cost of travel between cities will also decrease, making a
regional business model more cost effective for our companies.
// Healthcare
Reputational risk and maintenance of standards are key considerations in the healthcare
industry and more Singapore healthcare providers would be willing to invest abroad if
they can have greater management control over investments. Under the AEC, foreign
companies can enjoy greater autonomy in the hiring of personnel or purchase of
equipment and would thus have a greater degree of control.
// Tourism
The liberalisation of the tourism sector and establishment of common standards for
tourism professionals would increase service levels across the ASEAN countries and
allow local communities to embark on partnerships with foreign equity providers.
Singapore hospitality or real estate companies could also participate more actively in
the development and operations of attractions or in the refurbishment of historical
monuments in ASEAN countries.
5 Source: “Facts and Data about Southeast Asian Infrastructure”, Asian Development Bank, May 2012.
12ASEAN Economic
Community
(AEC) 2015:
Challenges and
Opportunities
Free flow of skilled labour
The AEC blueprint recognises that the flow of skilled labour across borders is crucial to
facilitating the free flow of services. The ASEAN Agreement on the Movement of Natural
Persons (MNP) was signed during the 21st ASEAN Summit in November 2012 to regulate
the temporary movement of skilled workers across borders. Separately, ASEAN has also
signed eight Mutual Recognition Arrangements (MRAs) in the fields of accountancy,
architecture, dentistry, engineering, medicine, nursing, quantity surveying, and tourism.
As a result of the MRAs, skilled professionals in these fields can have their qualifications
recognised in other ASEAN countries.
What this means for Singapore companies
Singapore companies in the services sector often cite the availability of skilled labour as
a key roadblock to overseas expansion, particularly in developing markets. The freedom
to move skilled professionals from one country to another would bring down the cost of
doing business in skilled-labour scarce markets. Singapore-based companies planning
to internationalise or expand into the ASEAN region will find it easier to move skilled
professionals to other ASEAN countries. Similarly, Singapore companies who require
foreign talent to complement our local workforce may tap into a wider pool of skilled
professionals should they so require, subject to the immigration and visa requirements of
local authorities.
13ASEAN Economic
Community
(AEC) 2015:
Challenges and
Opportunities
Free flow of investments and capital
Investment cooperation is implemented through the ASEAN Comprehensive Investment
Agreement (ACIA), which supersedes the earlier Framework Agreement on the ASEAN
Investment Area (AIA), and the ASEAN Investment Guarantee Agreement (IGA). The
ACIA covers the four pillars of liberalisation, protection, promotion and facilitation, and
is ASEAN’s instrument to create a free and open investment regime in the context of
an integrated economic community. The ACIA aims to provide greater confidence to
investors to invest and maintain their investments in ASEAN. Additionally, the ACIA aims
to encourage greater industrial complementation and specialisation among the AMS and
increase intra-ASEAN investment in the region.
Direct and portfolio investments are protected under the ACIA. It is based on international
best practices and has comparable provisions on liberalisation and protection. Investors
can also now make use of clearer and more transparent provisions to obtain approval
and transfers of investments. In addition, investors will be protected through more
comprehensive provisions on investor-state dispute mechanisms.
What this means for Singapore companies
The development of ASEAN as an integrated investment network would promote intra-
ASEAN investments and attract more external FDI into ASEAN as a bloc. The streamlining
of business procedures and enhanced investment protection would reduce the costs and
risks of Singapore companies doing business in Southeast Asia.
The availability of financing and arbitration options available in Singapore puts us in good
stead to attract global MNCs and regional conglomerates to locate offices or ink contracts
here. This would translate into opportunities for legal, accountancy and HR firms, which
can serve as partners for regional or global companies looking to establish a pan-Southeast
Asia footprint.
14Current State of Play
in AEC
The movement towards the AEC is a complex and dynamic
process that calls for the economic integration of ten
diverse economies. Some sectors for integration have
seen more progress than others. Tariffs on goods have
been almost completely removed, especially amongst the
ASEAN-6 economies and ASEAN continues to work towards
creating an environment in which services and capital flow
unhindered. This process of integration will eventually
increase the overall competitiveness and productivity of
ASEAN as a single economic region and make the region
more attractive to global and pan-ASEAN investors.
15Current State
of Play
in AEC
Plans and priorities have been approved by the respective governments in the AEC
process, though some sectors have seen more progress than others.
