Three months after the formation of the ASEAN Economic Community (AEC), there is growing interest among companies but market players say that it will take time for the tangible benefits to make themselves felt.
Singapore Business Federation chief executive Ho Meng Kit said that "we are seeing quite a bit of traction. I've seen companies showing interest in investing in the Philippines. With China becoming increasingly expensive, manufacturers are also getting interested in Cambodia and Vietnam, whose participation in the Trans-Pacific Partnership is an added attraction."
But he agreed that firms have not been active in any big way.
"There has to be a greater outreach, so that the community can know more about what the difference is and what sectors have opportunities. This is something the business chambers can do better, going forward. It will take time and organisation," said Mr Ho.
The AEC was formally established on Dec 31 last year, with the aim to build an integrated economy with a combined market of US$2.6 trillion (S$3.6 trillion) and over 622 million people.
In his Budget speech on Thursday, Finance Minister Heng Swee Keat alluded to the AEC as one of the several opportunities for growth for companies. He noted that ASEAN is expected to grow at 6.3 per cent per year over the next five years.
On the capital markets front yesterday, the ASEAN Capital Markets Forum unveiled several initiatives as part of the goal of improving economic integration. One of them was an ASEAN Young Regulators programme to help sharing of expertise.
However the existence of a pre-existing free trade agreement (FTA) means that many countries were already enjoying some of the benefits of easier trade access.
DBS economist Irvin Seah told The Straits Times, referring to the ASEAN Free Trade Area scheme implemented in 1993: "Given the fact that ASEAN already has a comprehensive FTA, the benefits will not be clear cut and quantifiable at this stage for Singapore."
Under this scheme, most of Singapore's exports to Malaysia, Indonesia, Thailand, Brunei and the Philippines have been duty free since 2010.
"So we should take a longer-term perspective to view the AEC, which can help in alleviating poverty in some countries while boosting economic development in others," Mr Seah said. "And what's good for the region will also be good for Singapore. For instance, we can expect more multinational companies to use Singapore as a hub to tap the business opportunities arising from the greater flow of investment and trade in ASEAN."
In any case, the political and development gaps between ASEAN members remain a hurdle for full regional integration.
CIMB Private Banking economist Song Seng Wun noted that the way forward willl not be without its speed bumps.
"The difference in development paths and domestic politics among the ASEAN states will always constrain the pace of implementation. The AEC may have been established, but it's still very much a work in progress," he said.
One challenge is that of having a more liberal flow of people and capital, Mr Song added. "But ultimately, especially for a small and open economy like Singapore, the simple fact is anything that lowers the barrier of business activities will help."
Mr Seah hopes ASEAN countries can focus on mutual benefits as they navigate their differences. "There will always be political resistance against regional integration, but what's important is for ASEAN members to bring a win-win mentality to the table," he said.
This article was first published on March 26, 2016.
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