Regional integration: Opportunities and challenges of the AEC

ON NOV 22, 2015, Asean leaders established the Asean Economic Community (AEC), which came into effect on Dec 31. One of its aims is to promote freer movement of trade and capital in the region. In practice, this means that tariff barriers between the 10 Asean countries will be eliminated while non-tariff barriers will be phased out. Restrictions on cross-border investment and the movement of labour within the region will also be progressively lifted.

The impact on enterprises will be significant. Consumer businesses will gain access to a combined market of approximately 625 million customers at a time when the middle class is growing in size and affluence. B2B businesses will gain access to an equally wide customer base that is also taking advantage of the AEC to expand around the region.

Small and medium-sized enterprises (SMEs) stand to benefit greatly from the upsides of new markets, cheaper resources, and more sources of capital. But they are also particularly vulnerable to the downsides of steeper competition and market volatility, as they may not have the capital or experience to adjust their strategies.