Southeast Asia

Positive sentiment hints Asean economic bloc is starting to take shape

By RJ Whitehead

- Last updated on GMT

Positive sentiment hints Asean economic bloc is starting to take shape

Related tags Asean economic community Asean Southeast asia

What would Asean look like if it were re-imagined as a single bloc, and what characteristics would it have if all 10 countries were aggregated into an economic unit?

The Economist Intelligence Unit has been pondering this question, and having questioned more than 170 business leaders and operators across a number of B2B and B2C segments in the Asean region, it found that three-quarters of companies were already using single, Asean-centric strategies for running their operations there.

Moreover, four-fifths of companies from outside the nascent bloc were more likely to have a regional strategy than domestic players.

Consolidation and centralisation

Many theories exist to explain this difference, but the fact that local companies are generally smaller than global multinationals is likely to be a major factor​,” the EIU reported.

It also singled out the policies of the Asean secretariat and Asean Economic Community for forging a regionally integrated market that are moving to reduce cost and increase efficiency.

Given falling trade barriers and deepening harmonisation of industry standards across Asean (albeit slowly for many industries), companies are increasingly able to consolidate and centralise their manufacturing in Asean​,” it said.

Again, this opens up the benefits of greater scale, as well as reducing complexity​.” 

For some firms, these falling barriers have been opening up possibilities for greater fragmentation of their supply chains. Increasingly they can break up their activities into distinct parts and put them into places with the most appropriate costs and skills, the EIU said.

Increased homogenisation

Its findings also suggested that consumers across Asean were becoming more alike. Although most respondents believed that their back-office support functions were working well across southeast Asia, some companies were finding it difficult to harmonise their client-facing activities.

Currently in the process of harmonising their regulatory framework that covers food safety, traceability and labelling, Asean is starting to show some other positives, the respondents identified.

Among these are greater ease of managerial recruitment and similarly high growth, which makes it wise for corporate strategists to devise and co-ordinate a region-wide approach to business.

However, a number of B2B companies did stress the importance of recognising that clients were increasingly adopting a pan-Asean strategy, so suppliers must therefore follow suit.

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