Aug 20, 2013

ASEAN Economic Community 2015, castle in the air?

Today I read an article from the Bangkok Post that reported that a survey conducted jointly by the American Chamber of Commerce in Singapore and the US Chamber of Commerce identified that US firms operating in ASEAN countries are skeptical that the 2015 deadline can be met to establish a single market.

475 senior US business executives from ASEAN were polled, and 52% believe the AEC's goals will not be realised by 2015. Of this 52%, almost 60% believe it will be delayed until 2020 or even later. Those that believed the 2015 goal will be achieved made up 23%.

US firms still expect their level of trade and investment in ASEAN to rise over the next five years, with Indonesia identified as the most attractive country for new business expansion, followed by Vietnam, Thailand and Myanmar.

The 10-member ASEAN which comprises of about 600 million people, aim to establish by 2015 a single market and production base for its members, by enabling free flow of goods, services, investment, capital and skilled labour.

The big picture of the proposed plan remains clouded by haze. The deadline is also set on Dec 31 2015, which really should let the plan be renamed AEC 2016.

It seems to me Thailand is the only member really enthusiastic about preparing for the AEC, as it prepared an 8-point strategic plan in the later half of 2012. They have also been bombarding their citizens with the AEC since around 2010.

The Philippines have only begun worrying about the AEC, as two senators are now seeking a Senate inquiry to determine the potential ''risks and opportunities'' for Filipino workers and industries as a result of the AEC 2015. The country is geographically separated from other ASEAN countries, which is a disadvantage.

The other members; who mainly trade with countries outside ASEAN such as US, Europe, Japan, are similarly starting to worry only now about the after effects of opening their economic borders to their neighbours, fearing that their domestic businesses may not be able to compete. It is only now that they realise the need to prepare their small and medium enterprises (SME's), train their labour force, review existing policies, etc. There is also a lack of unity at the member-level, which is a major stumbling block to the cooperation and coordination needed to create the AEC.

''ASEAN professionals in the following areas can work in other ASEAN countries, if they meet local qualifications, pass licensing tests in that country's local language and meet work permit requirements.
They are as follows; doctors, dentists, nurses, engineers, architects, accountants, and surveyors.''

When the borders finally do come down, I believe it will be the end for our local engineers! Labor-surplus countries will flood the developed members with labor, and I think it will truly be sad to be a member of the working-class then. (There are barriers such as qualifications, licensing tests yes, but anyone is naive to believe it will filter or control the impending labour tsunami.)

The single economic bloc will definitely result in inequality, with some members prospering more than others. Although there was a mention of suitable ''compensation'' to the losers, I am skeptical that they will be able to reach the ones who have fallen through the net.

Aside to that, the under-developed or developing members will become more attractive for foreign investment as low-cost manufacturing and production facilities relocate, while the big boys of the region, such as PTT, Astra or Singtel will benefit. Most large corporations with the means, have already or begun establishing operations in Southeast Asia as they start to organize their business structure.

Recent notable M&A activity within the region include the APB sale to Heineken, some of RBS' assets to CIMB, F&N to TCC. The Japanese have been very active too, with the deals for Bank of Ayudhya and PT Bank Tabungan. A new upcoming deal from Mizuho may involve TMB bank from Thailand.

An update for today, Thailand is in a technical recession, Indonesia has a current account deficit not seen since 1996,and also nothing optimistic on the horizon for the other smaller members. 

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