Figure 5: Progress on ASEAN economic integration by sector
Progress (%) 0–24 25–49 50–74 75–99 100
Trade Invest-
Tariffs Non-tariff measures Services Labor
procedures ment
Standards Other Single Single Services FDI
Tariffed Tariffed and regula- non-tariff window window Trade Trade restric- restric- Labor
goods amount tions measures2 status trade Customs speed cost tiveness tions mobility Average Lowest
Agriculture,
91 88 57 70 71 75 57
fisheries
Rubber 93 98 98 96 71 82 58
Wood 94 99 96 75 68 80 58
Textiles 96 99 99 73 81 82 58
Goods 70 58 61 85 94
Auto 94 94 94 39 81 77 39
Electronics 98 99 57 62 81 76 57
Consumer 94 99 60 56 81 76 56
Resources3 84 93 79 89 61 78 58
Air travel 71 61 66 61
n/a5
E-ASEAN4 60 47 54 47
Health care 33 83 10 42 10
Services Tourism 71 90 30 64 30
Logistics 46 94 70 46
Finance 59 64 n/a5 62 59
Telecom 60 47 54 47
Average 93 96 80 70 70 58 61 85 94 57 72 20 69 20
Source:
1 Based on assessments of Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. Brunei, Cambodia, Laos, and
McKinsey Global
Myanmar excluded due to lack of comprehensive data; Singapore excluded to avoid bias toward developed economies.
Institute integration
2 Includes administrative charges, certificates of approval, import licensing, quantity control measures, internal taxes, and
database
prohibition measures.
3 Includes mining, and oil and gas.
4 Digital readiness through connectivity, local content, e-commerce, common marketplace for ICT goods and services,
skills development, and e-governance.
5 Sectors not covered in mutual recognition agreements.
16 16Current State
of Play
in AEC
In summary, good progress has been made for trade in goods and most physical goods
flow without tariffs between the ASEAN-6 economies. The focus has turned to the
identification and elimination of non-tariff barriers although this continues to be difficult,
particularly in the non-commodities sectors as standards and regulations for non-
commodity goods continue to vary.
Progress towards the free flow of services has been slower as local governments face
domestic pressure or resistance against the liberalisation of sectors dominated by strong
local players or deemed critical to national security. For similar reasons, efforts towards
facilitating and increasing the flow of investments and skilled labor across borders have
also seen varying progress across different sectors.
Nevertheless, the AEC is not a one-off project but an ongoing effort towards creating an
ASEAN in which goods, services, people and capital flow unhindered. Taken in this stride,
the continued commitment of ASEAN member states towards the AEC is an encouraging
sign. When fully implemented, the AEC is expected to increase the competitiveness and
productivity of ASEAN as a single economic region by allowing international and
intra-ASEAN firms to fully leverage the comparative advantages offered by ASEAN
economies.
17How Singapore
Companies Can
Approach AEC 2015
Singapore companies need to adopt a pan-Southeast Asia
perspective and focus on economies and sectors that
would gain the most from integration, to fully tap into
the opportunities created by the AEC. While economic
integration will bring both challenges and opportunities, the
impact of increased competition from foreign companies
is likely to be minimal in Singapore which already has an
open economy. Beyond the AEC, Southeast Asia has sound
fundamentals for manufacturing and consumerism related
opportunities. Singapore companies should take a long term
investment horizon and tap into these growth trends.
18How Singapore
Companies Can
Approach
AEC 2015
Adopt a pan-Southeast Asia perspective for both opportunities
and risk diversification
Singapore companies need to adopt a pan-Southeast Asia strategy and recognise that
the benefits of increased integration will outweigh the challenges brought about by
increased competition given that Singapore’s economy is already highly liberalised. By
entering different markets across Southeast Asia, Singapore companies would be able to
take advantage of the regional trade and investment flows, particularly in production and
distribution.
Companies that have recognised these include our industrial park players. Singapore
industrial park players have established presence in Malaysia, Vietnam and Indonesia.
Already well positioned in the region, such companies are poised to benefit from the AEC
when it comes to fruition.
Focus on economies that are most ready or likely to gain from
integration
The ten members of ASEAN have varying levels of economic development and political
structures. Thailand has spent as much as 8 billion baht (US$246 million) to prepare its
companies for the AEC. Indonesia is also likely to benefit with foreign investors keen
to tap into the largest population in Southeast Asia. Singapore companies can consider
partnering firms in these countries to leverage their relative strengths to reap benefits
from the AEC.
For Thailand, third-country collaboration to take advantage of Thai conglomerates’ strong
networks in neighbouring countries such as Cambodia, Laos, Vietnam and Myanmar is
one possible mode. Apart from local or regional companies, MNCs can also make good
partners for Singapore companies. Regional players are familiar with the local climate
and have ready contacts while MNC collaboration would give our firms access to larger
projects, particularly in the infrastructure sector.
Indonesia, with the largest population in Southeast Asia, is expected to be one of the
largest recipients for the increase in foreign investment resulting from the AEC. This will
drive demand for infrastructure and the growth in affluence will increase the consumption
appetite of Indonesian consumers.
19How Singapore
Companies Can
Approach
AEC 2015
Pay particular attention to sectors that tap into Southeast Asia’s
strength as a manufacturing, and consumerism hub
The economic potential of SEA is anchored upon its large and young population of 600
million people and abundance of land and natural resources. The AEC seeks to maximise
these strengths by easing the flow of goods, people and knowledge across borders and
manufacturing and consumerism are sectors that will benefit significantly from regional
economic integration.
In the manufacturing sector, the surge in FDI brought about by liberalised investment
regimes will be accompanied by the flow of expertise and technology across borders.
