AT a time of ongoing economic challenges, we enter 2013 in a watershed period of an emerging common market in Asean.
The Asean market constitutes a size of 598.5 million people and GDP of US$1,858.7bil, spreading over a geographical size of 4.4 million square kilometers. Compare this with other regions.
The Asean region is a significant economic region, which offers a beacon of growth for most multinational corporations.
The convergence of Asean into a single market presents great opportunities for those who seek a larger market. With the economic slowdown in Europe and the impending fiscal cliff facing the United States, Malaysia needs to place a greater focus that a common Asean market can bring.
Both Malaysian and Singaporean companies have made inroads in the Asean region. The Thais have stepped up their efforts.
We, particularly the SMEs, need to plan well ahead if we are to gain well from the Asean market convergence.
Some SMEs may find the convergence threatening as barriers to trade and markets are dismantled, displacing their domestic businesses through integration.
There are some who are of the view that the financial markets were too volatile and the single market may be undermined by open industrial policies and therefore, the benefits of the convergence favour the stronger players.
The SMEs and their leaders need to reinvent themselves to tap on the opportunities of market convergence such as accessibility to markets, easier flow of labour, convergence of regulations and innovations.
There is a greater upside for Malaysia with Asean convergence but we need to take cognisance of its implications on the corporate sector, particularly in the area of capital market, reporting standards, regulations and flow of workforce. In early 2009, the Implementation Plan 2015 was presented and endorsed by the Asean Finance Ministers which is the first steps towards formalizing the capital markets integration.
Convergence leading to common listing will allow lower income member countries with great growth potential to tap the capital markets of high income economies, providing a regionally integrated market for issuers to raise capital and investors to invest freely across markets.
Furthermore, the listing rules and reporting requirements within the common market will eventually converge as with the local accounting standards along with IFRS need to converge.
Will there be a common currency like in EU? With the economic turmoil in EU, the call for a common currency is far from the mindset of the policy makers, particularly when the Asean countries have a greater disparity in monetary policies and economic development priorities.
Labour mobility within a common market, be it in EU or Asean can have both positive and negative implications on a country’s economy as a whole.
From an Asean perspective, the effect of labour mobility has a negative implication as workers move from their less-developed home country to another developing country in search of employment and better wages.
In Malaysia, such migration involves unskilled labour for the construction, agriculture, manufacturing and domestic work sectors.
The most prominent impact would be the labour wage while Malaysia moves towards a high income nation by 2020.
Cross-border movement/migration of labour triggers protectionism and undermine potential solutions to labor demands especially in selected industries and sub-sectors. According to Home Minister Datuk Seri Hishammuddin Tun Hussein, as of July 31 2012, there were more than 1.5 million legal foreign unskilled workers (legally paid and with temporary legal work passes issued) in Malaysia.
In reality, there are a lot more foreign workers.
Among Asean labour in Malaysia, Indonesians are the largest group, accounting for about 49% of all foreign workers, followed by Nepal 18%, Myanmar 9%, and the rest from other Asean countries.
Owing to the influx of supply of unskilled labour in these sectors that are paid a lower wage, this has indirectly caused many local workers to shun such jobs.
Although many say that foreign workers are the direct cause to lower wage structure in Malaysia, it has contributed to low unemployment rate and thus provided stability to the domestic economy.
The implementation of the minimum wage policy will see further correction as we drive further up the higher income nation.
Additionally, productivity of the labor force hinges on the quality of education and with the release of the Education Blueprint in 2012, it is expected to address the mismatch of skill-sets and produce long-term gains for the nation.
Learning from the EU debacle, member countries in Asean are likely to maintain fiscal and monetary policies independence to cater for their specific economic goals, which may remain divergent in the medium term largely because of the disparity in economic development.
We have on the one hand, Singapore with one of the world’s highest GDP per capita and much lower income countries in Indo-China region.
Whilst economic policies may remain divergent, there is no impediment to converge policies on trade and businesses. Market convergence will happen and it is a matter of degree of convergence and how prepared corporations and businesses are to embrace and tap on the market opportunities.
There could be disruptive forces which may arise from external sources and some of the issues concern inequality of income within countries and across the region, fragility of the financial system, migration and inefficiency of institutions. Although these are relatively possible issues which may disrupt Asean converged market system, we need to understand that strategies need to be developed to turn these disruptive forces into opportunities for sustainable growth and first mover advantage.
Coalitions between companies and governments to develop international institutions that can support as well as strengthen the system will address major challenges that may arise.
Combining the strength and innovation of businesses together provides a catalyst for achievement, beyond what a single entity could accomplish.
Structural innovations, new technologies, improved products and services, innovative processes and systems would in turn, reinforce the positive consequences.
What needs to be seen would be regional and combined large-scale collective actions of mediation, regulation and participation to provide growth, sustainability and liberty for corporate and public interest.
Source: The Star
Published: Saturday, January 5, 2013
By: MOHAMED RASLAN ABDUL RAHMAN
THE CHAMBERS OF LEE & CHONG 