There’s no stopping the ASEAN Economic Community (AEC) come 2015 which will pave the way for a single market with duty free imports, single production base for 10 country-members, with 600 million consumers and $1.9 trillion in combined GDP.
The AEC presents challenges as well as opportunities to local businesses especially small and medium enterprises. Some of the challenges include:
• Entry of imported products. Since tariff will be reduced to zero by 2015, there will be a deluge of products from consumer goods to industrial products. This will pose a huge threat to local manufacturers as they fight over market share. As an example, Kopiko of Indonesia is already selling its coffee to over 50 countries worldwide and commands a significant share and business in the country.
• The challenge of scaling the business. With the entry of imported products which can potentially be cheaper with better quality, local businesses are faced with the challenge of becoming more competitive by becoming bigger to take advantage of economies of scale. This will require them to acquire more capital, ramp up hiring and training, as well as engage in more aggressive marketing. Already, large conglomerates have started to scale their production and marketing to other countries to prepare for the AEC, such as Universal Robina and Asia Brewery which expanded its business to ASEAN countries.
• The need to be efficient. Local businesses need to improve their efficiencies to stay competitive against the influx of imported products. This entails investing in efficiency-gaining technologies that improve production output and upgrades in existing infrastructure such as telecommunications and information technology systems.
• The challenge to increase productivity. Local businesses should strive to increase productivity of its employees through retooling and retraining. This again entails investments in human capital to ensure that workers keep improving their productivities to improve output.
• The need for speed. Local businesses are faced with the challenge of becoming faster – may it be in launching a product or delivering products and services to customers. Faster responses to market demands will be improved through better systems in place using technology and processes.
• The challenge to innovate. Lastly, the need to innovate is paramount as innovative products from other ASEAN countries will enter the local market. Companies need to invest in research and development, market research, and new technologies of production.
Local businesses especially SMEs should address the foregoing challenges to compete against the entry of new players in the country. At the same time, they should capitalize on the potential opportunities that the economic integration presents, such as.
• Access to a bigger market. With a bigger market base of 600 million consumers, the ASEAN market is a huge one that businesses can tap.
• Supply of human capital. We are the largest English speaking country in this part of the world, and businesses can take advantage of this through the supply of talented pool of works. This presents huge opportunities for the local business process outsourcing sector which can potentially grow with the opening of the ASEAN economies. Supply of talent to other countries will likewise be a huge potential as companies overseas demand for skilled workers. –Reynaldo C. Lugtu, Jr., Manila Bulletin
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