SME’s Challenges and Opportunities after the ASEAN Integration

March 21, 20191:22 pm
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ASEAN integration represents the seventh largest economic power in the world, with combination of gross domestic product (GPD) worth $2.4 trillion in 2013. Moreover, if the economic development and plans are executed and running smoothly, it can be expected that ASEAN Economic Community (AEC) will be the fourth largest economic power in the world in 2050.

However, if businesses cannot survive in AEC, there will be a huge disintegration. John Peterson from FedEx revealed that small-to-medium enterprises (SMEs) bring up to 96 percent in ASEAN member states which generate employment and income fundamental in achieving sustainable economic growth. SMEs should prepare themselves to face challenges and opportunities brought by AEC. To help SMEs prepare themselves in the rapid competition of AEC, ILO Youth has gathered information concerning SME’s challenges and opportunities in ASEAN integration. By inviting expert speakers, here are insights of the information.

See also: Poor Working Condition is the New Employment Challenge

Potential effects of AEC on SMEs

Véronique Salze-Lozac’h, senior director, economic development and chief economist at Asia Foundation, said that despite challenges and opportunities, AEC is meant to provide integrated economic protection networks which also help SMEs to be able to expand their business in international trade. SMEs are important in the system as they support sustainable economic development.

However, some enterprises might have fear of what change AEC will bring to business organisations. Therefore, governments need to take an immediate and active role in promoting understanding of AEC and their application to domestic policies. As consequences, SMEs can develop their capacity to compete in regional market. Additionally, Salze-Lozac’s recommended that voices from SMEs should be taken into consideration when creating new policies about AEC.

Youth unemployment in ASEAN

More educated youths are entering labour market only to face difficulties in finding proper jobs for their degrees and skills. This can lead to high unemployment rate, especially among youth. Matthieu Cognac, youth employment specialist at ILO, commented that there are approximately 7.6 million unemployed youths in Asia and Pacific. However, employed women are showing progress as it has shown a positive shift with unemployment rate for female workers showing a marked decline in recent years.

In this unemployment issue, AEC could bring more opportunities for employment with its promise of free flow of skilled labour and transfer of knowledge and technology. And to fully benefit from economic integration, challenges for labour such as income inequality and minimum wages, access to skill training, career guide, and an appropriate social protection should be sufficiently addressed.

ASEAN integration in practice

Dr. Suthikorn Kingkaew, lecturer at Thammasat University, said that ASEAN integration has begun in practice but gradual implementation of the plan will take time. As ASEAN is integration of many culture and states, there will be huge cultural diversity and to do a business with other ASEAN should overcome the barrier, especially language. SME’s Thai, for example, needs to struggle as Thailand’s proficiency in English ranks last in ASEAN. Yet, English is expected to be de facto language of AEC. Additionally, logistics still lacks behind what is needed to optimise infrastructure conditions. According to Dr. Suthikorn, infrastructure, political instability, regulatory issue, corruption, wages are major obstacles in regions integration plan. However, he believed that SMEs will survive as large corporation will still rely on each other.

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