The Association of Southeast Asian Nations (ASEAN) was founded in 1967 with the aim of promoting regional cooperation between its members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines , Singapore, Thailand and Vietnam. The total population exceeds 600 million people and the total GDP reaches 2.300 billion dollars, with a growth rate of 5,7% (source: ASEAN).
If the GDP is low compared to that of the European Union, the growth rate is relatively high and the debt ratio considerably lower: this means that Governments have a wider margin for any future maneuver that may be necessary to support the current momentum of growth.
Growth that ASEAN actively pursues, engaging in diplomatic activities with major economies in the Asia-Pacific area through the initiatives ASEAN+3, which includes China, Japan and South Korea, and ASEAN+6, which also sees the participation of Australia, India and New Zealand.
Over the years, ASEAN has progressively managed to involve its members in a process of growing economic integration, the main objective of which is now set for 2015, with the birth of the ASEAN Economic Community (AEC, ASEAN Economic
Community) and the creation of a single market and a common production base.
Among the various regional associations in the world, ASEAN is the one characterized by the greatest diversity in terms of ethnicity, language, culture and religion. If diversity were to prove a catalyst for innovation and growth, then ASEAN has one of the
hands a huge potential.
The Importance of Foreign Direct Investment in ASEAN
The investment report published by the ASEAN secretariat in July 2013 shows global confidence in the potential of its member states, as evidenced by the increase in Foreign Direct Investment (FDI). The latest data available show total FDI
in ASEAN for 114 billion dollars (2011), equal to a 16,4% share of direct investment flows to developing countries, with an increase of 24% on an annual basis.
While the global macroeconomic backdrop makes it unlikely that such a growth rate will be sustained, foreign investors have nonetheless lost interest in ASEAN. UNCTAD (United Nations Conference on Trade and Development) predicts a slow year for FDI in ASEAN; however, it is expected that more than 100 will be added to the existing base
billions of dollars. Furthermore, since the end of the financial crises in 1997, ASEAN has seen a growing ecosystem flourish
operators such as financial institutions, law firms and strategic and corporate consultants, which collectively have made Singapore the preferred entry point into ASEAN. This situation, combined with the steady flow of FDI into ASEAN, has created a fertile environment
for mergers and acquisitions (M&A), with a consequent progressive alignment of the corporate culture with the best international practices.
Multinational companies benefit from this environment and from the structural changes that have taken place in ASEAN since the crisis to take advantage of the different propositions offered by each country. The activities of MNEs in ASEAN span the entire value chain, from low-cost or labour-intensive productions (especially in relation to commodities)
to interventions with a high R&D content which, especially in Singapore, can take advantage of one of the most advanced nations in the world in terms of innovation, education and promotion of technologies through government programs (see the research of the Ambrosetti Club "L' ecosystem for innovation: which paths for the growth of companies and the country"- May 2012 and May 2013).
The world's top 10 consumer electronics companies have production facilities in one or more ASEAN countries, as do the 10 leading pharmaceutical companies, which are even increasing their R&D activity in this part of the world.
ASEAN and the global market
ASEAN has entered into a number of Free Trade Agreements (FTAs) which, in Toyota's case, have made manufacturing facilities in Thailand and Indonesia ideal candidates for the Innovative/International Multi-purpose Vehicle (IMV) project ). Thailand ed
Indonesia are global centers for IMV, with production reaching 2011% of total sales in 58 and exports to Asia, the Middle East, Europe and Oceania accounting for 54% (source: Toyota).
The most important free trade agreements have been signed with China, India, Japan, South Korea, Australia and New Zealand. Singapore is currently finalizing a comprehensive free trade agreement with the European Union, which includes FDI and
it will represent a point of reference for a future enlargement to other ASEAN countries.
Among the various members of ASEAN, Singapore also has the task of directing the negotiations for the Trans-Pacific Partnership Agreement (TPP): in September 2013 the Prime Minister, Lee Hsien Loong, declared That
the ASEAN Economic Community and the TPP will be complementary (source: The Straits Times).
