SMEs 'at risk' in new Asean single market
There will be clear winners and losers when the Asean Economic Community (AEC) comes into force next year, according to a new report.
The increased competition will hit small and medium-sized enterprises across Southeast Asia.
On the other hand, companies that already have a strong presence regionally stand to benefit most from a more integrated Asean, the report from the Boston Consulting Group (BCG) said.
The AEC, which is due to come into force by the end of next year, aims to create a single market and production base across the Southeast Asian region, with minimal barriers to trade and investment.
The report includes a survey of more than 230 business leaders and senior government officials, both within and outside the region, on their views about Asean.
It found that 80 per cent of those polled regarded the AEC as a good business opportunity and believed it would accelerate growth in their industries.
However, the same percentage of respondents said they were bracing for tougher competition when the AEC comes into force.
While 70 per cent of the poll’s respondents said they believed more intense competition would encourage Asean companies to internationalise, 81 per cent said they expected SMEs to lose out.
BCG partner and managing director Michael Meyer and its senior partner and Southeast Asia head Vincent Chin told Singapore’s The Straits Times that SMEs needed to be “of a certain quality” to expand regionally.
Meyer said: “If you operate in a protected domestic market, you might not have the managerial capabilities and level of sophistication needed to compete internationally.”
Chin said national agencies such as enterprise development agency Spring Singapore and trade agency IE Singapore could play a role in helping SMEs become resilient enough to reap the benefits of a more integrated Asean.
Meyer and Chin co-authored the report with BCG senior partner and managing director Bernd Waltermann and Evelyn Tan, the firm’s lead knowledge analyst for its Global Advantage practice area.
The survey also compared levels of optimism about the AEC across Asean countries. Malaysian firms were found to be the most optimistic about integration, while the Indonesian ones were least upbeat.
Malaysian companies are keen on greater access to the larger Asean market beyond the country’s relatively small population of 28 million, Chin said. But Indonesian companies are apprehensive because of the anticipated influx of competitors into the country, as the region becomes increasingly integrated.
BCG’s report, which will be officially launched next month, also identified 50 Asean companies best positioned to take advantage of the AEC.
