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CHAPTER 2

GROWING ASEAN MARKETS

2.1 ASEAN Economic Community (AEC)

ASEAN Economic Community (AEC) create a common market area where the ten

ASEAN member countries are involved: Brunei, Cambodia, Indonesia, Laos, Malaysia,

Myanmar, The Philippines, Singapore, Thailand, and Vietnam. Single market creates a

market of over 600 million people and it will be competitive. Thus it mean: free flow of

goods, services, investments, and labor. It include also tariff reductions and renews in

certain procedures. Single market can offer a new opportunities but it also mean

challenges. Runckel (2015)

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2.1.1 According to Bangkok Post

Scorecard of AEC shows at the moment that the region is behind schedule, it achieved

just 73.6% of its phase 1 goals. AEC still offers a big opportunities in ASEAN as it can

be seen as a large single market. On future this integration helps it to increase ASEAN

competitiveness against big economies like: China and India. Issues, what are delayed

are: agriculture, non-tariff barriers, integration of the less-developed CLMV (Cambodia,

Laos, Myanmar (Burma), Vietnam) member countries, also financial integration is one

thing what must to be worked out. Runckel (2015)

2.1.2 According to Us International Trade Commission

According to the US International Trade Commission report on (AEC), the challenges

were seen in the area of importing and exporting which vary widely among ASEAN

members. For example, procedures for trading are relatively easy to complete in

Singapore, Thailand, and Malaysia, but very difficult in Laos and Cambodia. The

quality of logistics services also varies among the ASEAN members, such as customs

brokerage, freight forwarding, and express delivery. Logistics services are world-class

in Singapore but poor in Laos, Cambodia, and Burma. In many ASEAN countries,

restrictive regulations hamper the delivery of high-quality logistics services.

Runckel (2015)

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2.2 Benefits of the ASEAN Economic Community (AEC)

Increasing regional cooperation improves: efficiency, dynamism and competitiveness of

ASEAN members. AEC enables easier and faster movement of goods, services,

investment, capital and people. It can offer many new ways of coordinating supply

chains, or access to new markets.

All ASEAN countries have come more essential about the foreign investors if they are

expanding in a single market of nearly 600 million people. The ASEAN Free Trade

Agreement (FTA) will aim to zero tariffs including almost all goods by 2015. ASEAN

vision is to be involved in the global economy. ASEAN has agreements today, with

China, Japan, Korea, India, Australia and New Zealand.

Economic integration trends, Competitiveness on export, and Inbound Investment for

Selected Industries. AEC is coming at situation when it is recognized that investments

in growing markets are more competitive than in the US and Europe. The investments

can bring badly needed capital for some of the member countries, allowing them to

jump from the 20th century into the 21st in terms of competition, like mature countries.

Runckel (2015)

2.2.1 SMEs

SMEs are 50-85% of domestic employment across ASEAN. Integrating and supporting

SMEs in the initial period will be a challenge throughout ASEAN. Government of

Singapore realize these challenges and opportunities that AEC will set to SMEs.

On future the members of AEC must support their SMEs. Vietnam and Thailand, are

starting to plan more effective system for SME integration and support. In countries

like: Cambodia, Laos and Myanmar, plans aren't even this stage.

Runckel (2015)

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2.2.2 Opportunities in Tourist Industry

Many kind of opportunities in tourist industry. Asians travel more nowadays in the

region and amount of travelers from other countries has increased. Governments are

investing to facilities, for other leisure attractions, and also MICE facilities. MICE

tourism opportunities are particularly large and countries which have experience in this

area such as Thailand and Singapore must give their assistance to those which have only

weak MICE experience. Runckel (2015)

2.2.3 Internalization of Health Care

Internationalization of health care under the AEC. It will be a big challenge, and it is

complicated, because of the popularity of Singapore and Thailand's medical tourism.