EUROPEAN UNION and ASEAN: M&A activity between EAST AND WEST
Overall, ASEAN is the 3rd trading partner of the European Union (after the United States and China), with over 206 billion euros in trade in goods and services (2011). The European Union, ASEAN's 2nd trading partner after China, accounts for approximately 11% of ASEAN's trade and is by far the largest investor in the Association countries (source: European Commission). Noting that not all ASEAN members are ready for a comprehensive deal with the European Union, countries such as Malaysia, Thailand and Vietnam have now entered talks to conclude bilateral agreements similar to the EU's free trade agreement. European-Singapore.
What matters is that the free trade agreement signed between Singapore and the European Union will cover FDI aimed not only at Singapore, but also in the countries of the European Union. This will help increase the confidence needed for investment in Europe by the many ASEAN-based Sovereign Wealth Funds, local SMEs and Ultra High Net Worth Individuals (UHNWIs) currently interested in real estate investment opportunities. , in manufacturing (from high-tech to trendy), in distribution networks (department stores), in logistics operations, in food enterprises (to meet the growing globalization of food habits of an affluent class that is experiencing rapid development in ASEAN) and in lifestyle (football clubs) in Europe.
WHICH APPROACH TO ASEAN
Through ASEAN's path to the Economic Community (AEC), which is expected to be born in 2015, the opportunities for Western companies to participate in the economy of this rapidly growing part of the world are increasing. ASEAN governments promote
actively invest through tax breaks and other incentives. Of the top 10 automotive groups, 9 have factories
in one or more ASEAN Member States: the only one without a production base in the region is FIAT.
ASEAN: an integrated but diversified supply chain
The growing activity of multinational companies in ASEAN and their interactions with local operators have contributed to the creation of an integrated supply chain system involving all member states. Interestingly, ASEAN is currently (source: UNCTAD) the world's first or second largest producer of, for example,:
– Electronic integrated circuits
– Computer data storage units
– Telephone devices
– Components of braking systems for motor vehicles
– Footwear (after China)
– Shirts for men/boys (after China)
- Palm oil
- Rubber
– Natural gas (after Qatar)
- Rice
– Shrimps and scampi
– Coffee (after Brazil).
Firms such as Procter & Gamble (P&G), GE and Toyota benefit from such an integrated, yet diverse supply chain, with manufacturing strategies that identify ASEAN as a single manufacturing base, rather than a multi-country network. Procter & Gamble has regional headquarters in Singapore, where it also conducts R&D for a wide range of products. In ASEAN, P&G has 8 manufacturing centers and an equal number of so-called "mega distribution" centers.
It operates a business service center in the Philippines, covering a third of P&G's global operations. Thailand is the center
of regional marketing for cosmetic, textile and household products. The entire supply chain is therefore perfectly integrated with the local sales units across the ASEAN countries.
For example, for P&G's hair product line, the fragrances are created in Singapore, Indonesia does the packaging (through third party agreements), Malaysia processes the raw materials and Thailand combines everything into what is the largest hair products export facility in the world.
In aerospace, GE supplies several ASEAN regional carriers through direct operations in Cambodia, Indonesia, Malaysia, Vietnam and Singapore (which also serves as the regional headquarters). Interestingly, with the obvious exception of Singapore, the average wages of an engineer in ASEAN capitals such as Jakarta (Indonesia), Phnom Pehn (Cambodia) and Hanoi (Vietnam) are among the lowest in Asia, lower even to those of Delhi and Beijing (source: Jetro 2012).
Toyota has plants in 6 ASEAN countries, where it employs approximately 25.000 people with a production capacity of 1 million cars. In addition, it operates 4 manufacturing plants for components in the Philippines, Thailand, Indonesia and Malaysia, employing approximately 20.000 workers. Therefore, the company has increasingly taken advantage of the opportunity to rely on an integrated cross-chain model for cars produced not only for the ASEAN market, but also for other markets.
