Integrated ASEAN holds strong cards as companies invest closer to key markets

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President Rodrigo R. Duterte (C) links hands with Association of Southeast Asian Nations (ASEAN) Economic Ministers for a photo in Manila on Sept. 6. Philippines hosts the ASEAN Economic Ministers’ Meeting from Sept. 4 to 10. -- AFP

By Krista Angela M. Montealegre,
National Correspondent

AN ECONOMICALLY integrated Southeast Asia stands to gain from increasing global interconnection, but companies must embrace innovation and harness the power of data to thrive and survive in the rapidly changing business landscape.

In a keynote speech at the 15th Management Association of the Philippines (MAP) International CEO Conference on Tuesday in Makati City, Dr. Thierry Apoteker, chairman and chief economist of European research group TAC Economics, said the world is shifting away from globalization — the main engine of growth in the last two decades — and moving towards “globalnection”— a fully interconnected world that is altering most of the common production and distribution practices.

Mr. Apoteker pointed out in the forum co-presented by BusinessWorld that economies have seen a substantial increase in restrictive trade measures since 2009, prompting companies to look less at integrated global value chains and more on investing closer to their market base.

With foreign direct investment and corporate integration challenged by relocation and technological innovation, Mr. Apoteker said Southeast Asia is in a position to capitalize on this emerging trend given the large domestic market in the region and its proximity to China — the main driver of global economic growth.

ASEAN has a tremendous potential in this new completely changing complex world where people, data and information play a critical role in business,” Mr. Apoteker said.

“If you succeed in moving to further integration while benefitting from proximity to China, it will be a winning recipe, but only if the people see the benefits of this process,” he said.

Digitization of manufacturing, or “Industry 4.0,” is critical for Southeast Asia to succeed, with data, robotics and mechanization fuelling the next big wave of growth, said Richard Skinner, partner in deals strategy at PwC Singapore.

Industry 4.0 is a new paradigm for economic production, riding on automation and data exchange to boost productivity and improve efficiency.

“What we have lost in manufacturing is a bit of that innovation and technological change. We have to address that to enable (gross domestic product) to reach the 10% level,” Mr. Skinner said.

While global trade in goods will not register the same growth pace seen from 1990 to 2010, the exchange of data, on the other hand, is exploding because of the ability of people to get a huge amount of information instantaneously.

“The winners are going to be those guys that hold all our data. They will be the winners of our future,” said Anson Bailey, partner and head of consumer markets practice at KPMG Hong Kong.

Companies must evolve from an omni-channel structure to an omni business model marked by the seamless integration of all functions, enabled by digital technology and with the customer at the center, Mr. Bailey said.

“We are in for an unprecedented level of disruption. The speed is something you can never imagine,” he said.

Mr. Apoteker said it is imperative for ASEAN firms to rapidly upgrade and upscale the type of services they offer to weather the storm caused by disruption.

ASEAN has made so much progress on tariff measures and trade procedures, but the integration needs more work on the areas on services, investment and labor mobility as well as overcoming obstacles in the form of an inefficient business environment and infrastructure gaps.

Marc Dragon, chief executive officer at Singapore-based logistics technology solutions provider Y3 Technologies, said businesses must not be afraid to innovate even if this means greater scrutiny from the government.

In the Philippines, the Land Transportation Franchising & Regulatory Board slapped ride-sharing start-up Uber with a P190-million fine for violating the agency’s July 26 order directing transport network companies (TNCs) to stop accepting and activating accreditation applications. Taxi operators have complained about unfair competition from TNCs.

“Ultimately, what I am encouraged by is I know the government wants the same thing. This congestion is a big issue and so is the pain of commuting in Manila. That’s what we care about, too. It’s just about finding a common ground,” said Chan Park, Uber general manager for Southeast Asia.