Don’t miss the Asean bus

07 May, 2016
As appeared in TheStar.com.my

BREADTALK, a Singapore bakery, will open its first outlet in Myanmar in early 2017, in a franchise agreement with that country’s real estate giant the Shwe Taung Group. Breadtalk has spread to nearly 800 locations in primarily Asean countries.

A leading Singapore logistics group is looking to extend its trucking reach to Vientiane and as far as Kunming while driving also for the expansion of e-commerce across the region. Thai retail and real estate companies, such as the Central Group, have large footprints, particularly in continental South-East Asia, as they prepare and seek to tap demand and consumption from the growing and young middle classes in Asean.

VietJet, a low-cost Vietnamese airline, is fast spreading its wings and wants to fly all over Asean, using colors of bold red, albeit with a touch of yellow, made all too familiar by AirAsia.

China has a huge infrastructure development agenda in Asean, through the AIIB and One-belt, One-road initiatives, and through financing commitments in more focused areas such as the Mekong sub-region, the most recent, in March, being US$11.5bil in loans and credit for infrastructure under the Mekong-Lancang Co-operation framework.

American investment in Asean (total capital stock US$226bil) is larger than that in Japan, China and India put together (capital stock US$202bil), even if the European Union is still the largest foreign investor in Asean.

Japanese companies are all over the region, Toyota’s and Honda’s automobile hubs in Thailand being quite impressively well placed to take advantage of the free movement of the supply of parts under the Asean Economic Community (AEC), of the growing market of 630 million (the third largest in the world), and of the single market and production base to export worldwide.

This is Asean. That frequently cited combined GDP of US$2.6 trillion, seventh largest economy in the world, poised to become the third largest, after only China and India, in 2030 or just after.

Across the region, pro-active companies from within and outside Asean, from a range of businesses, traditional and conventional, digital and new world economy, are on the move to realise value from its growth and potential.

There are gaps and gaping holes in the integration process, including in the AEC and in socio-economic and political development, but a company or business would be left behind if it just dwelt on them.

Many Malaysian companies are of course in Asean and trading with Asean countries, in the financial services sector, in legal services, oil and gas, power, manufacturing and other businesses. However, there are also others who are not engaged and only have many complaints about the AEC’s imperfections.

Many of these complaints are not misplaced. However, in business you cannot wait for the perfect circumstances before you move.

You wait and you lose all the first mover advantages. You wait and you don’t develop relationships, and it will be too late and take too long to cultivate them when the time is ripe. You take risks, calculated against potential benefits.

A bakery venturing into a rice-eating country, only just now coming out of the economic dark ages, is not something without risk. But a calculation that the mostly young people in the population of 52 million will form the basis of a growing future sophisticated demand counterbalances it.

Political change is taking place in Myanmar. It is early days. There is no clear succession plan after Aung San Suu Kyi.

But is the change not irreversible? Will economic empowerment and the spread of its benefit not act as a check against any reversal?

And, coming back to the region as a whole, will not the imperfections and weaknesses of the AEC be addressed over time?

Indeed they are being addressed. As Asean Business Advisory Council (Asean-BAC) chair last year, we worked very hard to obtain explicit recognition of the private sector role in the Asean integration process, and a hard-wiring of the collaboration in that process, rather than just top-end picture opportunity dialogues with leaders and ministers.

As a result, the AEC 2025 Blueprint made extensive mention of the role Asean-BAC is expected to play, in association with other Asean and non-Asean private sector councils, representatives and interested sectoral expert bodies. There are actually 19 such councils and at least 66 sectoral expert bodies.

Asean-BAC is already working to ensure effective representation of views in a coordinated manner to the leaders, ministers and officials.

Perhaps, more importantly, Asean-BAC is identifying expert resources who can make their contribution in official Asean committees and working groups in sectors and areas of concern. This bottom-up work is perhaps more important than the big-ticket dialogues whose outcomes are often diffused and dissipated.

Therefore, working both top-down and bottom-up, Asean-BAC and all associated private sector groups will achieve better outcomes to address AEC shortcomings and imperfections.

For example, in the vexed area of non-tariff barriers (NTBs) there is an understanding with officials to prioritise their removal in four sectors: agri-food, healthcare, logistics and retail (including e-commerce). The Asean Co-ordinating Committee on NTBs has to set up the four working groups to get cracking.

As another example, the proposal by the Asean Business Club to have a private sector Financial Services and Capital Markets expert group work with the Asean secretariat could be adapted to have the experts work in the relevant committee or working group for faster financial sector integration.

All this takes painstaking work not always compensated by desired progress. There will be frustrations, even recriminations.

But it has to be done. The private sector must be committed and involved, even as they complain about the many shortfalls of the AEC.

Having said all this, it does not mean companies should sit on their hands and just wait and see. Those who have not made their Asean move should really ponder on what they would be missing and on why those who have, have done so.

Everyone is operating in the same Asean, warts and all. Those who are still waiting could very well miss out.

Indeed their very business will be threatened as markets become more open and competitive with a more integrated AEC – something which, ironically, they are waiting for.