On practice the patients are seeking better care at lower cost. The legal and licensing

frameworks are still under work. Runckel (2015)

2.3 Current Situation

2.3.1 Development of AEC

Development of AEC have been criticized to be too slow. Observers think that, the

issues have been avoided, which have a big importance. Effectiveness can make the

success of the integration. Some specialists have commented about the lack of the

leadership. ASEAN chairmanship is a role which is rotating position and some of

officials from the poorest or less developed ASEAN countries will be the chair of

ASEAN It means that leader is not experienced and it is less interested to pushing ahead

forward to integration. Observers has note that the low experienced official from poorer

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and less developed ASEAN countries just can follow. Those leaders can't own same

kind of leadership skills, and experience or knowledge, than skilled leaders have.

Runckel (2015)

2.3.2 Development of hard infrastructure

Development of hard infrastructure like: roads, ports, airports, etc. and soft

infrastructure like human resource and training are under the concentration. Hard

infrastructure: Governments have plans to upgrade the infrastructure, like the plan

where three highways are linking ASEAN - the North/South one linking South China

through Myanmar, Thailand, Lao and Vietnam; the East/West Corridor linking

Myanmar, Thailand, Laos, and Vietnam; and the South/South one linking Myanmar’s

Dawei deep seaport, Thailand’s Laem Chabang and Cambodia (link to our infrastructure

article). Thailand's government has also been talking to China about the high-speed

train project linking Laos and Thailand’s Nong Khai to the southern border and

Malaysia. Runckel (2015)

2.3.3 Soft Infrastructure

Soft infrastructure, countries with better English skills in ASEAN, such as Singapore,

Malaysia and the Philippines have an advantage over countries like Thailand. Thailand

has established the ‘‘English Speaking Year 2012’’ program in preparation for the AEC.

This is a step in the right direction but what is really needed is not only a program but a

new mind-set. Thailand has not given enough attention to improving English skills.

Runckel (2015)

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2.3.4 Banking Sector and Future

The banking sector must look on future, that Banks can facilitate investors and support

their needs throughout the region. Singaporean and Malaysian banks and telecoms, have

invested heavily in the region and those are ahead of the others. Other member countries

must follow this development, if these countries are willing to have more investments.

Runckel (2015)

2.4 Future of AEC

Inside of the AEC, managers will have sales opportunities across the region. They must

focus on cost efficiency by integration in their operations across the region. Lean

techniques, but also developing effective corporate centralization. Countries like: US,

Canada and Europe are going to have to start paying better attention to this new

opportunity. Many of them seem to have eyes for only China and India. Asia is much

more than both of these two countries and western managers need to study and better

understand the opportunities what the AEC can present. Businesses must adapt an

international mindset, which gives willingness and ability to make investments and

acquisitions inside of the region. Opportunity has been established.

The work is still in progress. Some efforts will go faster on practice, while others will

face more challenges and can be difficult to be implemented. Anyway AEC offers clear

opportunities and challenges in businesses, so investors must think the opportunities

what AEC can offer. Member countries still see each other as competitors. On future

there is no lines between competitors and collaborators.

Runckel (2015)

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2.5 Fastest Growing Markets

Growing markets in Asia and Africa are still leading. Whole world is expected to grow

3.2 percent in 2015 and 3.7 percent next year after growth 3.3 percent in each of the past

two years, according to a Bloomberg survey of economists. China, the Philippines,

Kenya, India and Indonesia, which creates 16 percent of GDP, aforesaid countries are

forecasted to grow more than 5 percent in 2015

China is still the fastest-growing G-20 nation, even the Asian economy’s situation is no

longer at the stage it did a few years ago. China's economy increased 7.3 percent in the

fourth quarter of 2014, a one year earlier, and it is expected to decline to 7 percent in

2015. Against the slowdown, People's Bank of China policy makers are boosting

monetary stimulus.

U.S. growth forecasts for 2015 are coalescing around 3 percent even as the dollar value

could increase to its highest level in more than a decade.

