Category: ASEAN Economic Community

Ahok concedes Jakarta election to Baswedan

ahok

Jakarta’s incumbent Governor Basuki Tjahaja Purnama (Ahok) has conceded defeat in the race to become the city’s new governor. This is after unofficial quick count results showed a former Indonesian education minister, Baswedan taking the polls.

Analysts are divided on the cause of his defeat – with Western observers largely zeroing on the rise of Islamist sentiment in Indonesia. However, the rise of Islamist is part of the broader socio-political issue, which has impacted Ahok’s Governor post.

Despite his popularity with middle-class Jakartans for his efforts to stamp out corruption and make the overflowing polluted city more livable, his upfront manner and evictions of slum communities could have alienated many in the city of 10 million.

The final straw, which may have broken the camel’s back, came when he was perceived to have ridiculed a passage in the Holy Al-Quran. Though the recording itself is questionable, it has been widely circulated on Youtube prompting a broad backlash from Muslim community and religious conservatives.

Baswedan, a highly educated Muslim moderate, is seen to have capitalised on the backlash against Ahok by courting the support of conservative religious leaders and figures on the radical fringe who opposed electing a non-Muslim.

Thailand and the Philippines to emphasise freedom of navigation in the South China Sea

Duterte and Thailand

Thailand and the Philippines have agreed to emphasise freedom of navigation in the disputed the South China Sea as a core value in securing peace and prosperity in the region.

Prime Minister Prayut Chan-o-cha and Philippine President Rodrigo Duterte shared the same stance on the maritime territorial disputes in the area during a joint press conference at Government House Tuesday,  21 March.

They also agreed to push for the completion of the Declaration on the Conduct of Parties in the South China Sea (DOC) in 2017.

“Maintaining peace, stability, and security as well as respecting freedom of navigation and over-flight in the South China Sea are in the interests of all countries, within and outside the region, as they are fundamental conditions for growth, development and prosperity,” Mr. Duterte said.

Meanwhile, Gen Prayut said Thailand believes the ultimate goal should be for the South China Sea to be the “sea of peace, stability and sustainable development” in order to benefit the region and its people.

The issue of the South China Sea and the bilateral relations between Thailand and Philippines is a complex play.

Thailand last year in September stated that it supports China’s work to “promote peace and stability” in the South China Sea. The statement is considered controversial as it was done hours after the Philippines made public images that it said show China preparing to begin island construction activities on the Scarborough Shoal.

The latest stand made between Duterte and Prayut, however, suggest that Thailand may slightly be inching towards a middle-ground policy on the South China Sea dispute.

Though much is left to be seen. Thailand’s true stand largely depends on its action pertinently in pushing for the completion of the Declaration on the Conduct of Parties (DOC) as soon.

AEC and Cambodian Labor market

Cambodia labour market

One of the pillars under the ASEAN Economic Community (AEC) will be the free flow of skilled labor across borders by 31 December. Eight selected sectors involving engineering, nursing, architecture, dentistry, medicine, tourism, land surveying and accounting will be covered under this scheme.

Given AEC limitation on labor migration only to these category of skilled professionals,  Cambodia with its low- to medium-skill workers may see an influx of better-qualified workforce. AEC may not also drastically boost the number of jobs on offer in the region instead the more liberalize market will increase the competition for these professions and Cambodians may not exclusively see a direct benefit. Instead, the likely scenario to occur is – professionals both from other ASEAN member states and Cambodians will be competing against each other in a bigger pool of qualified people.  

Hence there may be a slight sentiment on AEC within local labor grass-root.

Seang Vathana Tann, a Cambodian accounting student provides an interesting case-in-point.

An accounting student at CamEd Business School- she said that after graduating she would consider working abroad to get better experience and higher pay, but she also knows that the competition for local high-skill jobs will only get tougher.

“There might be more skilled workers coming to Cambodia than skilled workers in Cambodia moving abroad,” she said. Foreign professionals will come to occupy the top jobs and it will be hard to compete with them.

Officials and industry experts sought to ease such sentiments.

Heng Sour, spokesman for the Labor Ministry stated that “AEC will have a free flow of labour, but the labour laws in each member state are yet to be changed to date,” he said. “The old requirement of 10 per cent quota for foreigner workers [in Cambodia] will still remain as there is no agreement to change it anytime soon.”

