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Business Opportunity in EU-ASEAN Free Trade Agreement
Tue, 11/18/2008 13:40:26

The Association of South East Asian Nations (ASEAN) encompasses 10 South East Asian countries (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Burma/Myanmar, Philippines, Singapore, Thailand and Vietnam). Its key position in the Asia-Pacific region, its dedication to peace and stability in the region and its important economic weight has made ASEAN a key partner for the European Union.

In 2006, EU-ASEAN trade represented 5% of total world trade. The EU is ASEAN's 2nd largest trading partner, accounting for 11.8% of ASEAN trade (2006). Significantly, 13% of ASEAN exports are destined for the EU, which makes it ASEAN's 2nd largest export market after the US. ASEAN as an entity represents the EU's 5th largest major trading partner, accounting to Euro 127 billion, just ahead of Norway and equivalent to Japan. ASEAN's trade with the EU has been growing steadily over the past five years, with an average annual growth rate of 4%. The EU main exports to ASEAN in 2006 were chemical products, machinery and transport equipment. The main imports from ASEAN to the EU were machinery and transport equipment, as well as chemicals, textiles and clothing.

South East Asia's current economic strengths and its great longer-term potential continue to make it an attractive region for investment by EU economic operators. On average, EU companies have invested Euro 5.1 billion EUR a year for the period 2003 to 2005. EU is thus by far the largest investor in ASEAN countries: 27% of total FDI inflows from 2001 to 2005 come from the EU, compared to 15% for the US.

Since 2000, trade and investment issues are discussed at Ministerial (EC-ASEAN Economic Ministers) and official (Senior Economic Official Meeting) levels between the European Commission and ASEAN. The key challenge for the relations is to promote region-to-region economic relations, particularly by addressing non-tariff barriers through regulatory co-operation using the framework of TREATI (the Trans-Regional EU-ASEAN Trade Initiative), and ultimately to lay the foundations for a preferential regional trade agreement in the future.
(Source: Bilateral Trade Relations, European Commission, EU and the world – external trade, http://ec.europa.eu/trade/issues/bilateral/regions/asem/index_en.htm) 
 
As a single market, EU is the most advance and a successful example for the regional integration, while in ASEAN, the integration process is still on going, the growth of export and import in ASEAN as well as industrial production is increasing every year overcome the average growth of the world’s export, import and production. This means that the region is well promising for the investment, the base for production or outsourcing and also a huge market to enter for the goods and services from other countries.

Given the facts the importance of the relations between two regions and its possibility to grow even faster in the future, it is important to consider this relationship and to have a deep analysis and more understanding of the markets in both region. 

The method to analyze both regions is to provide the factsheet about the trade, investment flow and macro economy condition about each region for the last 5 years and to compare it with the other region and country with economy leading such as NAFTA, China and India. Evaluation of the factsheet will come to the conclusion of the importance for a deep economic cooperation between EU and ASEAN. It will also show the competitive advantage of each region and what is the specialization that both EU and ASEAN could focus in order to increase the trade. 

To explore more about the importance and what will be the economy impact and benefit for both regions, it is important also to analyze and include the evolution of trade between EU-ASEAN from the beginning to present and in the future, specially with EU-ASEAN FTA (Free Trade Agreement) that is currently under negotiation and to be expected to be implemented in 2015. What is the external factor that can impact the trade and what is the benefit for each region and business opportunity.

Moreover, with the facts and future trends in ASEAN, it has attracted other countries, especially in the region to have a Free Trade Agreement and it estimated to become the hub for the free trade area in Asia. Until now, ASEAN is in process of making an FTA with China, Japan, South Korea and India as well as Australia and New Zealand. The realization of this agreement in the future will make the biggest FTA in the world involving more than two billion people, providing a reason more for the EU to hurry the negotiations with the ASEAN.

For the above reason, the EU – ASEAN cooperation and collaboration in the future especially to face the free trade agreement between two regions which is now under negotiation and expected to take place on year 2015 will be an important moment for both region and this will be exploit in this paper about how it can become attractive and how to get the opportunity to build a business relation and gain benefits between these two regions.

Ardha Prapanca Sugarda, MBA

PT. Pacific Rekanprima

Trieste, 20 September 2008

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