Robinson (2015)

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Figure 1: All-Stars of the Global Economy 2015

Source: Robinson (2015)

2.6 Ease of doing business in ASEAN

Picture of ASEAN countries is positive when comparing to other Asian developing

countries nearby. ASEAN creates opportunities for different kind of businesses, traders

and investors. ASEAN countries must develop their infrastructure, Except: Singapore,

Malaysia and Thailand. Transportation system have to develop like: (road, rail, air,

sea...). A lot of to do for better communication and information systems, water and

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sewage, and power supply and grids. Road network is one the things what are needing

fix, or construction for new. Several things are also needed: dams, reservoirs, sewers,

sanitation, waste disposal units, hospitals, clinics, fire prevention facilities, schools,

other educational facilities. Agriculture remains the main business in many ASEAN

countries (Cambodia, Indonesia, Laos, Myanmar, the Philippines, Thailand and

Vietnam). It makes need for food processing and export systems. Malaysia and Brunei

got huge forest resources. It means that there is demand to processing forestry, timber,

wood and wood products, and for sustainable forest management. Manufacturing has

increased in the area it has been major growth in it, but only Singapore with Malaysia

are advanced in industrial sector. Opportunities exist in oil and gas; petrochemicals and

plastics; aviation; automobiles and automobile parts; mining and minerals; agro-

processing, including rubber, palm oil, and timber; electrical and electronic products,

power generation; transportation; drugs and pharmaceuticals, textiles and garments;

furniture and furnishing; building construction security and defense; pollution-control

equipment; medical equipment; digital broadcasting; and machinery and automation

equipment. (Balbir 2010, pp 185-187)

Table 1: Ease of Doing and Starting a Business in ASEAN

Source: Modified from: The World Bank 2014, Doing Business 2014, World Bank,

pp.173-234

Ease of Doing and Starting a Business in ASEAN

Ease of doing business (rank) Starting a business (rank) Procedures (number) Time (days)Brunei 59 137 15 101Cambodia 137 184 11 104Indonesia 120 175 10 48Laos 159 86 6 92Malaysia 6 16 3 6Myanmar 182 189 11 72Philippines 108 170 15 35Singapore 1 3 3 2,5Thailand 18 91 4 27,5Vietnam 99 109 10 34

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2.6.1 Open for Businesses

ASEAN countries are sending message that they are open for businesses. Countries are

making progress in deregulation, liberalization and reducing barriers from business

operations. Reforms are for make easier to start business by simplifying business

application processes and make it quicker through better processes. It makes easier to

get general trading licenses and business registration. Improvements in legal

protections, contract enforcement and intellectual property protection are under work.

Foreign Direct Investments (FDIs) has been the driver in ASEAN. FDI inflows are

influenced by government initiatives designed to attract inbound investment.

Governmental policies in each of the counties have long been tailored for attracting FDI

with numerous incentives.

PWC (2012)

2.7 Asia's Growing Middle Class and Population

ASEAN has dramatically beaten the rest of the world on growth in GDP per capita since

the late 1970s. Income growth has remained strong since 2000, with average annual real

gains of more than 5 percent. Some member nations have grown long time: Vietnam, for

example, took just 11 years (from 1995 to 2006) to double its per capita GDP from

$1,300 to $2,600. Poverty is receding. In 2000, 14 percent of the region’s population

couldn’t reach the international poverty line of $1.25 a day, but on 2013, that share

decreased to just 3 percent. About 67 million households in ASEAN are already part of

the “consuming class.”

Households with more than $7,500 in annual income (in purchasing-power-parity

terms). That number can almost double to 125 million households by 2025, making

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ASEAN will be a big consumer market on the future. It’s hard to define the typical

ASEAN consumer, but some trends have emerged, like: a greater focus on leisure

activities, a growing preference for modern retail formats, and increasing brand

awareness

(HV, Thompson, Tonby, 2014)

Table 2: Number of Mid Year Population of ASEAN countries 1980-2013

Source: ASEAN (2015)

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Figure: 2 Population by Age in ASEAN

Source: ASEAN (2015)

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2.8 Natural resources of ASEAN

Asia’s stake in world markets has grown dramatically in the last half-century. Today,

Asian countries rank as some of the top producers of many agricultural, forest, fishing,

mining, and industrial products. This increased production has brought extreme wealth

and negative environmental impacts to the continent.

