Singapore, Wednesday, 22 April 2009 – ASEAN SMEs can still look to markets within the ten-member grouping for business opportunities amid the on-going global financial turmoil and domestic political challenges. It is also hoped that these difficulties will provide the impetus and the resolve towards the realization of a more integrated and inter-connected ASEAN Economic Community by 2015 (please refer to the Annex for more details).
These salient points and useful ideas on doing business in ASEAN were shared by prominent business leaders and SME industry players at today's "ASEAN Economic Community – Growing Singapore SMEs" seminar organised by the Singapore Business Federation (SBF) and supported by the Association of Small and Medium Enterprises (ASME).
Speaking to about 90 participants from 27 sectors including Banking and Finance, Electronics, Engineering, Furniture, Healthcare/Medical, Hospitality, IT, Lifestyle, Real Estate, Trade & Investment) were Dr. Robert Yap, SBF Council Member and Co-chairman of ASEAN Business Advisory Council (ASEAN-BAC); Mr. Lawrence Leow, President of ASME; Mr. Patrick Tan and Mr. Lee Tze Shiong, who are Partner and Director of Assurance & Advisory Services, Deloitte & Touche LLP respectively and; Ms. Wenda Ng, President, Overseas Operations, Cherie Hearts Group International. SBF CEO, Mr. Teng Theng Dar moderated the Question and Answer session.
The local business community was also alerted to the advantages and risks of doing business in ASEAN during the economic downturn as the region gears itself to become a full-fledged economic community by 2015 - a more transparent and organised regional framework that will promote a pro-business environment.
Encouraging SMEs to consider their external wing, Dr. Yap, who is also the Chairman and CEO of YCH Group, said, "Business enterprises, particularly SMEs, may react to the current economic crisis by focusing domestically instead of continuing to seek ventures, regionally or internationally. A crisis does not automatically mean the end of the external wing."
Mr. Tan and Mr. Lee sketched a broad perspective on the benefits and challenges for SMEs arising from the growth of the ASEAN economy and highlighted financial concerns participants should note during the current economic situation. On the other hand, Mr. Leow and Ms. Ng gave the SME perspective of doing business in the region.
Mr. Lawrence Leow, President of ASME, said: "Singapore SMEs looking to expand into the region should seriously consider investing in our ASEAN neighbours for the many benefits that an integrated ASEAN Economic Community will bring - a combined market size of 550 million people, varied business opportunities and lower business costs, among others. This is the region where Singapore SMEs can carve a niche for themselves. I believe the timing is right as a number of ASEAN countries have yet to appear on the radar of the large global corporations."
For the issue on labour mobility across national borders, Ms. Wenda Ng raised the issue of the need for recognition of professional qualifications across ASEAN because mutual recognition would ease the flow of labour for regional investors.
Guidelines for companies going regional shared by Mr. Lawrence Leow and Ms. Wenda Ng
Dos and Don’ts
Do not use Singapore as a benchmark when investing overseas, regional development takes more than double the effort and experience.
Understand the country’s culture, social and economic issues.
Explore alternative forms of payment instead of cash, for example, barter trade.
Have strong systems put in place before venturing to the region.
Have a strong team ready to support regional operations.
Do market research, and find out about the labour law and legalities of the country.
Taxes
For companies with no overseas presence, look out for withholding tax on payments made to non-residents including employees, business partners and overseas agents.
For joint ventures, try to have a two-thirds majority in terms of representation in the board of directors, so that one would have more say in the decision making and this will lend weight in the event of a dispute.
Understand the capability of your partner and tap on his strengths. It is important to get the right partner and tax consultant to advise on the legal and tax obligations of the market.
Take note of the double tax treaty which prevents double taxation of income earned in one country by the resident of another country. Understand the tax obligations in relation to income arising from cross-border economic activities between two countries, as well as reduction or exemption of tax on certain types of income. Visit www.iras.gov.sg for more information.
Companies can consider investing via a third country, for example some Myanmar companies have enjoyed better returns when they use Singapore as the base for their business.
Agreement issues
Get the deal right from day one.
Be aware of the legal implications of the agreement
Take note if it is subjected to local jurisdiction and contractual obligations as well as arbitration or court of law in the event of a dispute.
Singapore has adopted the Convention on the Recognition and Enforcement of Arbitral Awards, also known as the 1958 New York Convention, on 21 August 1986. This means that foreign partners can pursue a law suit in your home country.
Under the Reciprocal Enforcement of Commonwealth Judgments Acts (RECJA), Singapore recognizes judgments made in the UK as well as jurisdictions that are part of the Commonwealth and with which Singapore has reciprocal arrangements for the recognition and enforcement of judgments.