Singapore companies can explore locating different parts of their operations across
different economies to maximise their cost efficiency. Increased productivity and lower
logistical costs from looser trade regimes would contribute further to reducing costs for
companies, making the region more attractive as a whole. This will pose benefits for
Singapore companies as they increasingly look towards ASEAN to hedge against the rising
costs of doing business in other parts of the world.
The emergence of an increasingly affluent and connected urban middle class in Southeast
Asia also creates opportunities for regional and global brands in the consumer sectors and
the AEC will ease the expansion of such brands across borders.
Take a long-term approach to investments in Southeast Asia
In many countries, political, legal and economic frameworks are still undergoing updates
and revision. These changes are not unexpected and investors need to factor in political
and regulatory risk when evaluating opportunities in Southeast Asia. They should also take
on a long-term view and not succumb to a knee-jerk reaction. Despite these uncertainties,
the Southeast Asian economies have demonstrated resilience and strong overall growth
over the past decade.
20Conclusion
The economic integration of such a diverse region is not
without challenges. Nevertheless, the AEC 2015 should
not be viewed as a deadline but an ongoing process aimed
at creating an ASEAN in which trade and investments flow
unhindered.
Over and above the AEC, Southeast Asia has good
fundamentals with a large young population, burgeoning
middle class and abundant natural resources. Opportunities
will continue to exist for Singapore companies in the
manufacturing, infrastructure and consumerism spaces and
the move towards integration will yield considerable benefits
for businesses.
21International Enterprise Singapore
International Enterprise (IE) Singapore is the government
agency driving Singapore’s external economy. We spearhead
the overseas growth of Singapore-based companies and promote
international trade. Our vision is a thriving business hub in
Singapore with Globally Competitive Companies (GCCs)
and leading international traders.
Trade has always been the backbone of Singapore’s
economy. In addition to promoting export of goods and services,
IE Singapore also attracts global commodities traders to establish
their global or Asian home base in Singapore. Today, Singapore is
a thriving trading hub with a complete ecosystem for the energy,
agri-commodities and metals & minerals trading clusters.
GCCs are a critical growth engine for the next phase of Singapore’s
development. GCCs compete on the global stage against the very
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resilience, develop Singaporeans into global business leaders and
strengthen the Singapore brand. Through our Global Company
Partnership, we work with Singapore-based companies in their
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We customise total solutions in capability building, market access
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Our global network of overseas centres in over 35 locations
provides the necessary connections in many developed and
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locations namely Bangkok, Hanoi, Ho Chi Minh City, Jakarta,
Kuala Lumpur, Manila, Surabaya and Yangon.
Visit www.iesingapore.com for more information.
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Ho Chi Minh City F +95 1 860 3359
International Enterprise Singapore Manila
c/o Consulate-General of the Republic of International Enterprise Singapore
Singapore – Ho Chi Minh City c/o Embassy of the Republic of Singapore
Saigon Centre, 65 Le Loi Boulevard 505 Rizal Drive, Bonifacio Global City
8th Floor, Unit 1, 1st District 1634 Taguig City
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T +84 8 3822 5173/74 T +63 2 551 4856
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Our Past Issues
// Vol.1_Jul 2012 China’s Twin Paradigm Shifts - Beacons in a Sea of Change
// Vol.2_Jul 2012 Myanmar: Opportunities in Asia’s Last Frontier Economy
// Vol.3_Sep 2012 Thailand: Resilience and Economic Revival
// Vol.4_Oct 2012 A Win-Wind Situation: Opportunities in the European Offshore Wind Industry
// Vol.5_Nov 2012 Indonesia: Partnering the Private Sector for Growth
// Vol.6_Jan 2013 Malaysia: State of Transformation
// Vol.7_Mar 2013 Forging Ahead in China: A Survey of Singapore Companies
// Vol.8_Apr 2013 Japan: Opportunities Amid Change and Recovery
// Vol.9_Jun 2013 Central China: A Growth Story
// Vol.10_Sep 2013 Driving Singapore’s External Economy Beyond 30 Years
// Vol.11_Sep 2013 Vietnam: Prospects Amidst Challenges
// Vol.12_Oct 2013 Brazil: Beyond the World Cup and Olympics Scan for past
// Vol.13_Nov 2013 Indonesia’s Consumer Sector: Tapping the Consumer Dollar in Food and Retail issues of
// Vol.14_Jan 2014 Myanmar: Navigating the Risks and Opportunities IE Insights
// Vol.15_Feb 2014 China’s Third Plenum: Decisive Shifts towards a Market-Oriented Economy and People-Centric Urbanisation
// Vol.16_Oct 2014 Mexico: The Aztec Tiger
// Vol.17_Oct 2014 Recipe for Success in the London Food Services Market
// Vol.18_Oct 2014 Making Inroads: Capturing Intrastructure Opportunities in Asia
// Vol.19_ Nov 2014 The Philippines: A New Awakening
// Vol.20_ Nov 2014 Turkey: Stepping into a New Era
// Vol.21_ Apr 2015 Indonesia’s New Administration: Infrastructure and M anufacturing Opportunities
23Our Global Network
V1/May 2015
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