7/23/2019 Trade Experts Push Companies

http://slidepdf.com/reader/full/trade-experts-push-companies 1/4

Trade Experts Push Companies

to Be Ready for the AEC

Thai enterprises must hasten

 preparation for opportunities and challenges as the

ASEAN Economic Community (AEC) fast approaches

its launch in three years. Readiness will mean the

chance to prosper on a grander scale.

The 1 mem!er countries of ASEAN" or the Association

of Southeast Asian Nations" are scheduled to form the

AEC in #1$ as a single mar%et and production !ase.

Thailand" Singapore" &alaysia" 'ndonesia" ietnam"

Cam!odia" aos" &yanmar" *runei and the +hilippines

 plan to drop trade tariffs !etween them to ,ero and

li!erali,e in-estment sectors" ena!ling the free flow of

goods" ser-ices" capital and s%illed la!or across the

regional !loc. *ut while this opens the door to a huge

mar%et of million consumers" it also puts pressure

on Thai companies to !e ready for intensified

competition with the le-el playing field.

/0e cannot sit and wait" said Surin +itsuwan"

secretary2general of ASEAN and a former foreign

minister of Thailand. 3e issued the warning #4 5e!ruary

at the /AEC and *eyond symposium in *ang%o%.

6rgani,ed !y the 7epartment of Trade Negotiations"

&inistry of Commerce (&6C)" the meeting drew $

local and international !usiness leaders" policyma%ers"

academics and N86 representati-es to mo!ili,e ideas

for enhancing Thailand9s AEC readiness with

 preparation time running out.

/'f you do these you can !e hugely successful" 7ayal

said" offering a formula that Thai enterprises could

follow to !enefit from AEC mar%et e:pansion.

Successful steps that the company too% under its

regionali,ation program include restructuring the

organi,ation to eliminate layers and duplication"

/flattening its supply chain for stronger negotiating power with suppliers" and locali,ing management in

each ASEAN country where it operates.

/The proof has !een in the profits" 7ayal said.

/ASEAN is the ;ewel in the crown. 't9s where the

growth action is for our company.

Lively Southeast Asia the Place

to BeThe !irth of the AEC comes propitiously as the region

e:periences a soaring middle class" meaning greater

 !uying power for e-erything from Ts to cars. 'n

coming years" with <.S. and European economic

de-elopment li%ely to remain stagnant" ASEAN9s

middle class is e:pected to e:pand si: fold and

ur!ani,ation in the region will pass 4=. Those

consumers" with their higher salaries" will generate more

demand for companies.

/This is a great neigh!orhood to !e in" said &athew

erghis" lead economist at the 0orld *an%" *ang%o%.

0ith traditional %ey mar%ets such as the <nited States

and the European <nion stuc% in the mud" and e-en

China and 'ndia starting to slow" he noted that ASEAN

is the glo!al growth engine now.

7/23/2019 Trade Experts Push Companies

http://slidepdf.com/reader/full/trade-experts-push-companies 2/4

Some fear that small and medium enterprises (S&Es)

might struggle under AEC li!erali,ation. 6thers say the

stiffer competition would !enefit Thai companies !y

moti-ating them to impro-e. Nandor -on der uehe"

chairman of the >oint 5oreign Cham!ers of Commerce

in Thailand" pro-ides a colorful e:ample? /'t9s li%e an

athlete in a -illage that always wins the local !attles

there. *ut when allowed to compete on the international

stage" he !uilds up his muscles to !ecome e-en

stronger. The !iggest challenge might !e the need for a

total mind shift.

As the AEC single mar%et will a!solutely change the

economic landscape" go-ernment officials are pushing

Thai companies to no longer !e satisfied with ;ust their

@ million domestic consumers.

S&Es must instead reali,e they ha-e million AEC

consumers within their grasp and go regional. This is the

same modality that fledgling >apanese" orean and

Chinese economies used to their good fortune in the

 past. They in-ested outside and returned the profits to

their local economies.

ittiratt na Ranong" deputy prime minister" said a new

*esides a li-ely mar%et" afforda!le production costs and

ample natural resources" the region is !lessed with other

-ital characteristics. 6ne important force is its young

 population" as currently one2third of the people in

Southeast Asia are !elow # years of age. 'n coming

decades those people will !ecome important consumers.

'n another !ig ad-antage" ASEAN is one of the world9s

most sta!le and peaceful regions. The harmony of the

region contri!utes to growth.

Realizing ASEA !"#

ASEAN as a group pre-iously forged free trade

agreements (5TAs) with si: countries" namely China"

>apan" South orea" 'ndia" Australia and New Bealand"

all important economic partners for the association9s

mem!er states. Through these 5TAs" the association has

already achie-ed significant progress in tariff remo-al.

7/23/2019 Trade Experts Push Companies

http://slidepdf.com/reader/full/trade-experts-push-companies 3/4

mindset would mean that Thai companies should loo% at

Thailand as !orderless.

