Business needs to seize ASEAN opportunities
Ruth Le Pla reports back from a seminar on doing business in ASEAN countries, held at the Crowne Plaza Hotel in Auckland on 15 April 2010.
The door to free trade with ASEAN countries is open. It’s now up to business to walk through it.
That was the key message from a number of speakers at the recent Auckland seminar ‘Expanding trade and economic linkages with Southeast Asia’. The seminar was organised by the Ministry of Foreign Affairs and Trade, and New Zealand Trade and Enterprise.
In a keynote address, Dr Ganesh Wignaraja (pictured, first from right), principal economist from the Office of Regional Economic Integration at the Asian Development Bank in the Philippines, said business, government and business associations must work together to leverage FTA potential. (view his slides)
“The challenge is how to make these opportunities a reality.”
Tony Nowell (pictured, centre), founding director of trade and investment growth vehicle Valadenz and New Zealand’s representative on the APEC Business Advisory Council (ABAC), stressed the need for a ‘New Zealand Inc’ approach.
“Individual companies going into ASEAN will find it very difficult,” he said.
Opportunities
Mr Nowell described ASEAN’s 580 million population as a ‘very large and rapidly expanding’ market opportunity for New Zealand.
“It is a great investment environment and a ready source of increasingly skilled and competent labour. It’s a great place to be considering doing business with,” he said.
“New Zealand’s free trade agreements in the region make a huge difference in practical terms.”
Like the rest of emerging Asia, the outlook for Southeast Asia is positive compared with that for developed countries.
A recent Asian Development Bank (ADB) report ‘Asian Development Outlook 2010’ released on April 13 -- just two days before the Auckland seminar -- estimates 5.1 percent growth in GDP for ASEAN in 2010. This compares with 1.2 percent growth in 2009.
The report says the positive outlook for 2010 is based in large part on the recovery in global trade and investment.
Dr Wignaraja described the opportunities for New Zealand business in the region as enormous. The ADB is predicting growth in 2010 in every ASEAN country. “Overall, these are historically unprecedented numbers. And the upturn is faster than at any time in previous crises.”
A good place for business
Stand-outs include Vietnam, which is emerging as a major player with 6.5 percent growth rate predicted for this year, and Indonesia which is expected to lift its GDP by 5.5 percent.
Dr Wignaraja said a wide range of FDI incentives are now in place and New Zealand business should investigate options for taking advantage of them.
In Vietnam, for example, there are incentives for identified strategic sectors (such as agribusiness, and aquatic cultivation and processing) and import duty exemptions for equipment, materials and transport means in selected projects.
Malaysia allows 100 percent foreign equity holding for all FDIs in new, expansion and diversification projects. It also offers sector-specific incentives including for reinvestment in food processing activities.
Alongside a wide range of other incentives, Thailand allows duty-free imports on machinery and equipment, and has eased restrictions around work permits and visas proceedings.
Recent World Bank data (‘Doing Business 2010 Indicators’) now ranks Singapore as the easiest country in which to do business.
The same data shows that it takes three days to start a business in Singapore, 11 days in Malaysia and 32 days in Thailand. That compares with just one day in New Zealand.
Dr Wignaraja recommended New Zealand businesses develop business-to-business links with ASEAN Chambers of Commerce and other business organisations in order to make the most of opportunities in ASEAN.
Learning about FTAs
He also suggested they actively learn about FTAs.
He emphasised the need to investigate relevant details around preferences, rules of origin (ROOs), foreign direct investment and intellectual property rights. Specialist consultants are available to help, he said.
New Zealand businesses should incorporate FTAs into their business strategies, he advised, and they could benefit from participating in outbound missions to ASEAN.
Dr Wignaraja also recommended New Zealand businesses look at ways to link into regional industrial supply chains in ASEAN. This is particularly helpful in the processed foods and machinery sectors, for example.
Similarly, he suggested companies in the education, IT, business consulting and financial services sectors tie in with ASEAN services value chains.
