Market access conditions and regional integration

Week 04
Market access
conditions and
regional
integration

Week 04
 Market access
conditions and
regional
integration

• Market access conditions:

variations and market
integration impacts in Asia
Learning from leaders: Best practice

The most successful firms are

• Capable of identifying characteristics of the diverse
macro-economic environments in different Asian
countries.
• Adapted to understand how free trade agreements
and other forms of market integration impact firms’
market expansion.
• Swift in taking strategic actions in response to
opportunities and challenges embedded in the
dynamics of the Asian markets.
The analysis of a business environment

This typically includes:

• the political and social environment

• the economic environment
• the natural environment
• the technological environment
• the legal environment
• bi-lateral and regional market group contexts.
Understanding the Asian
macroenvironment

• In the political and social environment, one focuses on

the stability or change emanating from legislation
(local and international), government policies, political
change, funding, grants and other initiatives, wars or
conflicts, local and internal trading environments, as
well as the social context impacting consumer and
lifestyle trends (behaviour and attitudes),
demographics (age, sex, gender, ethnicity,
employment, home ownership), media and ethical
issues.
• In the economic environment: Factors influencing
consumer purchasing power and spending include,
among others, trends in income levels, income
distribution, an emergence of the middle-class,
interest rates, savings, industry trends and local
Understanding the Asian
macroenvironment

• In the natural environment, the existing and changing

physical and natural resource factors are scrutinized
including commodities and raw materials, but also
environmental and natural attitudes, disasters, and
changes in government intervention.
• In the technological environment, changes in
technology affect marketing and operational efforts
including, among others, innovative skills, methods,
systems and equipment such as automation, robotics,
Artificial Intelligence and Virtual Reality.
• The legal environment includes factors shaped by all
legal aspects including employment, labour, quotas,
taxation, resources, imports and export regulations.
Trends & challenges in selected countries

• The IMF World Economic Outlook has

forecasted economic growth specifically for
India to continue for many years to come,
driven by increased domestic demand, and an
even better integration into regional and
international trade and investment, and at the
same time, stable consumer prices.
• China continues to be able to keep rising
inflation at reasonable levels, while its growth
has become steadier, at a more sustainable
pace due to population and productivity
constraints.
Trends & challenges in selected countries

• East and South Asian countries have been

exposed to hardships due to trade tensions,
especially those between the USA and China,
and they also face difficulties regularly due to
meteorological challenges. One example for
the latter instance is Malaysia.
• Countries that participate in higher value-
added exports and experience sustained
dynamic services demand are the main
beneficiaries of regional growth. Example for
this are countries like Japan, South Korea,
Singapore, and especially Thailand and
Trends & challenges in selected countries

• The very low-income countries

continue to experience hard times
mostly due to persisting economic
inequality and weak market access
demand, while economic inequality
has declined across most of Asia:
• Afghanistan: low-income country;
Mongolia: lower middle-income
country; Kazakhstan: upper middle
country.
Trends & challenges in selected countries

• Some of parts of developing Asia is

less affected, in that the economies
are increasingly becoming attractive
for cross-border trade and investment,
and many are determined to be part of
free trade areas and currently show
considerable growth:
• The ASEAN-5 including Indonesia,
Malaysia, Philippines, Thailand,
Vietnam.
Trends & challenges in selected countries

• Many economies in Asia have expanded,

thanks to commodity exporting activity;
yet some countries continue to depend
strongly on this one particular export:
• Indonesia and Malaysia.

• Some emerging countries such as

Vietnam, Myanmar and Bangladesh have
become or are on the way to becoming
thriving locations for low-cost
manufacturing and have attracted
manufacturing formerly located in China.
Trends & challenges in selected countries

• The regions to the west of Asia are yet

missing out on economic growth due to
war, unrest or weak governments that do
not provide the conditions favourable for
the internal growth of domestic industry
or for international investors or for value
chain participation.
The benefits from cross-border business
activity

• The ease of acquisition, processing and

acting on information about labour
supply opportunity and shared
production networks;
• The existence of close business links
provides for efficient exchange and spill-
overs of business knowledge;
• Regional cooperation supports the
formation of alliances between firms and
the development of distinctive business
The benefits from cross-border business
activity

• Economies of scale originate from

sharing infrastructure, with efficiency
derived from industrial linkages and
subcontracting, the division of labour
and sometimes, common regional
governance structures supporting the
development of regional industrial hubs.
• In trade flows, intra-regional demand for
finished and unfinished intermediate
products increases steadily.
Intra-Asian Free Trade Agreements (FTAs):
Creating positive or negative integration

Positive integration Negative integration

The commitment of FTA members to Forming a ‘common market’ with

removing trade barriers is called appropriate institutions governing the
negative integration, that is, the group, and a policy framework that
removal of restrictions. This is, for allows turning of commitment into
example, the case for the China- practice, that is, policy integration and
Singapore FTA, and for the South development and modifications for
Korea-Vietnam FTA. joint action. ASEAN is working to
become a common market.
Degrees of international integration
Cost efficiencies result from increased
market access

• Reducing transaction costs in terms of currency

losses, border patrols, customs procedures and
red tape reductions;
• Reducing uncertainties among member states
benefitting the relative price of currencies. This
facilitates the selling of securities, the raising of
funds and capital, and the recruitment of diverse
labour.
• Increasing marketing initiatives, price and cost
transparency, efficiencies and economies-of-
scale effects; improvements of productivity and
the international value chain.
Key forms of market integration

• APEC, the Asia-Pacific Economic Cooperation, is

a regional economic forum founded in 1989. This
is the largest market grouping in Asia.
• The 21 APEC members include Australia,
Brunei Darussalam, Canada, Chile, China,
Hong Kong-China, Indonesia, Japan, Republic
of Korea, Malaysia, Mexico, New Zealand,
Papua New Guinea, Peru, Philippines, Russia,
Singapore, Chinese Taipei, Thailand, United
States of America and Vietnam. They
represent 2.6 billion people, about 60 per
cent of world GDP and 47 per cent of world
trade.
Key forms of market integration

• ASEAN: Most members of ASEAN are members of

APEC. APEC trade facilitation initiatives reduced
transaction costs and continues to focus on the
reduction of trade transaction costs including
non-tariff measures and behind-the-border
barriers.
• ASEAN members are Indonesia, Malaysia,
Philippines, Singapore, Thailand, Brunei
Darrussalam, Laos, Vietnam, Myanmar and
Cambodia, with 590 million inhabitants in
2009, 633 million in 2017, and an expected
741 million people for 2035.
Key forms of market integration

• Middle East: With parts of the Middle East

located in Western Asia, it is important to be
aware of the Gulf Cooperation Council (GCC),
with the members Saudi Arabia, Kuwait, Bahrain,
Qatar, the United Arab Emirates, Yemen and the
Sultanate of Oman.
• Trans-Pacific Partnership: Since December 2018,
it provides businesses with preferred market
access across 11 mainly Asia-Pacific-centric
countries, including Australia, Brunei, Canada,
Chile, Japan, Malaysia, Mexico, New Zealand,
Peru, Singapore and Vietnam.