SINGAPORE (Aug 4): The goal of an integrated ASEAN economy, or the ASEAN Economic Community (AEC), may still be in progress, but it is one that small and medium enterprises (SMEs) in the region should look forward to.

The AEC was formally established in 2015 and aims for a more fully unified ASEAN market by 2025, with the eventual goal of a single market within the bloc.

For one, SMEs stand to benefit from improved supply-chain networks as companies are able to work with other companies in neighbouring ASEAN countries more easily.

“SMEs look for a system where they are able to go… and they don’t have to worry too much about creating trouble,” says Teng Theng Dar, chairman of barterfli Holdings. He was speaking at a media briefing at the ASEAN Summit 2016, organised by law firm RHTLaw Taylor Wessing. “The single market approach [will mean that] when you cross borders, rules are the same.”

Secondly, SMEs will be able to leverage on the attractiveness of a united ASEAN market to the global economy.

ASEAN member states had a combined GDP of US$2.6 trillion (S$3.5 trillion), making it the seventh largest economy in the world, said Singapore's Ambassador-at-Large Ong Keng Yong in a speech earlier during the summit. And it is poised to be the fifth largest in a decade.

Teng reiterated that point, adding that ASEAN countries do not look “exciting” individually, but as a whole the region offers a market of 630 million people.

In order to take advantage of a single market and grow, SMEs in Singapore looking to expand cross-border have to move away from replicating their business models overseas, says Stephen Wyatt, executive director of SMU-Executive Development. “It’s a born-ASEAN model… versus a Singapore-centric model,” Wyatt says.

“SMEs here have to combine resources [with other companies overseas, and] know that you aren’t going to always be 100% in charge when you’re out of Singapore,” Teng adds. 

For now, however, SMEs in ASEAN face a variety of challenges, says Ong, who also served as the secretary-general of ASEAN from 2003 to 2008. This includes limited access to finance and international markets, lack of education in entrepreneurship, inconvenient business registration procedures, and a low average productivity rate.

He noted that the rate was less than one-third of US labour productivity in 2015, although it varies within the region, from 112% in Singapore to only 5% in Cambodia.

As such, he adds, the countries have to help SMEs – which represent more than 95% of all enterprises in ASEAN – by providing easier access to funds, networks, and export programmes.