1. by Marn-Heong Wong Assistant Professor
(1) Challenges and Benefits of AEC (2) Role of Business in Regional Economic Integration
by Marn-Heong Wong
Assistant Professor

2. Learning Objectives To promote students’ understanding of :
the benefits that an AEC will bring to the different stakeholders as well as the challenges that ASEAN faces in implementing measures to achieve an AEC on a timely basis.
the specific role of the business sector, including small and medium enterprises (SMEs), in furthering regional economic integration
MHW LKYSPP 2012

3. Suggested Key Contents
Challenges and benefits of AEC.
ASEAN’s engagement with the business community.
Business perceptions of ASEAN.
Promoting SME development and participation in trade and investments activities in ASEAN (internationalization).
MHW LKYSPP 2012

4. Short List of Teaching Materials
Severino, R. (2006), Southeast Asia in Search of an ASEAN Community, Chapter 5: Integrating the Regional Economy and Chapter 7: The ASEAN Community: Is it for Real?, Singapore: Institute of Southeast Asian Studies.
Plummer, M. G. and Chia, S.Y. (2009). ‘Executive Summary’, in Plummer, M. G. and Chia, S.Y. (eds), Realizing the ASEAN Economic Community: A Comprehensive Assessment, Singapore: ISEAS.
ASEAN (2010). ASEAN Strategic Action Plan for SME Development
MHW LKYSPP 2012

5. Short List of Teaching Materials
Wong, M-H. (2011). Findings from 2010 ASEAN- BAC Survey on ASEAN Competitiveness, A Report for the ASEAN Business Advisory Council, Jakarta: ASEAN Business Advisory Council.
 Wong, M-H. and Wirjo, A., (2012). Findings from ASEAN-BAC Survey on ASEAN Competitiveness, Jakarta: ASEAN Business Advisory Council.
 Various business association websites, newspaper articles and news releases from the ASEAN Secretariat.
MHW LKYSPP 2012

6. Challenges towards Realizing the AEC
Inadequate resources and institutional capacity
Weak coordination
Insufficient political will
Many measures to achieve an AEC depend on national policy decisions and domestic reforms
ASEAN: neither NAFTA-style legally binding treaty nor EU-style supranational authority
Road to economic integration requires political leadership and sense of community
Some areas benefit from regional action and agreement
Benefits of ASEAN agreements: raise standards, peer pressure, commitment device
Key reference: Severino, R. (2006), Southeast Asia in Search of an ASEAN Community, Chapters 5 + 7
WMH LKYSPP 2012

7. Benefits of the AEC
“The AEC has the potential to generate significant economic benefits for nearly all stakeholders in the region… there will be costs as well as benefits… our results show that the gains of the AEC will be far greater than the losses, and the net benefits to all member states should be high.” - Plummer and Chia (2009),
Key references:
Plummer, M. G. and Chia, S.Y. (2009). ‘Executive Summary’ and ‘Benefits of the AEC’, in Plummer, M. G. and Chia, S.Y. (eds), Realizing the ASEAN Economic Community: A Comprehensive Assessment
Plummer and Chia quantified the economic benefits from an AEC as well as analyzed the benefits to different stakeholders
WMH LKYSPP 2012

8. Benefits of the AEC
ASEAN
Consolidates ASEAN centrality
“ASEAN One Voice”
Anchors production networks in region through FDI inflows
Gain political and macroeconomic stability
Source: Schematic drawn by author based on arguments summarized in Plummer and Chia (2009).
WMH LKYSPP 2012

9. ASEAN’s Engagement with Business
Why put spotlight on the role of the business sector in ASEAN economic integration?
Channels for policy makers to engage with businesses
National/regional level
Meetings with business associations, sectoral dialogues, large-scale conferences etc.
Business organization associated with ASEAN in the ASEAN Charter and others, e.g.
ASEAN Business Advisory Council (ASEAN-BAC)
Inaugurated in April 2003 and mandated by ASEAN Leaders as the official ASEAN linkage to provide private sector feedback and guidance to boost ASEAN's efforts towards economic integration and to identify priority areas for considerations by the ASEAN Leaders.
ASEAN SME Advisory Board, US-ASEAN Business Council, EU-ASEAN Business Council
WMH LKYSPP 2012

10. ASEAN’s Engagement with Business
18th AEM Retreat in Naypyitaw, Myanmar ( Feb 2012) - ASEAN Secretariat press release:
… the Ministers—based on feedback from the business sector—unanimously agreed it is time we looked into impediments at and behind the border.
“The only way to tackle these issues is through better engagement with the business sector, not only at the Ministerial level but also at the sectoral levels.” Minister Cham Prasidh further emphasised that “we should not only listen to the issues they have raised with us, we should also provide them with responses to the issues that they have risen. Otherwise, the private sector will not take us seriously.”
WMH LKYSPP 2012

11. ASEAN’s Engagement with Business
18th AEM Retreat in Naypyitaw, Myanmar ( Feb 2012) (cont.):
The ministers also noted that the foreign-based multinational corporations (MNCs) and associations were more forthcoming and focused with solid issues of interest to their business community. The Ministers would therefore call on ASEAN-based organisations also to be proactive and voluble in raising concerns.
“We also need to find a way on how to create the space for the young, active, and enthusiastic business persons in ASEAN—who will probably be more upfront in raising issues as the younger generation can better relate to ASEAN,” stated Dr Surin Pitsuwan, The Secretary-General of ASEAN.
WMH LKYSPP 2012

