Asean Economic Community - what opportunities/risks are there for local SMEs?
The AEC is meant to drive deeper regional integration and stronger growth, by lowering barriers to boost the flow of trade, services and investments within the region. Yes, it definitely brings benefits and opportunities, but note that the AEC is a long-term commitment among ASEAN members. It takes time and there will be risks.
We can look at the benefits in 3 areas:
First, in goods. Currently, the barriers for trade in goods within ASEAN are quite low so exporters and manufacturers across different sectors can already benefit. For example, the ASEAN – 6 (Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand) have eliminated import tariffs on more than 99% of goods from other ASEAN countries, while the remaining countries are expected to follow suit in the next 3 years. With this, costs of regionally-sourced raw materials or inputs become lower for SMEs. This reduces your manufacturing and production costs, and raises competitiveness for Singapore-produced goods. However, Non-Tariff Barriers still need to be reduced and customs procedures need to be streamlined.
Second, in services. We see good progress in the liberalisation of the services sector. Sectors such as professional services, construction and healthcare have opened up, creating opportunities for our SMEs to enter the space.
Third, in investment. Singapore-based investments into another ASEAN country is better protected by a robust Investor-to-State Dispute Settlement (ISDS) mechanism, which gives investors additional recourse to seek redress or compensation if they are treated unfairly by the host government.
Overall, the AEC has created favourable conditions for Singapore companies to expand their markets and lower their costs. But we are aware that you may face challenges in finding suitable local partners and navigating the local business landscape, which differ greatly from Singapore. With strong connections on the ground, IE Singapore can help by sharing market insights, advising on setup and regulations, as well as connecting you to potential local partners and relevant government agencies. We also work with industry associations and chambers of commerce to help companies gain exposure to the region through workshops and seminars. In fact, we recently organised a webinar where we discussed some of the key opportunities and challenges faced by Singapore firms interested in venturing to the region, and we encourage you to learn more here: https://www.iesingapore.gov.sg/IE-Blog/ASEAN-Webinar-Opportunities-for-y...