National Geographic

Table 3: ASEAN Major Industries

Source: Modified from (Balbir 2010 p. 175)

Country Major IndustriesBrunei Oil and Gas, constructionCambodia Germent, mining, construction

agriculture, tourismIndonesia Oil and Gas, electrical appliances

, plywood, textiles, rubberLaos Mining. Timber, electric power,

,consruction, garments

Malaysia Rubber, electronics, petroleumproduction, logging

Myanmar Tourism, gems, oil andforestry

Philipines Semiconductors, garmentspetroleum products, copper

Singapore Electronics, chemicals, financial services, petroleum

Thailand Tourism, textiles, agriculturalprocessing, beverages

Vietnam Food processing, garmentsshoes, machine building, mining

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Figure 3: Natural Resources of ASEAN

Source: aseanbicaraenergi.com

2.9 Great Mekong Sub-region (GMS)

(GMS) Mekong River economic area, covers 2.6 million square kilometers and

population about 326 million. The GMS countries: Cambodia, the People's Republic of

China (PRC, specifically Yunnan Province and Guangxi Zhuang Autonomous Region),

Lao People's Democratic Republic (Lao PDR), Myanmar, Thailand, and Viet Nam. It

was a year 1992 when, these six countries entered into a program of ADB to start a sub-

regional economic cooperation, it was designed to empower economic relations

between the countries which are mentioned above. ADB (2015)

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2.9.1 ADB's Support to Sub-region

With support from ADB and other donors, the GMS Program helps the implementation

of high priority sub-regional projects in transport, energy, telecommunications,

environment, human resource development, tourism, trade, private sector investment,

and agriculture. Substantial progress has been achieved in terms of implementing GMS

projects since 1992. Priority infrastructure projects worth around $11 billion have either

been completed or are being implemented. Among these are the upgrading of the

Phnom Penh (Cambodia) Ho Chi Minh City (Viet Nam) highway and the East-West

Economic Corridor that will eventually extend from the Andaman Sea to Da Nang

ADB (2015)

2.9.2 Natural Resources of GMS

The land its rich: timber, minerals, coal, and petroleum, water what comes from many

rivers give support to agriculture and fisheries and produce energy like hydropower.

There is a lot of coal reserve in the sub-region, the oil and gas reserves notable. Most of

these are located in Myanmar, Thailand and Viet Nam. These energy resources hasn't

used yet. ADB (2015)

2.9.3 Modernization and Industrialization

Modernization and industrialization are increasing because of transition and

transformation. The Mekong countries are shifting now from farming to more to open,

market systems with bigger diverse. This area is growing relations between the six

countries. Increasing factors are: cross-border trade, investment, and labor mobility. ,

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Natural resources, like hydropower, are beginning to develop and used inside of the

region. ADB (2015)

The rich human and natural resources of the Mekong region have made it a new place of

Asian growth. Mekong region got potential to become one of the world's fastest

growing areas. ADB (2015)

Figure 4 GMS

Source: gms-dan.org

2.10 DAWEI Port of Myanmar

THE Burmese city of Dawei lies 350 kilometers (220 miles) west of the Thai capital,

Bangkok. The two are separated by a stretch of mountainous jungle and have never

been connected. But over the past five years, Thailand’s biggest construction company,

Italian Thai, has cut a swathe through the jungle which, once paved, will cost roughly

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$1m per kilometers of road. The plan is that it will connect Bangkok with a $50 billion

industrial hub and deep-sea port at Dawei on the Andaman Sea. The Economist (2013)

2.10.1 Scale of the Plan

The plan is epic in scale. At 205 square kilometers (80 square miles), the project area is

the size of the Vietnamese capital, Hanoi, and nearly ten times as big as Thailand’s

largest industrial area at Map Ta Phut. Thailand has a coastline on the Andaman Sea,

but it is in the south of the country. Dawei’s proximity to Bangkok and the cheapness of

Myanmar’s labor and land are attractive. And, crucially, the port would be a long way

north and west of the potential chokepoint for shipping at the Strait of Malacca.

Boosters of the project in Thailand suggest, somewhat implausibly, that it will increase

annual Thai GDP by 2%. The hope is that the Thai middle class could soon be driving

their Japanese cars over the mountains and through the jungle into Myanmar. In

anticipation of a new gateway for international trade and tourism into South-East Asia,

land prices in some parts of Thailand’s Kanchanaburi province have already begun to

rise. The Economist (2013)

2.10.2 Biggest Problems of the Project

The project’s biggest problems, however, are financial. Japanese investors have been

flying in by corporate jet for some time (no Chinese money is involved), but it appears

that they cannot quite bring themselves to believe that Dawei will really happen. And

besides, the Japanese have been focusing on developing a port and industrial zone at

Thilawa, closer to Yangon, Myanmar’s largest city. A consortium of Thai banks, many

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of them state-run, has been roped into providing $4 billion to move things along at

Dawei. But ultimately, vast sums of private money will be needed.

