TABLE OF CONTENTS May 2014 - 0 comments

ASEAN 101-A primer for trade

ASEAN, a market of more than 615 million consumers, is now Canada's seventh-largest trading partner

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By: Ken Mark
2014-05-01

The Association of Southeast Asian Nations (ASEAN) consists of 10 member states: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

To increase regional economic integration by 2015, members plan to launch the ASEAN Economic Community (AEC). It will transform ASEAN into a group similar to the European Union that offers members the free movement of goods, services, investment, skilled labour, and freer flow of capital.

According to recent DFAIT figures ASEAN, a market of more than 615 million consumers, is now our seventh-largest trading partner. From 2007 to 2012, Canada-ASEAN bilateral merchandise trade rose 19.2 percent to $15.8 billion.

Canada’s Export Development Corporation (EDC) looks beyond conventional foreign trade and investment categories - physical goods exports and inbound foreign investment - to encourage more modern, value-to-Canada approaches. These include integrative trade in which goods produced by Canadian firms overseas may never come back to Canada and outbound foreign direct investments that make such production possible. That combination adds value by maintaining head-office, management jobs in Canada and streaming profits and dividends back home.

At the same time, smaller Canadian businesses often lack the time, money and resources to pursue foreign markets on their own. A more effective approach is to join the value chain of large multinational corporations. That starts with being a valued supplier to the company here in Canada. If the buyer opens up new overseas operations, it may ask the Canadian supplier to ship inputs over there. If the supplier agrees, it becomes an exporter, which can help open up other opportunities in that country or in others.

EDC can support such efforts by offering to firms financing, insurance against receivables, expropriation and political upheaval insurance as well as market intelligence.

According to EDC chief economist Peter Hall, Indonesia is one ASEAN country to watch closely. “It has a quarter billion - 250 million - people. But here in Canada we are seeing a shrinking labour pool - we’re running out of skilled labour. We need to find them somewhere else,” he says.

“If Canadian producers can work with Indonesian partners who have skilled workers, they can employ labour without having to move it.” When that happens, it solves problems for both sides.

For an in-depth analysis of the region, check out the 59-page ASEAN Commercial Opportunities Study for Canadian Business

available from the Canada-ASEAN Business Council website: www.canasean.com.

The following is a snapshot of the economies and possibilities in each ASEAN member nation:

Malaysia is the region’s sixth most-populous country with the highest per-capita income among these six. Its central location within ASEAN makes it the ideal regional showcase for retail brands looking to target the well-travelled, middle-income consumers of the trade bloc. Zaimah Osman, the MATRADE representative in Hong Kong, encourages Canadian importers to attend the annual Malaysian International Halal Showcase (MIHAS), the world’s premiere showcase for sourcing and trading of halal goods.

Indonesia, the largest economy and the most highly populated country (250 million) has become a lucrative market for multinational retail companies attracted by its robust economic growth, rising domestic consumption driven by an expanding middle class and a youthful population. Attractive sectors for Canadian firms include infrastructure, shipping and ports, agri-food, oil and gas, mining and power.

Singapore is a sophisticated city-state that resembles Hong Kong as the region’s financial, business and logistics hub. Foreign investors are also attracted by its electronics industry, contract manufacturing services, integrated research, logistics services and top standards in technology manufacturing.

The Philippines offers a rapidly evolving food and beverage market that is adapting to the habits of a youthful urban population with money to spend. Canadian agri-food exports there have been very successful, making it the third-largest ASEAN export destination. Canadian exporters should explore the market’s developing appetite for modern agricultural equipment, high-yield seeds and fertilizers.

Thailand and Canada enjoy a robust trade relationship, heavily weighted in Thailand’s favour. Domestic firms known as efficient assemblers must still import most of their production inputs, which creates opportunities for high quality, competitively priced Canadian suppliers to set up a local presence and become part of the sector’s extensive supply chain.

Vietnam, an ASEAN member since 1995, is the size of Germany with a young, skilled and educated population of more than 85 million. Its skilled, low-cost workers, proximity to customers, reliable power and water supply have brought in massive foreign direct investments. Goldman-Sachs has predicted that by 2025, Vietnam will rank 17th in the world. Thousands of Vietnamese who have immigrated to Canada are an untapped resource for opening doors to business deals back home.

Brunei Darussalam is an oil-rich sultanate on the island of Borneo. It offers trade opportunities to Canadian firms in the oil and gas, information and communication technologies (ICT), agriculture and agri-food sectors.

Laos, Cambodia and Myanmar (formerly called Burma) are smaller countries, which are now on the upswing after recently restoring political and economic stability. Owing to their central location, these countries will expand quickly once proposed high-speed rail and modern highway projects link the region with Kunming in China’s southernmost Yunnan Province. When linked to modern harbour facilities under construction in Yangon (formerly Rangoon) in Myanmar, the port will serve as a direct sea link to South Asia and beyond.

The proposed Dawei deep-sea port and special economic zone is moving forward after Thailand and Myanmar recently signed three memoranda of understanding. Located some 350 km from Bangkok by road, the project is a key part of the East-West Corridor that will enable Thailand to become an ASEAN logistics hub.



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