One Vision One Identity One Community

Future Market of ASEAN

Presented by: JAFFY BRATT R. MANDAWE College of Management University of the Philippines Visayas

Presented to: Prof. JOSEPH EDWARD O. IDEMNI Faculty, Department of Accounting College of Management, UP Visayas 1|Page

Future Market of ASEAN

Table of Contents

One Vision One Identity One Community

I.

Overview a. History and Formation b. Member Countries c. Objectives and Fundamental Principles 2

1 1

3 4 4 6 7 7 8 9 10

II.

Profiling ASEAN Industry a. Facts and Figures b. Major Industries c. ASEAN Business Landscape c.1. Traditional Economy Vs. New Economy c.2. Business Landscape Configuration c.3. Changing Business Landscape

III. IV.

Assessment Bibliography

S. Rajaratnam, "ASEAN: The Way Ahead", in The ASEAN Reader, Institute of Southeast Asian Studies, Singapore, 1992. The official website of the Association of Southeast Asian Nations Secretariat (www.aseansec.org) The official website of the Association of Southeast Asian Nations (www.asean.org) ASEAN Secretariat Statistics ASEAN Secretariat and the CIA World Factbook Report of the ASEAN Eminent Persons Group (EPG) on Vision 2020

Future Market of ASEAN

I. Overview a. History and Formation1

One Vision One Identity One Community

On 8 August 1967, five leaders - the Foreign Ministers of Indonesia, Malaysia, the Philippines, Singapore and Thailand - sat down together in the main hall of the Department of Foreign Affairs building in Bangkok, Thailand and signed a document. By virtue of that document, the Association of Southeast Asian Nations (ASEAN) was born. The five Foreign Ministers who signed it - Adam Malik of Indonesia, Narciso R. Ramos of the Philippines, Tun Abdul Razak of Malaysia, S. Rajaratnam of Singapore, and Thanat Khoman of Thailand - would subsequently be hailed as the Founding Fathers of probably the most successful inter-governmental organization in the developing world today. And the document that they signed would be known as the ASEAN Declaration. It was a short, simply-worded document containing just five articles. It declared the establishment of an Association for Regional Cooperation among the Countries of Southeast Asia to be known as the Association of Southeast Asian Nations (ASEAN) and spelled out the aims and purposes of that Association. These aims and purposes were about cooperation in the economic, social, cultural, technical, educational and other fields, and in the promotion of regional peace and stability through abiding respect for justice and the rule of law and adherence to the principles of the United Nations Charter. It stipulated that the Association would be open for participation by all States in the Southeast Asian region subscribing to its aims, principles and purposes. It proclaimed ASEAN as representing "the collective will of the nations of Southeast Asia to bind themselves together in friendship and cooperation and, through joint efforts and sacrifices, secure for their peoples and for posterity the blessings of peace, freedom and prosperity." And so in early August 1967, the five Foreign Ministers spent four days in the relative isolation of a beach resort in Bang Saen, a coastal town less than a hundred kilometers southeast of Bangkok. There they negotiated over that document in a decidedly informal manner which they would later delight in describing as "sportsshirt diplomacy." Yet it was by no means an easy process: each man brought into the deliberations a historical and political perspective that had no resemblance to that of any of the others. But with goodwill and good humor, as often as they

Future Market of ASEAN

One Vision One Identity One Community

huddled at the negotiating table, they finessed their way through their differences as they lined up their shots on the golf course and traded wisecracks on one another's game, a style of deliberation which would eventually become the ASEAN ministerial tradition.
1. S. Rajaratnam, "ASEAN: The Way Ahead", in The ASEAN Reader, Institute of Southeast Asian Studies, Singapore, 1992.

b. Member Countries2 Page 1

2. Membership Date a. b. c. d. e. Brunei Darussalam Cambodia Indonesia Lao PDR Malaysia Jan. 7, 1984 Apr. 30, 1999 Aug, 8, 1967 Jul. 23, 1997 Aug. 8, 1967 f. g. h. i. j Myanmar The Philippines Singapore Thailand Vietnam Jul. 23, 1997 Aug. 8, 1967 Aug. 8, 1967 Aug. 8, 1967 Jul. 28, 1995

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c. Objectives and Fundamental Principles Objectives3

One Vision One Identity One Community

The ASEAN Declaration states that the aims and purposes of the Association are: (1) to accelerate economic growth, social progress and cultural development in the region and (2) to promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries in the region and adherence to the principles of the United Nations Charter. The ASEAN Vision 2020, adopted by the ASEAN Leaders on the 30th Anniversary of ASEAN, agreed on a shared vision of ASEAN as a concert of Southeast Asian nations, outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development and in a community of caring societies. In 2003, the ASEAN Leaders resolved that an ASEAN Community shall be established comprising three pillars, namely, ASEAN Security Community, ASEAN Economic Community and ASEAN Socio-Cultural Community. Fundamental Principles4 ASEAN Member Countries have adopted the following fundamental principles in their relations with one another, as contained in the Treaty of Amity and Cooperation in Southeast Asia (TAC):

mutual respect for the independence, sovereignty, equality, territorial integrity, and national identity of all nations; the right of every State to lead its national existence free from external interference, subversion or coercion;

non-interference in the internal affairs of one another; settlement of differences or disputes by peaceful manner; renunciation of the threat or use of force; and

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One Vision One Identity One Community

effective cooperation among themselves.

3. Taken from the official website of the Association of Southeast Asian Nations Secretariat (www.aseansec.org) 4. Taken from the official website of the Association of Southeast Asian Nations (www.asean.org)

II.

