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Move Over, China

Here is my latest column for The Edge Review, on how much of the U.S. is missing a huge story developing in Asia -- the creation of a single common market due by the end of next year.  Follow TER on Twitter @EdgeReviewSEA.  And please leave any comments at the bottom.

Copyright: The Edge Review

Move Over China

ASEAN’s economic integration heralds a vast new frontier for foreign businesses

 

By Keith B. Richburg / BANGKOK

 

Much of the business news out of Asia in recent months has been about the difficulties foreign companies face in China.

 

Drug-maker GlaxoSmithKline has been targeted in a corruption probe. Firms ranging from technology giants Microsoft, Apple and Qualcomm to automakers Daimler and Audi have been hit by China’s anti-monopoly police, accused of price gauging and cowed into paying hefty fines. Partly as a result of the anti-foreign onslaught, foreign investment in the Middle Kingdom is falling dramatically and some big name companies are talking of pulling out.

 

But there’s another, good news story coming out of Asia these days, and it’s a story that’s been developing largely beneath the radar screen of the U.S. media. While China has become more hostile to foreign multinationals, the 10 countries of the Association of Southeast Asian Nations (ASEAN) are forging ahead with plans to create a single economic market, called the Asean Economic Community (AEC) by the end of next year. And that prospect has American and European business leaders salivating at the bullish prospects.

 

Most Americans have probably never heard of ASEAN, or likely could not distinguish it from the region’s alphabet soup of acronyms for organisations from APEC to ARF to the EAS. For many in the U.S., even the names of Asian countries are wrongly interchanged — Thailand is often confused with Taiwan, Indonesia for India.

 

But Southeast Asia collectively over the years has become an increasingly important trade and investment partner for U.S. businesses. According to the US-ASEAN Business Council (US-ABC, if you want another acronym), the ASEAN bloc is now America’s fourth largest trading partner, behind neighbours Canada and Mexico, with China at number three. In 2012, the U.S. exported nearly US$100 billion worth of goods and services to ASEAN countries. Compare that to the US$109 billion exported to China the same year.

 

And America’s trade with ASEAN is only likely to expand exponentially — particularly once the common market comes into effect and foreign firms can look forward to a more streamlined set of rules and regulations for doing business across the diverse and sprawling bloc.

 

“Harmonization of rules and regulations across ASEAN, the ASEAN Single Window for Customs, free movement of professionals are all examples of the kinds of real change that will help U.S. companies unlock the economy of scale that the ASEAN Economic Community will deliver,” said Alexander Feldman, US-ABC’s president and CEO, “allowing American products and services to truly access the over 600 million consumers in the region.”

 

And how come, I asked Feldman in an email, there’s such scant notice of this in the American media?  “Yes, very little is understood about ASEAN and why it is important,” he replied.  “China and India often overshadow ASEAN in the press,” he added.  “Yet the American business community has more at stake in ASEAN than ANYWHERE else in Asia.”

 

To put it in perspective, Feldman pointed out that American companies have more invested cumulatively in ASEAN than in the five BRICS countries — Brazil, Russia, India, China and South Africa — combined.  “ASEAN matters,” Feldman said, “but the media has lost the plot.”

 

Other analysts, and surveys of business leaders, support the idea that ASEAN’s star is rising just as China is becoming a tougher place to make a buck. The media may be missing it, but U.S. multinationals are paying close attention, and making plans.

 

Consider two recent reports from two American Chambers of Commerce — one in Singapore and the other in Beijing. They make for starkly different reading. 

 

The Singapore survey, of 475 American business leaders and covering all of ASEAN, found strong optimism, with some 84 percent expecting profits in Southeast Asia and nearly a fifth saying they planned to diversify some big operations away from China and into the region.

 

By contrast, the latest business climate survey for China, canvassing 365 members, was full of gloom and pessimism about the tough business environment.  “After years of meteoric growth, China’s economy and the overall business environment are now more soberly assessed,” the report said.

 

But don’t expect ASEAN’s coming economic integration to mean greater political or security cooperation among member countries anytime soon. That was what happened with the European Union — which I covered for five years from Paris and Brussels from 2000 until 2005. Europe’s economic ties gradually led the way to moves toward more common foreign and defense policies, culminating in the Treaty of Lisbon. But obstacles and differences remain.

 

In Asia, the political differences are still too vast, and the supra-national structure of the ASEAN Secretariat is still too weak. ASEAN comprises robust, chaotic democracies such as the Philippines and Indonesia, Communist-run states Vietnam and Laos, and everything running the gamut in between.

 

“The 10 countries are just too different and lack a shared culture and history that would make increased regional cooperation, especially at the political level, very difficult,” said Murray Hiebert, a senior fellow and deputy director of the Southeast Asia program at the Center for Strategic and International Studies.

 

There have been moves towards more defense cooperation, with ministers holding regular meetings. But, as Hiebert said, “that is probably driven more by China’s increased assertiveness in the South China Sea than by economic factors.”

 

Former U.S. Secretary of State Henry Kissinger, lamenting Europe’s lack of a common foreign and security policy, once famously quipped: “Who do I call if I want to call Europe?”

 

The current Secretary of State, John Kerry, may well be asking the same thing about Southeast Asia. But even absent a single ASEAN security policy, foreign multinationals will soon find it a lot easier working across 10 countries in a common market with more unified regulations and freer movement of people.

 

I wonder if Beijing’s anti-monopoly police are paying close attention? Maybe not, if they are monitoring the U.S. media.

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