To prevent such reciprocal judgments, the solution would be for investors to set up a Special Purpose Vehicle for the business as part of risk management.
Human resource
Take note of the minimum wage rates in different ASEAN countries such as Cambodia, Laos, Vietnam, Indonesia and Thailand. Some of these countries have influential workers’ unions that negotiate wage-related issues and benefits, and seek hefty compensation for retrenchment of workers.
Foreign worker restrictions and work permit issues may make it difficult to bring skilled staff to set up operations in foreign markets
Cultural differences of staff
Safety and medical aspects
Income tax incentives
Currency exchange
There is no consistency in the accreditation of educational qualifications, e.g. early childhood qualifications in ASEAN
Sudden change in government policies resulting in surge in labour cost, e.g. foreign worker levy.
A lively exchange arose during the dialogue session between panelists and participants.on a variety of subjects including creating awareness among European companies of investing in ASEAN, using Singapore as an entry point into the region. Mr. Jan Pieter G. Prins, the Chair of the Dutch Chamber of Commerce (Singapore), suggested, "ASEAN needs to better coordinate, structure their business efforts and market their good selling points to the European SMEs in a more focused manner. We need to keep it simple, place one to two A4 paper worth of selling points and highlight what we have to offer to the Europeans."
Other participants shared problems encountered in the ASEAN region. Ms. Desiree Hwang, Senior Consultant, APCO Worldwide Corporate Advisory Services, told the panel SMEs have ecountered difficulties doing business in the ASEAN region posed by the delays in the implementation of tax agreements from its Free Trade Agreements (FTA). She said, "The customs division of some ASEAN governments are often not aware of the FTA benefits or they delay the implementation of the agreement."
Mr. Nick Lee, Director, Wavex Technologies Pte Ltd, raised the issue of SME financing and regional expansion. He said the loan terms were still very rigid. Mr. Teng informed him that SBF works closely with the respective government agencies to assist SMEs in their financing needs. Should SMEs have any concerns in this regard, they were urged to raise the matter to SBF which will facilitate feedback to the government.
Extending beyond ASEAN, SMEs can stand to gain from larger market share through reduced tariff barriers and increased investment opportunities from various ASEAN Free Trade Agreements. Presently, Singapore is in various stages of Free Trade Area engagement with China, Korea, Japan, India, the EU, and Australia and New Zealand. The FTA scenario gives a bigger picture of the various building blocks which ASEAN is presently working on – which will contribute towards the realisation of the ASEAN Economic Community.
In the context of ASEAN public-private sector partnership, in Singapore’s case, the feedback channel for SMEs is through business organisations such as SBF, the apex business chamber whose membership comprises 70 per cent SMEs. Also playing the bridging role are ASME and the local and foreign chambers and industry associations. Collectively, these business organisations facilitate the connectivity between the private sector and governments at the respective national, regional and international levels.
At the ASEAN level, the ASEAN Business Advisory Council (ASEAN-BAC) is the highest-level business grouping providing business feedback to the ASEAN Leaders during the annual ASEAN Summit. It was previously held in Singapore in 2007 and Hua Hin, Thailand in 2009. SBF facilitates the participation of Singapore’s ASEAN-BAC members in the ASEAN-BAC Forum. Accordingly, views from business community arising from seminars such as today’s seminar can be channelled via SBF for the consideration of the respective governments of ASEAN and ASEAN Dialogue partners.
Mr Teng Theng Dar, CEO of SBF, concluded: "While we face the current challenges, we must also look to the mid to long term horizon. With better understanding on the opportunities and benefits of ASEAN economic integration, Singapore SMEs can map out their respective regional business strategies to harvest the opportunities"
For more information on ASEAN-BAC activities, please contact
Ms. Paulna Tan
Executive, ASEAN
Singapore Business Federation
Email: paulna.tan@sbf.org.sg
Tel: 6827 6850
About The Association of Small & Medium Enterprises (ASME)
The Association of Small & Medium Enterprises is a not-for-profit organisation that welcomes all in the entrepreneurial community into our membership. With a wide array of business-centric activities, services and programmes, ASME is well-poised to facilitate the growth and development of SMEs in Singapore.
Pioneered by a group of entrepreneurs in 1986, ASME remains one of the foremost champions of the Singapore pro-enterprise movement. Today, we continue to work closely with both the public and the private sectors to ensure that businesses in Singapore can operate in a conducive and fair environment.
At ASME, we reinforce our position as the business association for entrepreneurs, by entrepreneurs.
About Deloitte & Touche LLP
Deloitte provides audit, tax, consulting and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in 140 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte's 165,000 professionals are committed to becoming the standard of excellence.