12. ASEAN’s Engagement with Business
Why are ASEAN local firms less forthcoming or even resistant?
Lack of confidence in ability to compete
Perception that MNCs benefit more from ASEAN integration measures
ASEAN is challenged to promote the greater involvement of ASEAN local firms in intra-ASEAN trade and investments
E.g. Cooperation among firms in the textiles and apparel industry through the ASEAN Federation of Textile Industries’ Source ASEAN Full Service Alliance (SAFSA) programme
Key references
Severino (2006), business association websites, ASEAN documents and news reports
WMH LKYSPP 2012

13. Business Perceptions of ASEAN
Surveys can be conducted to find out what a larger segment of the business community think
ASEAN-BAC Survey on ASEAN Competitiveness
Aims to collate views of businesses based in ASEAN on the competitiveness of the ASEAN region for trade and investments and the effectiveness of ASEAN policy initiatives
Inaugural survey in 2010 (355 responses); followed by Survey (405 responses)
Respondent profile: from across ASEAN economies, firm-size categories, age and ownership profiles and economic sectors
Majority from wholly locally-owned companies
WMH LKYSPP 2012

14. Business Perceptions of ASEAN
Key findings
Businesses consider ASEAN to be an attractive region for trade and investments
Effective implementation of policy measures towards an AEC is important
ASEAN’s competitiveness for investments
Country that offers the best prospects for organization’s offshore direct investments over the next 3 years
By firm size
% of Respondents
WMH LKYSPP 2012

15. Business Perceptions of ASEAN
ASEAN’s competitiveness for investments
% of Respondents
39% of businesses consider the investment attractiveness of ASEAN as a whole in planning investments in ASEAN countries
WMH LKYSPP 2012

16. Business Perceptions of ASEAN
Impact and effectiveness of ASEAN policy initiatives
74 percent of respondents in the 2010 Survey considered implementation of the AEC Blueprint to be of at least medium importance in their decision to expand exports and investments in ASEAN
65 percent indicated that the cost to their business if ASEAN were to fail to form an AEC by 2015 would be medium to very high
In the 2010 Survey, 61 percent of businesses assessed AEC implementation to be behind or very far behind schedule. 86 percent rated the likelihood of an AEC by to be medium to not likely.
WMH LKYSPP 2012

17. Business Perceptions of ASEAN
Impact and effectiveness of ASEAN policy initiatives
There is a clear gap between the importance that respondents attached to AEC Blueprint implementation, which was relatively high and their level of satisfaction with ASEAN’s implementation, which was around average.
Ratings, 1 (very low) – 5 (very igh)
WMH LKYSPP 2012

18. Business Perceptions of ASEAN
Policy recommendations
Ensure full and timely implementation of commitments in the AEC Blueprint
Intensify the dissemination of information among businesses
Strengthen implementation in areas where businesses find to be among the last satisfactory
Promote SMEs’ participation in intra-ASEAN trade and investment activities
Key references
Wong, M-H. (2011). Findings from 2010 ASEAN-BAC Survey on ASEAN Competitiveness
 Wong, M-H. and Wirjo, A., (2012). Findings from ASEAN-BAC Survey on ASEAN Competitiveness
WMH LKYSPP 2012

19. SME Development and Internationalization
SME development is a major action item to achieve the pillar of ‘a region of equitable economic development’ in the AEC Blueprint
Importance of SMEs in ASEAN economies – in terms of contribution to total number of enterprises, employment, GDP, exports
Challenges to SME development e.g. access to finance, technologies and markets, entrepreneurship, management skills, utilization of ICT
ASEAN cooperation to foster SMEs is guided by the ASEAN Strategic Action Plan for SME Development
Measures under the headings of access to financing, facilitation, technology development, promotion and human resource development
Funding of SME activities remain a challenge
WMH LKYSPP 2012

20. SME Development and Internationalization
SME Internationalization: “Don't feel just comfortable staying here. Go out, explore and examine the landscape. It's been built, it's been open”
– Dr Surin Pitsuwan, ASEAN Secretary-General
ASEAN-BAC Survey contains a special section to seek business views on government initiatives to promote SME development and internationalization to inform government priorities
WMH LKYSPP 2012

21. SME Development and Internationalization
Summary findings from ASEAN-BAC Survey:
Financing is a critical area for SME development and internationalization, but businesses want to see ASEAN member governments step up on a few other areas related to networking and information dissemination e.g. business missions to other ASEAN countries, info on opportunities from ASEAN and ASEAN-plus FTAs and FTA-related documents, SME Service Centres, non-bank funding availability and available technology for SMEs in ASEAN.
Key references
ASEAN (2010). ASEAN Strategic Action Plan for SME Development
ASEAN Secretariat (2011). AEC Factbook: Section on SME
Wong, M-H. and Wirjo, A., (2012). Findings from ASEAN-BAC Survey on ASEAN Competitiveness
WMH LKYSPP 2012

22. Suggested Questions
Is ASEAN likely to achieve an AEC by 2015? What are the challenges that stand in the way?
Are there only winners in an AEC?
Would the Southeast Asian region be worse off without an ASEAN and its efforts at regional economic integration?
 Why do ASEAN policy makers want to engage with the business community? How do they do so?
How do businesses view ASEAN’s attractiveness for investments? Do they consider ASEAN as yet to be an integrated investment area?
MHW LKYSPP 2012

23. Suggested Questions
How do businesses view ASEAN’s efforts at forming an AEC? Do businesses see ASEAN economic integration as a threat or an opportunity?
 Why should ASEAN promote SME development and internationalization? Discuss the relevant government initiatives that will assist in SME development and internationalization.
MHW LKYSPP 2012

24. Questions on Course Materials
Please me at
if you have further questions on the course materials
MHW LKYSPP 2012