He added that New Zealand businesses must meet world-class levels for price, quality and delivery if they are to leverage opportunities in ASEAN countries.
For its part, Dr Wignaraja said government should look at increasing resources for agencies and organisations that help business to utilise FTAs. Specifically, it could increase information about FTAs and investment regulations in ASEAN and provide more integrated supply-side support for upgrading and linking to supply chains.
He also recommended lifting surveillance of non-tariff measures (NTMs) that may impede ease of doing business.
Connecting business and government
Vangelis Vitalis, New Zealand’s lead negotiator for the AANZFTA (ASEAN, Australia, New Zealand) and Malaysia New Zealand free trade agreements, reiterated the need for dialogue between business and government on NTMs.
He urged business to report any problems they encounter in this area.
“If business finds a barrier to business, the bureaucrats need to know about it.”
Tony Nowell recommended business focus on overcoming cultural, rather than linguistic, barriers.
“It’s always nice to be able to say ‘good morning, ‘good evening’, ‘how are you?’ in a foreign language but I don’t believe you need to be fluent in Indonesian, Vietnamese or Tagalog in order to effectively operate in ASEAN.
“You need to understand how [other people] see the world.”
Mr Nowell said business people wanting to learn more about the cultural dimensions of ASEAN countries can access a large body of information available in books and on the net.
Referring to the cultural dimensions explored by Dutch social psychologist Geert Hofstede, he said value dimensions such as ‘short-term versus long-term’ and ‘individualism versus collectivism’ are important concepts for New Zealand business people working in ASEAN countries.
Mr Nowell said people often raise the question of corruption in business dealings with ASEAN countries.
“Non-tariff measures and the corruption beneath that is certainly an issue that we have to deal with; there’s no question about that,” he said.
“So, yes, you do have to deal with these issues but you have to also realise that the way the other party views that issue is fundamentally different to the way that you view it.”
Mr Nowell said businesses going into ASEAN have to prepare themselves for a whole range of issues.
“New Zealand businesses seem to have a fear factor around joint venturing,” he noted.
Trying to enter markets alone – and believing that you know everything there is to know – is a recipe for failure, he said.
“You need to engage with local competency that will work with you and there are very appropriate processes for doing due diligence and finding the right partners.”
Cultural learning
Sir Peter Maire told seminar delegates he found his own particular personality type dovetails neatly with an ‘Asian’ psyche.
Sir Peter, who has been involved in business in Asia for some 25 years now, said his love of meeting people made him an ideal person to front business in the region.
“That’s because I like to become friends with the people I’m doing business with and find out about their families and how they live.
“In Asia this is important. The relationships that you put together are much longer lasting but they also take a longer time to develop.”
Sir Peter said he was recently involved in sourcing product from a large Asian company.
“For me it’s very easy. I pick up the phone and call people who I started developing business with 25 years ago. These people are still friends. They too have moved from company to company and they have their networks of friends,” he said.
“If you’re really serious about the Asian region you’ve got to put in the time to make the right relationships. Spend the time to find the right people. Don’t jump in to the first opportunity.”
He advised New Zealand business people to be prepared to take the time to sell their vision of where they are going.
“A lot of Kiwis are worried that if they share their long-term vision with business people in Asia their ideas will be stolen. That can happen anywhere, of course. But we’ve noticed that if you share your vision and convince a potential supplier, partner or customer, they can see the long-term potential.
“In Asia, the cultural view is very long-term so they see it as a relationship that’s worth nurturing.”
PHOTO ( left to right): David Catty, Executive Director, ASEAN New Zealand Combined Business Council Tony Nowell, Founding Director, Valadenz and New Zealand Representative, APEC Business Advisory Council (ABAC) Dr Ganesh Wignaraja, Principal Economist, Office of Regional Economic Integration, Asian Development Bank
Article uploaded: 28 April 2010
Related files:
View Dr Ganesh Wignaraja's slides