Profiling ASEAN Industry Page 3

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a. Facts and Figures5

One Vision One Identity One Community

Page 4

Page 5

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b. Major Industries6

One Vision One Identity One Community

5. Taken from the ASEAN Secretariat Statistics 6. From the ASEAN Secretariat and the CIA World Factbook

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c. ASEAN Business Landscape c.1. Traditional Economy Vs. New Economy 7 Traditional Economies Markets Scope of Competition Organizational Form Stable National (or Regional) Hierarchical Bureaucratic

One Vision One Identity One Community

New Economies Dynamic Global Networked Entrepreneurial

Key Production Factor Importance of Research Nature of Employment Regulation

Labor and Capital Moderate Stable Command and Control

Knowledge and Innovation Critical Risk and Opportunity Market-oriented Flexibility

The accompanying table also shows the disparity between the traditional economies and the knowledge-based new economies. This disparity often related to the intention of ASEAN to narrow the development gap among member countries through realization in order to speed up its integration into the global markets. Exotic, traditional Southeast Asia is fast transforming into Business ASEAN with vast opportunities for development and growth. Through this disparity as well, ASEAN member countries can create level of comparison that is essential for the priorities for growth and development. Since the key production factor in the disparity favors knowledge and innovation for the new economies, priorities such as electronics, wood-based products, automotives rubber-based products, textile and apparels, agro-based products and the fisheries in the goods and manufacturing sector will be emphasized. In the service sector, it is as well as important when we consider Infocom Technology (ICT), e-ASEAN, Healthcare, Air travel and tourism. However, this will take effect if the member countries will be sufficient enough in terms of loyalty and sincerity for this potential growth since internal

7. From the 2003 Report of the ASEAN Eminent Persons Group (EPG) on Vision 2020

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principles. c.2. Business Landscape Configuration

One Vision One Identity One Community

issues are solely managed by the respective members as stated in the fundamental

Future Market of ASEAN

One Vision One Identity One Community

Change is triggered mostly by external factors and technology has been the key driver for change in the history of globalization and world economic development. Change is a value migratory dependent on the certainty and importance of the change. It creates new demand and supply conditions. Organizations that respond timely and aptly to changes will survive and stand to emerge winners in a changing business landscape. Organization that are slow to react or complacent with their current situations will face totally different business conditions in which they are unable to fathom or penetrate due to the existence of established players in the marketplace. c.3. Changing Business Landscape Traditional Businesses Markets National Overseas subject to tariffs Scope of Competition National (or Regional), Protectionist Organizational Structure Hierarchical Bureaucratic, Specific Scope, Localized Networked Entrepreneurial, Multidisciplinary, Empowerment Key Productivity Factor Labor (Skills) and Capital, In-house expertise, Durability Knowledge and Innovation, Outsourcing/Offshoring, Time to Market Importance of Research Moderate, Imitate and Improve Nature of Engagement Mandate, Relationship, Intuition Regulation/Governance Top-down silo, Closed Group Strategic Management Inside out SWOT Critical, Innovate and Invent Opportunistic, Free market, Due Diligence Connected Matrix, Transparency Outside in TOWS New Businesses Trading bloc, free trade zone Global, Liberalized Page 8

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Strategic Marketing 3 Cs Competition, Company 4 Ps Product, Place,

One Vision One Identity One Community

Customer, 4 Cs Change, Customer, Competition, Company PDB triangle Positioning, Differentiation, Brand Customer-centric Service

Promotion, Pricing Marketing Focus Product-centric Distribution Growth Industry Market Share

Sustainability

Strategic marketing for a changing business landscape must apply a fundamental shift from an inside-out approach to one that uses an outside-in Page 9 principle. The external environment is far more important in determining future consumer trends and markets, including competition and alliances. In addition, political directives and transnational initiatives such as ASEAN economic integration lends immeasurable assistance to organization which take advantage of the incentives and schemes to promote trade and investments. Open economies like ASEAN have to continuously adapt and adjust to external changes in order to take advantage of new opportunities and be prepared for new challenges. We use the comparison of the traditional and new economies shown earlier and adapt it to show the shift in norms and strategic focus for future businesses in todays evolving global economy.

III.

Assessment The future market for ASEAN is intra-ASEAN among the ten countries, and

extra-ASEAN with the traditional trading partners: the US; EU; Japan; growing economies; China; India; and South Korea; and other global open economies. The greatest potential for growth are those industries that contribute to free flow of goods and services such as transportation, and in areas where ASEAN has a clear comparative advantage such as high-tech manufacturing and ICT.

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One Vision One Identity One Community

For example, the logistics sector is set to grow rapidly with the liberalization of markets and removal of tariffs in ASEAN. This potentially lucrative business is especially needed in the newly opened economies of Cambodia, Laos, Myanmar, and Vietnam, as well as Indonesia and the Philippines where the geographies are relatively stretched. Developing an efficient logistics network will require construction of roads, ports and storage facilities, transportation, handling expertise, and the entire supply chain of material, people, skills and equipment. ASEANs future market is right here on its own home turf. The winners are those who establish themselves in these markets and the losers are the latecomers and those who do not expand regionally. With an ASEAN free trade zone and more free trade areas being agreed on with other regions, businesses here must adopt a globalized approach for economic integration and maximization of comparative advantages. Although globalization presents a vast amount of opportunities and potential, it creates as well as threats and complexities, hence regionalization is the first direction to take. Page 10