According to Sour, the new regulations will not open the floodgates for workers to enter the country, and member states can use a clause in the AEC regulations to stop the inflow of migrant workers, if they deem there is no need for such workers or if they want to protect the local labour force.

Cambodian industry experts also suggest the transfer of skills and expertise in prioritized field from developed ASEAN countries will benefit Cambodia in the long run. It is worth noting, Cambodia relatively is still behind in terms of talent resource in all selected professions under the ASEAN free labor movement pillar. Moreover, Rana Sowath, a Cambodian Human Resource scholar also stated that Cambodia national institutions and small private companies do not have training programs for their employee.

The arrival of experts from different region provides immense opportunities for Cambodians to acquire the best practice in the highlighted field. Experts may provide an informal approach of passing on their experiences. Key skills may also contribute towards Cambodia’s National Strategic Development plan for enhancing Capacity Building and Human Resource Development 2014-2018.   

From a short-term perspective, the impact of AEC to Cambodia will be felt by locals, given the anticipated arrival of foreign experts to their shores. Experienced or freshly minted graduates will face the heat. The latter will feel the pinch more – given that companies may be attracted to better qualified foreign graduates with competent technical and communication skills.

Equally, however, the cumulative learning experience from other developed ASEAN members should not be discounted. This indirect form of capacity building through selected transferable skills may provide Cambodia with the needed stepping stone to increase the country talent capacity.   

 

Survey finds US businesses remains cautiously optimistic about ASEAN

kontena

American companies remain cautiously optimistic about business prospects in the Association of Southeast Asian Nations region, according to an annual survey by the American Chambers of Commerce in Asean member countries.

The annual ASEAN Business Outlook Survey, released  on 26 August by the Asean chambers and the US Chamber of Commerce, surveyed 471 senior executives representing US companies in all ten ASEAN nations

More than 70% reported that their company’s level of trade and investment in Asean has increased over the past two years, and 86% of respondents expect it to increase over the next five years.

Despite investor confidence, optimism has declined over the years. More than half (53%) of respondents said Asean markets have become more important to worldwide revenues over the past two years, down 10% points lower than reported two years earlier. In addition, 66% of the executives this year expect Asean to become more important in terms of worldwide revenues over the next two years; while still high, this is seven percentage points lower than two years earlier.

However, investor confidence has been steadily increasing in countries, such as Malaysia, Vietnam and Cambodia. For example, investor satisfaction with new business incentives offered by the government has risen by 25 % over the past five years in Malaysia.

Corruption was the top issue of concerns and impediments to their growth across Asean, cited by the majority of respondents in all countries except Brunei and Singapore. Also highlighted were burdensome laws and regulations, lack of transparency, poor quality of infrastructure, and the difficulty in moving products through customs in some countries as obstacles to greater investment. 77% of respondents to this year’s survey reported that exchange rate volatility has a “significant” or “somewhat significant” impact on their business operations in the region.

AEC sense of urgency gains momentum after KL-Asean Economic Ministers meet

mustapa

Dato’ Sri Mustapa Mohamed, the Minister of International Trade and Industry Malaysia chaired the 47th ASEAN Economic Ministers’ (AEM) Meeting from the 22 to 25 of August.  Asean Economic Community(AEC) has been at the top list of the discussion including China’s recent yuan devaluation.The currency fluctuations created greater urgency for the AEC establishment apart from being a critical push factor for all ASEAN states.

Mustapa said closer economic integration was important for ASEAN because it would allow the region to better face external challenges. ASEAN aims to announce the formation of the Asean Community at the end of this year, which will comprise three pillars, namely the economic, political security and socio-cultural.

The necessity for AEC has been highlighted by The Asian Diplomat in its August 14 article. ASEAN need to work on proactively with its single currency/ economic union project. This could be a possible measure to mitigate drastic fiscal actions by economic giants such as China and the US to the region. The reliance of Southeast Asia as a single economy and currency could help not only in mitigating immediate financial impact but also raise the confidence level of foreign investors on the robustness of the system and reduce any panic factor – which has the potential to plunge a single state economy overnight.

The revered question : Is ASEAN ready for an Economic Community?

