In less than two years, the 10 states of the Association of South East Asian Nations (ASEAN) will implement the ASEAN Economic Community (AEC).
Economically, the AEC is intended to drive growth for the ASEAN member states, making it cheaper and easier to do business in the region and possibly, globally.
Goods, services, investments as well as skilled labour and capital are likely to flow more freely in this increasingly pro-business environment.
Possibilities available to Singapore businesses looking to internationalisation as an option for business expansion have never been as exciting as they are today.
As an ASEAN-based business, you are likely to find greater ease operating in the region as your business operations can be structured using the region as one integrated production base.
It will also offer you new ways to coordinate your supply chains and offer you access to new regional markets for your products.
What the AEC means
Regional integration into a single market with the AEC in 2015 offers Singapore’s enterprises great opportunities to tap into regional business opportunities.
By taking a regional focus to how you look at your business operations, you could as a Singapore business enjoy unique opportunities to stay ahead of new entrants into ASEAN markets.
At the same time, thinking regional could help you think globally in how you structure all aspects of your business, thereby remaining relevant to global customers.
For example, as a company operating in the AEC, growth can take the form of establishing SME service centres in ASEAN countries. Besides offering greater intra-regional coverage, it could also offer capital raising opportunities not only within Singapore but the region.
Are local entrepreneurs and businesses ready for AEC?
If successfully implemented, having one regional economic market offers regional governments greater opportunities for cooperation.
The AEC will likely become more significant to international investors as it will pave the way for a single market with duty free imports, single production base for 10 country-members, with 600 million consumers and $1.9 trillion in combined GDP.
With Singapore as part of the AEC and a reputation for being a business hub, more incoming regional investments could flow through Singapore. This in turn means greater market opportunities for Singapore businesses.
But there are concerns as well.
Greater competition, rapid technological advances, more demanding and constant changes in market and consumer requirements mean that SMEs have to be innovative and forward looking in order to manage with success the challenges of the global, regional and domestic markets.
It also means that as a Singapore business, you will need to move faster than before to tap into these opportunities and keep up with new market demands. It will also mean that you will have to raise your capabilities to compete regionally.
SMEs are not alone
Many businesses have already begun to prepare themselves ahead of time to meet the challenges and opportunities of the AEC.
It is also apparent that the Singapore Government fully realises both the opportunities and challenges that the AEC will present to SMEs.
To maintain the competitiveness of small business, both locally and in the much larger market, various internationalisation schemes have already been implemented.
For example, there has been a Double Tax Deduction for Internationalisation scheme available to Singapore businesses for some time which provides double tax deduction for certain expenses incurred on overseas expansion.
There is also an Integrated Investment Allowance scheme which allows Singapore businesses to claim enhanced writing-down allowances on equipment used for an approved project outside Singapore, as well as financial grants such as the Global Company Partnership and Market Readiness Assistance schemes.
Looking beyond market related incentives, I hope to see more incentives for Singapore enterprises investing in building their own uniquely Singapore brand.
Encouraging a focus on creating more internationally recognisable brands will encourage Singapore companies to look beyond their traditional markets to find opportunities to drive sales.
The competitiveness of Singapore businesses abroad can be increased, when international customers demand products or services offered by a Singapore business simply because its brand promise offers greater fulfilment of a product or service.
Bold steps forward
The planned establishment of the AEC by December 2015 is now less than two years away. If you have not begun thinking about it, there is no time to lose.
Bold and decisive steps may be required to put you in a strong position to take advantage of the benefits the AEC stands to offer.
Nevertheless, do realise that the journey toward economic integration is long and these are early days yet.
Taking the example of the European Union which started this journey several decades earlier, it is still very much a work in progress.
With the AEC, we can expect that some efforts at integration will go faster and bear more fruits than others; while others may face more challenges.
Still, the future is promising and all businesses in Singapore should actively consider if opportunities await in the region.
As the old saying goes – being prepared is half the battle won when opportunity comes knocking.
This article is contributed by Mr Chiu Wu Hong, Tax Partner at KPMG in Singapore. The views expressed are his own.