The Association of Southeast Asian Nations (ASEAN) has come a very long way since its founding in 1967, doubling in size from its initial five members to encompass ten countries with a combined GNP of over US$2.3 trillion.
And if recent development trends among ASEAN members continue, says director of SDV’s Singapore-based South East Asia desk Yves Laforgue, activity within the free trade area and with external trading partners like Europe, the US and China should surge as well.
In addition to founding members Indonesia, Malaysia, the Philippines, Singapore and Thailand, the ASEAN now also includes Brunei, Laos, Myanmar, Cambodia and Vietnam. That association brings together 617 million people, constituting the world’s the sixth-largest economic zone. All ASEAN economies respectively expanded by more than 5% annually for most of the past decade.
The bloc was formed with the same general objectives as the European Union: to enhance political stability, improve relationships and cooperation, and encourage greater economic activity for all members by pursuing collectively beneficial interests. Central to those has been the consolidation of its tree trade agreements, which aim to eliminate cross-border duties and permit the increasingly freer flow of goods, people and capital.
“They don’t have to worry about being taxed when importing the finished materials to final distribution points”
“The elimination of duties in particular means companies and countries can obtain materials or goods, or move production centers to where costs will be the lowest,” says Laforgue. “They don’t have to worry about being taxed when importing the finished materials to final distribution points, because there won’t be taxes paid in crossing regional borders.”
The advantages of lowering costs and transport flows between production and distribution sites across the region are obvious – especially with 36% of the ASEAN trade coming from exchange within the union, which boast the largest bloc of purchasing power in Asia.
That cooperation is also important to external partners with trade accords with the ASEAN - including the EU, US, Australia, South Korea and China. Once goods enter the ASEAN zone, they won’t be taxed as they are moved within the region towards final consumers.
Yet, differing entry dates and contrasting levels of economic development of members means the ASEAN is not yet a seamless entity with uniform rules. Recent arrivals like Cambodia and Vietnam, for example, are given longer periods to lower duties to zero and harmonize customs requirements to the sought minimum.
Lingering differences and remnants of national-based customs and border controls make transport across the ASEAN more complex than in the US or EU. Laforgue notes that no single transport solution for the entire region exists yet, which make the help and experience of experts like SDV critical.
Laforgue says, for example, that ground transport remains divided by checks enforced and cabs changed at each border. That means a container prepared in SDV’s 140,000 square-meter logistics center in its Singapore hub will change national transport company at each border, rather than being able to rely on regional networks that have yet to develop.
“At the moment, it’s more like a chain with intertwining links than a single system – but that system is coming,” Laforgue says, noting that seven of the region’s countries connected together by roads. “It’s one reason why companies need partners like SDV who believed in the ASEAN project since its inception, is present in all ASEAN countries since the very start, and can offer all transport options and solutions.”
There’s also security for companies relying on networks like the one SDV continues to consolidate. Laforgue says the group can transport goods from anywhere in the ASEAN to a regional destination from one to three hours by air, and two to four days by ship. And despite the sequential process of trucking options, a Singapore to Bangkok delivery still only takes “three to four days, at lower cost, and provides door-to-door service.”
That’s also vital to international giants that have built enormous production facilities in the ASEAN to be able to serve rising consumer demand elsewhere in the region and beyond.
“Experience has shown this is a positive process for ASEAN economies, companies and consumers, but it’s also fueling activity with outside partners as well,” Laforgue says.