Speaking at the 48th anniversary of ASEAN’s founding ceremony on the 8th of August 2015 – Thailand Foreign Minister Tanasak Patimapragorn emphasized that the union should tighten up cooperation in all fields to make the community more inclusive, which is a key principle of the Asian Economic Community(AEC).

Rewinding 8 years prior to the ceremony, the leaders of the Association of Southeast Asian Nations (ASEAN) has adopted the ASEAN Economic Blueprint on 20 November 2007 to served as a plan to guide the establishment of the AEC, due for implementation by the end of 2015.

The main goal is for regional economic integration, defined by four characteristics: a single market and production base, a competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.The European Union economic community is the likely example taken for this endeavor.

ASEAN-Economic-Community-Opportunities-in-Managing-the-Challenges-of-the-Region

It was initially forecast for 2020, however, the deadline was moved forward to the beginning of 2015 before being pushed back again to the end of this year. With the dateline looming, The Asian Diplomat compiled perspectives and discourses on the AEC prospects:

Financial Investor perspective

From an investor perspective, AEC in principle shall make capital market products to be available freely in any ASEAN market from a single access point. Capital market intermediaries should also be able to provide services throughout the region, based on home country approval.

Too good to be true? Possibly. Though the plans and priorities have been approved by the respective governments, the devil is always in the details where in this instance, the speed and extent of implementation.

There is a host of initiatives and actions outlined in the AEC Blueprint, divided into four broad areas, targeted to be phased in over eight years (2008 to 2015). However, the general consensus by observers and ASEAN watchers is that a full integration will not happen by the end of 2015.

Small Medium Enterprise

Apart from investors, the prospect may also paint differently for existing Small Medium Enterprises.

While larger companies seem ready for the AEC (Garuda Indonesia announced its readiness/Antara News 2014), small and medium-sized enterprises (SMEs) are less prepared. According to a survey by the Asian Development Bank, less than one-fifth of ASEAN businesses are ready for the transition. This is despite the fact that small to medium-sized businesses generate approximately 90 percent of ASEAN jobs and 30 to 50 percent of GDP.

Some commentators highlight a lack of awareness and understanding among SMEs regarding the AEC. According to a 2013 survey conducted by the ASEAN Secretariat in Jakarta, three out of every four ASEAN citizens questioned had no real understanding of what the AEC entails.

ASEAN has taken some steps to promote awareness of the AEC for SMEs. A seminar held in Bangkok from the 15th to 16th of June 2015 aimed to promote awareness of the AEC for businesses.

Secretary-General of the ASEAN-Business Advisory Council, Syed Nabil, raised some of the issues faced by SME’s. These include limited access to finance, markets, and improved technology, as well as challenges in facilitating the free movement of goods. To overcome these challenges, much more will need to be done in order for SMEs to be prepared for the AEC’s implementation.

Free labour Movement

A recent policy brief from a Philippine-based think-tank(Ibon International) indicates that AEC may increase corporate profits at the expense of workers’rights. Secondly, there are also continued fears that AEC will worsen inequalities between and within ASEAN countries – with poorer countries experiencing distorted development as they continue to be the primary source of raw materials and cheap labour. In other words, the perpetuation of skewed labour mobility from poorer countries to more developed ones.

In a nutshell

From a short-term perspective, ASEAN Economic Integration will indeed happen by this year end. However, the burgeoning question is to what extent it will take into effect? While not in its entirety, investors and business people should expect pockets of areas where capital, services, and goods begin to flow more freely. More crucially, ASEAN members that are better prepared will kick-start the initiatives, with the circle widening as and when other member economies are ready to join.

However from a long- term perspective, it will take some time for ASEAN to be turned into a comprehensive economic community. Investors and businesses should avoid the expectation of an immediate change Post 31 December 2015.

More importantly, wealthier and stable ASEAN members should also take corrective measures to address any political, economic and social inequalities that exists between its members. This is required for the sustainability of the co-operation.

Worth noting that – it took the European Economic Community, which was created in 1957 to establish a common market among its politically and economically less prominent members, a total of 36 years. It was then finally declared a “completed project” in 1993.

Hence with the current different political climate and diverse economic performance for each ASEAN members – similar scenario should likely be anticipated for ASEAN.