Singapore

Singapore: Benefits of integration still far off for businesses

Office workers in Singapore's central business district.
Office workers in Singapore's central business district. PHOTO: ST FILE

Asean is set to declare the formation of the Asean Economic Community (AEC) on Dec 31 in its pursuit of a single market and production base, a highly competitive economic region, a region of equitable economic development and a region that is fully integrated into the global economy. Ten Asean papers of the Asia News Network report on sentiments within their countries for the AEC as the deadline nears in this special report.

Regional governments will reach a milestone at the end of this year, when the Asean Economic Community (AEC) is launched - at least in name.

But for businesses, the date will pass without fanfare as Asean has yet to deliver on many of its targets for the ambitious trade pact across the 10 Asean member nations.

Take, for example, the Golden Bridge factory in Senoko, Singapore.

The processed meat supplier's regional expansion plans are in limbo, a reminder of the many indirect barriers to trade that years of government-to-government talks have not brought down.

Mr Ong Bee Chip, managing director of Golden Bridge, thinks he is more likely to sell his wares in South Korea before he can get his first shipment through a port in Asean nations such as Vietnam, the Philippines or Indonesia.

Liberalisation may be moving at a snail's pace, but the sheer size of the opportunities that will be opened up by a fully-realised AEC has meant that many of the larger firms are keeping an eye on its progress.

"It's very funny. We are Asean countries, we have FTAs (free trade agreements) with them, but they are taking their time to approve our shipments," said Mr Ong.

It has been 19 months since the Agri-Food and Veterinary Authority of Singapore helped him send a request to the Philippine authorities to audit his factory as part of a customs clearance protocol, but he has not heard back.

Mr Ong also had to stop a $100,000 shipment he had sent to Vietnam in June after the customs approval he had been granted by one local body was withdrawn by a higher authority days ahead of the scheduled delivery.

While intra-Asean tariffs have fallen from 13 per cent in 1993 to near zero in 2013, the next step towards the free flow of goods - the removal of protectionist barriers such as costly and complicated import and export processes - seems to have stalled.

Countries have agreed to build a database of non-tariff measures and eliminate those that act as barriers by 2018, but have not come to a consensus on what exactly counts as such measures, and what is outright protectionist.

Given all this, no one expects trade within Asean to be free-flowing at the end of the year.

And as Dec 31 approaches, the AEC implementation deadline is more commonly flagged as a milestone rather than a destination.

Mr Bob Fletcher, customs and global trade leader at Deloitte Singapore and Asia Pacific, said: "The AEC implementation deadline is not a static goal - rather, it is the beginning of an ongoing journey to transform the Asean states into a single market and production base, and become more competitive and connected with other trading blocs."

Singapore Business Federation chief operating officer Victor Tay said: "While there has been harmonisation of trade tariffs, liberalising of rules of origin and of the service sector, Asean must stay integrated and continue to progress as other trade pacts, like the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership, are forged."

For firms in the service sector, the relevance of the AEC is fainter still.

The freer flow of skilled labour is one of Asean's stated targets, but progress has, so far, been confined to a framework for Mutual Recognition Agreements (MRA) that will allow workers in just eight professions to have their certifications recognised in other member states, with restrictions.

These professions include engineering, nursing, medicine and accountancy.

Ms Wong Chian Voen, director of trade advisory Mayer Brown Consulting Singapore, explained: "Even if there's an MRA in place, it doesn't mean that you don't need to apply for an employment pass or a visa.

"It just means that the country will recognise your professional certification. Every country has its own immigration policies and that would not be affected by the AEC."

Liberalisation may be moving at a snail's pace, but the sheer size of the opportunities that will be opened up by a fully-realised AEC has meant that many of the larger firms are keeping an eye on its progress.

Mr Bennett Neo, chief executive of home-grown logistics giant YCH, said: "We are looking closely at the changes, in particular, customs processes, full participation of logistics businesses in the various countries including foreign ownership of logistics companies, and the freer flow of talent. The main problem for me is talent."

Encouragingly, private-sector lobbying over the years has also pushed Asean closer to its AEC goals in some industries, creating safer goods, customer choice and cost savings for businesses big and small.

Since the cosmetics sector was one of the first to achieve regulatory harmonisation in 2008, Dr Alain Khaiat, president of the Cosmetic Toiletries and Fragrance Association of Singapore, has been on a regional campaign to teach cosmetics manufacturers how to take advantage of the opportunities that the AEC has created for them.

His interest in the cause began years back when he was at Johnson & Johnson's consumer division in Singapore, sent to train other firms, and even potential competition, about quality assurance and product safety. The reason?

"If the product is not safe, it's the whole industry that suffers," said Dr Khaiat.

"One of the major aspects of the Asean cosmetics directive is that products have to be safe, and companies are responsible for safety. And that is terrific progress - when you buy a product, you know that the product is safe."

Firms here are also warming to the idea that the AEC increases the size of the pie for everyone, said Dr Khaiat.

"Companies today, when I speak to them, don't think Singapore - they think Asean. And some of the larger ones are now looking at Asia because they know that if they meet the requirements in Singapore, they meet international standards. The world is open to them."

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A version of this article appeared in the print edition of The Straits Times on December 28, 2015, with the headline 'Benefits of integration still far off for businesses here'. Print Edition | Subscribe