About Cherie Hearts Group International Pte Ltd
Cherie Hearts Group International Pte Ltd is the largest, multiple award-winning international brand of childcare centres that prides itself on its vast experience in the provision of quality & innovative early childhood education. An industry leader with more than 60 childcare centres in Singapore and other ASEAN countries. Cherie Hearts Group has established presence in the region, namely in Vietnam, Malaysia, Hong Kong, Indonesia, China and Korea.
Cherie Hearts is the recipient of numerous National awards and believes in providing a one-stop education service that grooms the Physical, Intellectual, Emotional, Social and Language (PIESL) development of children so that parents can spend quality family time with their child after office hours. The founders, Dr Sam Yap and Dr Gurchran Singh of Cherie Hearts firmly believe in providing quality care for our little Cherians. Hence Touching Hearts. Moulding Lives. For more information, please visit our website: www.cheriehearts.com.sg
The Association of Southeast Asian Nations
The Association of Southeast Asian Nations or ASEAN was established on 8 August 1967 in Bangkok by the five original Member Countries, namely, Indonesia, Malaysia, Philippines, Singapore, and Thailand. Brunei Darussalam joined on 8 January 1984, Vietnam on 28 July 1995, Lao PDR and Myanmar on 23 July 1997, and Cambodia on 30 April 1999.
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.
The ASEAN Business Advisory Council
The ASEAN Business Advisory Council (ASEAN BAC) was inaugurated in April 2003 at the ASEAN Secretariat in Jakarta, Indonesia. Its establishment was earlier mandated by the ASEAN Leaders at their 7th ASEAN summit in Bandar Seri Begawan, Brunei Darussalam on 5-6 November 2001, as the official ASEAN linkage to provide private sector feedback and guidance to boost ASEAN's efforts towards economic integration and to identify priority areas for considerations by the ASEAN Leaders.
ASEAN Plus Three
Asean, which comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, has China, Japan and South Korea as its dialogue partners under the auspices of Asean Plus Three. Asean Plus Three is driven by the expansion of international trade and foreign direct investment. Over the last few years, the region has been experiencing close economic integration through the FTAs. The ASEAN+ 3 process is seen as the main vehicle for achieving the long term goal of building an East Asia Community including India, Australia and New Zealand.
ASEAN+3 Government Initiatives
Chiang Mai Initiative
The Chiang Mai Initiative (CMI), launched on 6 May 2000 by the ASEAN+3 Finance Ministers to provide short-term financial assistance to Member Countries in need of temporary liquidity support.
The Asian Bond Markets Initiative (ABMI)
ABMI was launched in December 2002. Since then, efforts have been made under six Working Groups to create an enabling environment towards fostering the development of bond markets in the respective ASEAN+3 Member Countries.
ASEAN+3 Cooperation Fund
The ASEAN Plus Three Cooperation Fund (APTCF) was launched on July 22, 2008 with an initial contribution of US$ 3 million. China, Japan and Korea will each contribute US$ 900,000, and ASEAN will contribute US$ 300,000.
Annex
About the ASEAN Economic Community
The ASEAN Economic Community (AEC) Blueprint was signed in November 2007 to transform ASEAN into a single market and production base by 2015. The aim is to achieve free movement of goods, services, investment, skilled labour and freer flow of capital within a pro-business environment. The ASEAN Charter was ratified by all ASEAN countries by December 2008, marking a milestone in giving ASEAN the legal basis to implement its various agreements.
ASEAN Policy Blueprint for SME Development (2004-2014) outlines framework for SME development in ASEAN, including strategic work programmes, policy measures to enhance competitiveness of ASEAN SMEs by facilitating their access to information, market, HRD, finance, technology. The Blueprint also aims to strengthen resilience of ASEAN SMEs to better withstand adverse macroeconomic and financial difficulties, as well as a more liberalised trading environment.
Under the Blueprint, plans for SME growth include establishing comprehensive SME service centres with regional linkages, SME financial facilities in each ASEAN country, regional programmes for promoting internship schemes for staff exchanges and visits for skills training, regional SME development fund as a financial source for SMEs doing business in the region.
Important to involve indigenous industry in ASEAN regional economic integration as SMEs form backbone of economies of ASEAN countries - SMEs account for 90 per cent of all domestic firms; 75-90 per cent of the non-agricultural domestic workforce;
40 per cent of business contribution to GDP
In Singapore, SMEs account for 99 per cent of all enterprises; 62 per cent of the workforce; 46 per cent of total value-added to the economy
SME involvement in process of economic integration will boost capacity-building of ASEAN SMEs, raising their ability to compete at the regional level, thus broadening their respective market bases; in turn, the resulting SME involvement will raise the volume of intra-ASEAN business transactions and trade
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