The Economist (2013)

Figure 4: Dawei Port of Myanmar

The Economist (2013)

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2.11 Business Investments

Indeed, it seems likely that ASEAN stands on the brink of a multi-year investment

boom. Many ASEAN nations have significantly under-invested in infrastructure and

other fixed assets in recent years, thanks to the fallout from the Asia Financial Crisis of

1997 and 1998. During the years after the crisis, many companies and governments in

the region concentrated on paying off debts and repairing balance sheets rather than

investing in new projects. The resulting investment deficit has created huge pent-up

demand for infrastructure, for housing, and for factories. This pent-up demand will

drive high levels of investment activity for many years, fueling economic growth in the

short-term through construction activity, as well as in the long-term by raising the

region’s future productive capacity. Economist Corporate Network (2013)

2.12 Business Attractiveness

Impressive rates of economic growth. For the period between 1999 and 2012, the

ASEAN region grew in real terms by an annual average rate of 5.5%, so doubling in

size in just 13 years. South-east Asia is expected to grow at a similar pace for the

foreseeable future.

Economist Corporate Network (2013)

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Figure 5:

Figure 6

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2.13 Taxation

Table 4: Taxation in ASEAN

Source: ASEAN Briefing (2014)

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2.14 Security of Property

2.14.1 (IPR) Intellectual Property Rights

It’s still issue for ASEAN, but not such a big problem than in other Asian countries.

Foreign companies feel that laws are up to date, but enforcement doesn’t work well.

Countries has started to strength and improve the enforcement on protection,

administration, legislation, and tracking of IPR public records.

When companies are expanding to ASEAN one of the major consideration will be how

to protect intellectual property. (IP) AEC is working the need for cohesive IP Laws in

the region. However, the concepts of IP are tackling in ASEANS's developing states.

Investors are likely to focus on countries where IP is protected. Singapore, has high

positioning in IP protection and it has advantage in it because Singapore has developed

its laws and regulations. From a tax perspective IP is one of the important things of

value. The location of IP affects to company's tax position.

KPMG (2013)

2.15 Legal Issues, Laws, and Regulations

The Legal system inside of ASEAN member countries varies very much. Diversity is

influenced by history of the each country, most of the laws are originated by

colonization. Some jurisdictions are influenced by Roman and Napoleonic systems and

adapted some Dutch continental law, there are also Muslim Syria Courts

(Malaysia and Brunei). Singapore, Malaysia and Brunei follow the common law system

inherited From the British system. Thailand has civil law structure and Philippines has a

hybrid system. Legal system in Indonesia is based on Dutch system. Institutions like

World Bank and the Asian Development Bank (ADB) have launched law reform

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projects in the ASEAN countries. Projects hasn't succeed. ASEAN countries are

working for harmonization of laws and regulations. A key issues are protection of

intellectual property and administration of contracts. (Balbir 2010, pp 177-178)

2.16 Investment protection

The AEC Blueprint makes numerous references to efforts to achieve free and open

investment. Further it called for a review of the two existing investment agreements, in

order to realize a more comprehensive investment agreement that would increase

investor confidence in ASEAN. The new agreement is the ASEAN Comprehensive

Investment Agreement (ACIA) signed in 2009, brought in to effect 2012, which is based

on international best practices.

While the ACIA focuses on promoting foreign direct investment, an important feature is

the protection given to intra- ASEAN investment with non-discrimination provisions. In

particular, national treatment offer an ASEAN investor the same ability to invest as a

local investor in other ASEAN member states. Further, the ACIA maintains most

favoured nation provisions, where preferential, treatment granted by any member state

must be extended to all other member states.

THE ACIA is a step forward in promoting intra-ASEAN investment and an important

indication of the region's commitment to AEC. Anyway less supportive, barriers to

intra- regional investment, ACIA is a positive sign that the required steps to achieving

an integrated region are underway.

