Asean economic integration winners and losers

IT is fair to say that the countries and regions around the world have taken the creation of the single Asean market with 600 million people and a combined GDP of $2.1 trillion seriously, and have studied the opportunities Asean offers and are looking at the best entry points into the region. At the same time, the Asean member-states have encouraged their business sectors to get ready.

The name of the game is competitiveness. In this process, it is essential that we look at winning sectors and at sectors that will be challenged.

Let’s look at some sectors:

Transport

Southeast Asia is not only a vast and developing market, it is also bound by the dynamic economies of China, India, South Korea and Australia. Facilitation of trade is vital for all Asean countries, which occupy an area at the heart of these leading global manufacturers. Trade among member-countries themselves is steadily increasing with intratrading expected to increase to 30 percent of total trade. As a result, transport and logistics have become big business in Southeast Asia. For the Philippines this means to accelerate the implementation of transport infrastructure; the Philippine government has to address cost, quality and competitiveness issues in domestic logistics.

Aviation

The aim of the Asean Single Aviation Market is to foster a competitive airline industry and propel the region’s carriers into the global market. It is a strategy that seeks to increase market access, establish central authorities and industrial standards for a sector that is undergoing unprecedented expansion. Open skies will yield a host of opportunities for Asean members by removing obstacles to growth, such as restrictive airspace and route constraints. In the Philippines the decision has to be made to expand Clark and modernize the Ninoy Aquino International Airport, provide night-landing equipment to airports and improve civil aviation regulation.

ICT

Sustained investment in information and communications technology (ICT) is proving to be one of the most potent drivers of development for emerging economies. The strong focus on ICT development is having a significant impact on the Asean region. There is a master plan to deliver ICT as an engine of growth for all- member-states and to establish the region as a global communications hub. The Philippines is a leader in business-process management (BPM) and will have to improve its telecoms infrastructure/broadband if it wishes to maintain that position.

Health care

Health spending in Southeast Asia is expected to double in real terms over the next decade, outstripping GDP growth, as governments seek to improve standards and widen the scope of care available. There are wide variations in the region.

Several Asean members have passed laws to establish national health insurance systems and mandated universal coverage, including the Philippines.

Services

Within Asean, the services sector accounts for 40 percent to 70 percent of each economy’s GDP. Education, the upgrading of local skills, infusion of foreign skills (which will lead to mutual technology/knowledge transfer) and overall productivity increases are the cornerstone of a competitive economy.

The Philippines has a great chance to take dominant positions in BPM (we are already No. 1 in voice in the world) and in various creative sectors, from animation to game development to digital content and digital design).

Agriculture

The sector’s output derives almost entirely from small holdings, which dominate the region’s agricultural landscape. Many farms occupy less than 2 hectares and have low access to technology, information, finance and, crucially, to markets. The problem is that poor techniques and low-grade inputs, including seeds, lowers productivity, while farmers struggling to survive are driven to over culture their lands and deplete scarce water resources as a result.

The integration of the agri sector will be challenging with winners and losers. The Philippines will not be among the winners in the short term.

Manufacturing

In the last 25 years Asean countries have become established as a preeminent destination for global manufacturers seeking a well-resourced, cost-effective manufacturing base for garments and textiles, electronics and a huge variety of branded goods that stock the shelves of retailers in Europe and North America.

There is a developing strategy among many Asean states to move from low-cost manufacturing and become providers of value-added products in many sectors, involving ship and drilling rigs, automotive, mineral smelting and refining, biomedical and biochemistry, petrochemicals, health care, agro-biotechnology and many more.

Food and beverage

Almost all countries in Asean are experiencing high economic growth accompanied by rapid changes in the consumption pattern. A growing middle class is developing preferences for food and beverages that are more convenient and packaged well, especially juices and premium beverage alcohols.

The Philippines must take the agri-food supply chain much more seriously and develop strategies to increase farm productivity through mechanization, consolidation of farmland and the application of new technologies.

Consumers

The ever-growing diverse consumer market of Asean with a combined GDP of $2.4 trillion will be the fourth-largest economic region in the world by 2050, according to research conducted by McKinsey&Co. (McKinsey Global Institute analysis). The growth of the region’s various economies and its rising middle class speak volumes for the future as companies can tap into expanding opportunities. By 2025, McKinsey expects the size of this consumer-driven market to almost double to 125 million households.

Tourism

The travel sector is helped by growing connectivity in the region, which supports to stimulate tourism. As a result, the travel and tourism industry is seen as crucially important for development. Tourism is vital for its socioeconomic benefits, as it promotes people-to-people connectivity, one of the key strategies toward achieving the Asean community.

Income received from international tourism is at an estimated $21 billion for Malaysia in 2013, $18.9 billion for Singapore, $9.3 billion for Indonesia, $7.5 billion for Vietnam, $4.7 billion for the Philippines, $2.7 billion for Cambodia and a huge $42 billion for Thailand.

In conclusion, there are definitely more winners than losers. And where challenges exist, governments and the private sector should get together to find solutions without delay jointly. Asean is a big adventure.

-Written by Henry J. Schumacher in BusinessMirror.  See original article link here.

Leave a Reply

Your email address will not be published. Required fields are marked *