Stepping $p to AEC Prosperity

Comprising .@= of total companies in the country"

S&Es are the heart of Thai !usiness. Trade e:perts

recommend a long list of steps S&Es should ta%e to

ensure competiti-eness when mar%et si,e is multiplied

nine fold.

An important mo-e is for Thai S&Es to go Duic%ly up

the -alue chain to focus on mid2le-el and high2end

consumers in the region. This would differentiate Thai

 products from the profusion of low2 end goods from

China" against which Thailand could not compete cost2

wise. 0ith !uying power on the rise in economies such

as &yanmar and ietnam" there is plenty of room for

culti-ating higher -alue regional trade.

To accomplish upgrading" Thai e:porters are !eing

ad-ised to gain !igger scale so they will ha-e sufficient

resources for ad-anced R7" new technologies" !etter

Duality and the a!ility to attract talent. Alliances and

 partnerships are one way to go !ig time. 6!taining

 !igger scale would ena!le Thai companies to compete

against the multinationals. 5rom production to logistics

3owe-er" the goal for a free flow of goods and ser-ices

would reDuire not only ,ero tariffs !ut also the remo-al

of non2tariff !arriers. As such" the formation of the AEC

single mar%et is therefore regarded as a deeper

integration" or what one analyst called /ASEAN #..

aunching the AEC should resol-e the current situation

where the many !ilateral trade agreements !etween

-arious ASEAN mem!ers is li%ened to a !owl of tangled

spaghetti" as e-eryone has !een doing their own thing.

The 1 ASEAN countries ha-e come a long way since

the association9s esta!lishment in 1@" with

de-elopment now reaching a com!ined 87+ of <SF#trillion and trade !etween them totaling <SF$ !illion

annually. *ut a lot of wor% remains" as intra2ASEAN

trade is only a!out #$= of mem!ers9 total glo!al trade.

This pales in comparison to intra2European <nion trade

at = and internal trade of the North American 5ree

Trade Agreement !etween the <nited States" Canada

and &e:ico at 4G=.

As for the AEC9s implementation scorecard" according

to Thai &inister of Commerce *oonsong Teriyapirom

so far ASEAN mem!er countries ha-e ratified @$.= of

agreements on eliminating import tariffs and in-estment

 !arriers" standardi,ing customs procedures" and ironing

out the hundreds of other details for regional integration

of all industries" from agriculture to

telecommunications.

The AEC concept stems from ASEAN leaders meetings9

in the late 1s and early #s see%ing to transform

the association into a highly prosperous region with

eDuita!le economic de-elopment and reduced po-erty.

The /AEC *lueprint" as it9s called" was then adopted

with firm commitments at the #@ ASEAN Summit in

Singapore as a master plan for achie-ing a single mar%et

of unrestricted !usiness flow among the 1 nations.

6n the road to the AEC" Thailand9s !usiness sector has

7/23/2019 Trade Experts Push Companies

http://slidepdf.com/reader/full/trade-experts-push-companies 4/4

to retail" more international enterprises are setting up

operations in ASEAN countries" many using Thailand

itself as a spring!oard.

Another positi-e step that Thai manufacturers could ta%e

is to purchase more raw materials from neigh!oring

countries at ad-antageous prices due to ,ero duties

under the li!erali,ed mar%et. 6ne effecti-e strategy

would !e for companies to set up logistic operations in

AEC countries with desired materials to cut sourcing

costs.

'n addition" Thai enterprises could gain an edge !y

impro-ing s%ill le-els in e-erything from design toengineering to English.

*lueScope Steel is an Australia2!ased company with a

 production facility in Thailand and operations also in

&alaysia" 'ndonesia" Singapore and ietnam. San;ay

7ayal" chief e:ecuti-e of Asia for *lueScope" recently

shared the company9s firsthand e:periences on the

 !enefits of going regional and operating throughout

ASEAN for 4 years.

 pro-en resilient in !ouncing !ac% ro!ustly from the

1@ Asian financial crisis" #G glo!al economic

downturn and the country9s #11 flood. 'n a #4 5e!ruary

#1# press !riefing" the 'nternational &onetary 5und

 praised the country for /strong macroeconomic

fundamentals and forecast Thai 87+ growth of $.$=

this year and @.$= in #1H. Thailand9s solid growth

 prospect comes despite growth of only H.H= pro;ected

in #1# for the world economy.

*ut while Thailand9s !usiness community has

demonstrated great fortitude" it is now !eing urged to

show foresight !y tapping opportunities !eyond its !orders. Sarasin iraphol" e:ecuti-e -ice president of

the C+ 8roup" one of Thailand9s !iggest enterprises with

deep regional operations" espouses this notion. /0e

must e:ploit all of the wonderful opportunities" he said

of the AEC9s offerings. Iuoting a Thai saying" he added?

/Jou can9t fight luc% and fortune. 0hen it comes your

way" see it as a !lessing.