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Businesses see ASEAN economic integration an opportunity not a threat.
Saturday, 14th December 2013
Source : ASEAN Business Advisory Council
 

In addition, investor interest in the ASEAN region remains strong and more businesses are seeing ASEAN as one region in making their investment decisions.

These are some of the key findings from the 2013 ASEAN-BAC (ASEAN Business Advisory Council) Survey on ASEAN Competitiveness as ASEAN pushes on with its efforts to realize the ASEAN Economic Community (AEC) by the end of 2015.

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The 2013 Survey collated 502 usable responses across various firm-size categories, age, ownership profiles and industries from all ten ASEAN member economies. The 2013 Survey is the third wave of a Survey that has been conducted since 2010 by ASEAN-BAC in collaboration with Dr. Marn-Heong Wong, Assistant Professor at the Lee Kuan Yew School of Public Policy (LKY School), National University of Singapore. Findings from successive waves of the Survey and related policy recommendations have been presented to ASEAN Leaders and Economic Ministers by ASEAN-BAC at their annual dialogue and consultation sessions. The 2013 Survey Report, prepared by Marn-Heong Wong and Andre Wirjo of the LKY School, is released today.
 
The Survey found that more than half of the businesses considered ASEAN economic integration to pose a low or very low threat to their organizations (Figure 1a), rating the threat level at an average of 2.49 on a scale of 1 (very low) to 5 (very high). Close to 60 percent of the businesses considered ASEAN economic integration to be providing high or very high opportunity for their organizations (Figure 1b), giving the opportunity level an average rating of 3.59 on a scale of 1 (very low) to 5 (very high). However, the Survey also noted that a lower share of small or local firms shared this sentiment.
 
Businesses continued to view the ASEAN region’s competitiveness for investments positively. More than half of the businesses that had internationalized (engaged in export or outward foreign direct investment (OFDI) activities) or planned to do so within the next three years (2013 – 2015) indicated an ASEAN country as the most attractive country in the world for their OFDI (Figure 2). This reflected investors’ sustained or increased interest in ASEAN countries, most notably Myanmar. ASEAN’s attractiveness also continued to be rated higher than China’s both as a market for goods and services and as a production location.
 
94 percent of businesses planned to invest or increase investments in an ASEAN country over the next three years. The main reason for investing in ASEAN countries, as identified by the largest share of businesses, was to ‘access a new or growing market’, which attests to business optimism in the growth prospects of the ASEAN region. This was followed by ‘supply main or leading customers’ and ‘low-cost production facilities’.
 
The authors of the Survey Report pointed out that ‘there are growing signs that more businesses are adopting an ‘ASEAN strategy’ in their approach to expansion, marketing and branding in response to ASEAN’s move towards an AEC.’ Close to half of the businesses planned their investments in ASEAN countries over the next three years by considering the investment attractiveness of the ASEAN region as a whole rather than the attractiveness of individual countries (Figure 3). This was up from two-fifths in the 2011-2012 Survey.
 
Businesses expressed slightly above-average satisfaction with ASEAN’s implementation of the AEC Blueprint overall and across most of the 16 selected policy areas (Figure 4). Consultation with businesses and dissemination of information were among the least satisfactory areas rated by businesses, as they had been over the last two waves of this Survey. Businesses also suggested that ASEAN governments make improvements to rules and regulations related to business registration, investment and customs procedures.
 
The 2013 Survey contained a special section that analysed the profile of ASEAN-based businesses that are engaged in international activities compared with those that are not. The Survey found that among the respondents, one-third did not engage in international activities and had no plans to do so over the next three years. The majority were either small or local firms, and cited reasons such as the intention to focus on the local market, financial constraints and competition from abroad for not internationalizing. Businesses that had internationalized tended to be larger, older and have foreign equity ownership. A much higher share engaged in export rather than OFDI activities. A global mindset of the top manager and a more dynamic industry environment seemed to spur firm internationalization.
 
Arising from these findings, ASEAN-BAC has put forth some policy recommendations to ASEAN. ASEAN must ensure the timely and effective implementation of measures towards an AEC to spur even more businesses to adopt an ASEAN strategy. In this regard, ASEAN should give priority attention to harmonizing, simplifying and enhancing the transparency of rules and regulations in the areas of business registration, investment and customs procedures.
 
ASEA-BAC strongly urges ASEAN to strengthen the process of information dissemination and consultation with businesses on AEC initiatives. In particular, ASEAN should redouble its efforts to reach out to local small firms – to allay their fear of ASEAN economic integration as a threat to their businesses and alert them to the opportunities from an AEC. As local small firms are also more likely not to be engaged in export or OFDI activities at this point in time, ASEAN should step up measures to facilitate their internationalization by addressing their financial constraints, enhancing their understanding of overseas markets and improving their capabilities. This will enable them to participate fully in the AEC and strengthen AEC’s pillar to achieve equitable economic development.
 
The full Survey Report can be downloaded at:
lkyspp.nus.edu.sg/2013-ASEAN-BAC-Survey-Report or www.asean-bac.org
 
For more information, please contact Dr. Marn-Heong Wong at
sppwmh@nus.edu.sg or
Ms. Novia Yap at
novia.yap@asean-bac.org

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