KPMG (2013)

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Table 5: ASEAN Economy and Legal Systems

Source: Modified from (Balbir 2010 p. 175)

2.18 Business Culture of ASEAN

Each country have a unique blend of ethnicities, religions, and languages. Region’s

geography affect the culture directly. Conflicts must be avoided even it can aim

consequences. ASEAN have the largest, and universal religions in the world, including:

Hinduism, Buddhism, Confucianism, Islam and Christianity. Integration of the region’s

economies has grown by ASEAN, and it take cultures closer. Respect and trust are the

basic things, which can lead to good relations, patience is an asset. In negotiations must

be calm, and undermine or causing embarrassment must avoid. Group consensus is

important like in all social relationships, people are collective. Individuals identify

Country Economy Legal SystemBrunei Free Market British common lawCambodia Free Market French Civil Code

Indonesia Free Market Customary Law, Dutch Colonial Law, national Law

Laos Free Market French legal norms, andprocedures, socialist practices and traditionalpractices

Malaysia Free Market English common law

Myanmar Central British LawPlanning

Philipines Free Market Spanish and Anglo-American laws

Singapore Free Market English common law

Thailand Free Market Civil Law from British, JapaneseFrench and German

Vietnam Free Market Legal theory, and French civil law

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themselves in groups and families. All countries willingness is to improve their quality

of life and that’s why the investments are welcome and it open a new business

opportunities. English is widely spoken, so it’s possible to handle almost all the things

just using English, but it will help if can use a little bit local language

(Balbir 2010. pp 179-181)

ASEAN people are more forward looking, operate by consensus and have a strong

family values. Influence of family values can see at home only, it affects to work.

Relationship building is important. Building a business the partnership is better than

trying to do all alone. A partner have: connections, knowledge of language, and

bottlenecks of the business and industry. A partner must be treated well and evaluation

before choosing it is necessary, because afterwards it can be very difficult to replace it.

Small misunderstandings at meetings where other side may lose its face can bring

consequences. Patience is gold. Things can’t happen as quickly to want it to happen. It

takes time to establish and develop the business. In Western societies corporation matter

more, when ASEAN people and families are higher valued. 60% of Asia’s companies

are family businesses. Decisions of management can be more emotional than rational.

The Corruption problem is existing it depends on by low salaries of government staff.

It’s good to have contacts within the industry as well as government. All of the ASEAN

countries are trying to strength their political system to catch up the developed

countries.

(Balbir 2010, pp 181-185)

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2.19 ASEAN VS EU

2.19.1 What ASEAN Can Learn from EU

ASEAN has started to form an economic union, What ASEAN can learn then from EU

some of these things are positive, while the other are not. The start of AEC will happen

on the last day of 2015, some of the principles are almost similar like in the European

Union's single market.

Eliminating barriers of trade and investment in national scale will increase growth and

living standards. Political stability across Southeast Asia will increase also like in

Europe. It means cooperation with totally different countries with different cultures,

political systems and income levels.

Asia can learn from EU's enlargement process in many ways, for example how to

prepare countries which are not so developed, democratic and how to put economic

institutions to a level that countries are better and able to participate in regional

integration.

ASEAN is not going to launch the monetary union that has proved so problematic in

Europe. Things like monetary union must be planned and organized well before

implementing it.

Arnold, WSJ (2012)

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2.19.2 Eurozone Crisis

EU has met a few economic crisis, which have caused increasing doubts about the

European integration process. The lack of efficiency and common response against the

euro crisis. Has raised a question about the integrity of the euro-zone, structural and

institutional problems have been revealed by the financial crisis. These doubts affect

with dramatic changes in the global economic, as the decline of the EU and United

States and the rise of Asia.

Cameron (2010)

2.19.3 Greece Debt

Germany and France EU’s biggest economies, are nominally the most involved.

However, the influence would be greater of the areas, like Slovenia and Malta, Spain

and Italy, these economies are more weak and fragile.

After Greece came under market pressure and entered a bailout program in 2010,

foreign banks started to rapidly reduce their exposure to Greece.

Euro area banks’ exposure to Greece, which had peaked at about €128bn in 2008,

dropped to €12bn in September 2013. UK banks’ exposure was €13bn in March 2008,

and dropped to €4.3bn by December 2012. US banks’ exposure, which was about €14bn

in September 2009, was down to €2.5bn at the end of 2012.

Merler (2015)

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2.19.4 Why Greece Economy Can Affect Globally.

Greek’s economy has such a major effect on the global markets. Fear of the unknown is

driving the markets up and down like a yo-yo. People in Greece did not want to accept

the changes what the European Central Bank (ECB) has set for the new bail out loan,

but the government thought that it is the only way out of that situation instead of

collapse. The major components are: 1) Greece defaults on the bailout loans that they

have already been given. 2) Greece goes out of the currency.

Considering the coming problems what would occur, if Greece defaults, and how it can

affect to lender countries. German Banks, France and England have supported Greece

with loans. Greece is not an insignificant economy and its failure would affect

throughout the world. The European Union (EU) links even more. Biggest fear is that if

Greece defaults, other members might default as well and it will be ultimately affect to

many economies.

This is not just problem for the EU, Many of the large American banks issued default

insurance to the banks that were lending to Greece and other struggling nations. If

Greece will default, then these major US banks will have to pay out billions to cover the

losses. World Financial Watch (2015)

2.19.5 Too Much Regulations (For Example)

The EU and its supporters say the banning a products will improve the energy

efficiency, environmental friendliness and health standards.

European Commission Regulation No. 1677/88, "Class I" and "Extra class" cucumbers

are allowed a bend of 10mm per 10cm of length. "Class II" cucumbers can bend twice

as much. Any cucumbers that are curvier may not be bought or sold.

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"The bureaucracy has went out of control. Outcomes of this new law does is to create a

job for new civil servants, paid for to move mountains of papers round all day, while

forbidding with the right of people to grow what they want, and charging fees for the

use of plants that were domesticated and grew by the public over thousands of years of

small-scale agriculture." — Ben Gabel, Director, UK-based Real Seed Catalogue.

Kern (2013)

Table 6: Difference Between Regional Agreements

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2.20 Future of ASEAN

Southeast Asia can address its productivity challenges and find new catalysts for growth

by carving out its own unique opportunities from three global megatrends which are

several below: Mc Kinsey & Company (2014)

2.20.1 Interconnection with Global Economy

Global economy is interconnected with: huge volumes of goods, services, capital,

people, and data. Southeast Asia can capitalize on this phenomenon by accelerating

implementation of the AEC integration plan to create a single market of 600 million

people and consumer. It also can build a more competitive manufacturing sector which

could attract additional production from multinational companies while labor costs are

rising in China. These opportunities could create about $280 billion to $615 billion in

annual economic value by 2030. Mc Kinsey & Company (2014)

2.20.2 Riding the Urbanization Wave.

The booming cities of Southeast Asia makes 65 percent of the region’s GDP today, and

90 million and more are going to move to the urban areas by 2030. This movement will

support continuing growth of the consumers. Amount of these consumers can double to

163 million households by 2030 and Southeast Asian's market on future are for different

kind of companies and industries. Sustainable growth and cities with a high quality of

life will demand, $7 trillion investments in infrastructure, housing, and commercial

space. By 2030, the growth of cities could rise about from $520 billion to $930 billion

to the region’s annual GDP. Mc Kinsey & Company (2014)

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2.20.3 Deploying Disruptive Technologies.

Related technologies are: mobile internet, big data, internet of things, the automation of

knowledge work, and cloud technology. Aforesaid modernize the sectors across the

economy and works as driver for the major productivity improvements. In many field of

industries, the trend is on digitalization which by they can cut expenses and be more

effective. Estimation about disruptive technologies shows that it could produce $220

billion to $625 billion in annual economic impact for Southeast Asia by 2030, but the

region will need to prioritize building the infrastructure to achieve this opportunity.

Global flows, urbanization, and technology are already moving the region. But if policy

makers and businesses prioritize the opportunities associated with these trends, the

results could be transformative. Southeast Asia could make a major strides in economic

development to increase the possibilities for what the integration can achieve.

Mc Kinsey & Company (2014)

36

Table 7: Economic Opportunities