ASEAN Economic Community, Business Opportunities for the U.S
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Speech by Mr. Pisan Manawapat, Ambassador of the Kingdom of Thailand to the United States of America on ASEAN Economic Community, Business Opportunities for the U.S. at 2015 Duke University Asia Business Conference February 21, 2015 at 1000 hrs Fuqua School of Business, Duke University Thank you Professor Douglas T. Breeden, Former Dean of Duke Fuqua School of Business, for a warm welcome and kind introduction. Members of Fucua School of Business, Members of the business community, Students, Distinguished Guests, (General -1) It is an honor for me to be here today at Duke University – one of the leading research universities and a top university in America. It’s also a great pleasure, and at the Fuqua School of Business – also one of the top business schools in the U.S. - named after a self-educated and highly successful man (J.B. Fuqua) who has proved that “any obstacle can be overcome if you are willing to educate yourself and work hard." So I would like to thank the Asian Business Club for inviting me to be part of this year’s Asia Business Conference. I also wish to extend special thanks to our Thai students especially Mr. Passaworn, who is one of the Conference’s directors, for reaching out to our Embassy. I actually just arrived in Washington to assume my position as the 44th Thai Ambassador to the United States last Friday. And I started my official work with the first meeting at the State Department this past Wednesday. So this trip to North Carolina is my first outside of Washington. And this Conference is my first public event with a U.S. audience. But today’s Conference is also a great opportunity to share with you the many exciting economic opportunities in Southeast Asia. Because Southeast Asia is where we see some of the fasting growing economies in the world. And in Southeast Asia, we are also excited about the ASEAN Economic Community, including in Thailand. This is not least because Thailand is the birthplace of ASEAN – the Association of Southeast Asian Nations – over 47 years ago. North Carolina ranked 3rd in the list of the Best States for Business 2014. It’s also among the top ten in terms of employment supported by foreign direct investment. Multinationals like Bridgestone, Fujitsu, Hitachi, Honda, Lenovo, Mitsubishi Electric, Siemens, Volvo, invest here. More than 180 aerospace companies are engaged in manufacturing in North Carolina. 23% of the top 150 North American OEM parts suppliers have facilities her, and 19 of those have more than one facility in the state. North Carolina’s Research Triangle Park is the largest research park in the U.S., led by 3 major universities including Duke. All these speaks to North Carolina’s strength which also means more potential and opportunity to explore. (How and Why ASEAN Matters -2) My topic today is about ASEAN Economic Community, or AEC. So let me begin my presentation with why we should talk about the AEC. The AEC is one of the main 3 pillars of the ASEAN Community, which will be officially launched by the end of this year. ASEAN – the Association of Southeast Asian Nations – comprises 10 countries – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. It’s a combined market with over 620 million people – and over 65% is under age 35. ASEAN’s combined nominal GDP is 2.3 trillion USD. So in terms of the size of the economy, ASEAN is a bigger than India which has more than 1.2 billion people. The OECD (Organization for Economic Cooperation and Development) has forecasted that ASEAN growth will continue to be robust over 2015-2019 at an average of 5.6%. This growth will be powered by domestic demand growth, private consumption and investment, which will insulate it from slowing growth in India and China. Also important is that while ASEAN member countries are diverse in terms of history, size, culture and religion, the region has seen relative peace and stability, which makes it conducive for growth. The potential of Southeast Asia has been factored in the U.S. Administration’s rebalance policy to increase engagement with the region. And it’s why President Obama has met with ASEAN leaders almost every year, including at the latest ASEAN-U.S. Summit in Nay Pyi Taw, Myanmar last November. (How and Why ASEAN Matters -3) The numbers speak for themselves. ASEAN is the 4th largest export market for the United States. According to a publication done jointly by the U.S.-ASEAN Business Council, the East-West Center in Hawaii, and the Institute of Southeast Asian Studies in Singapore, ASEAN’s trade value with the U.S. in 2012 was almost 234 billion USD – so less than Canada at 616 billion USD, China at 536 billion USD, and Mexico at 493 billion, but more than Japan at 216 billion. It’s also more than the U.S. trade with Germany, the U.K. or South Korea. Indeed, ASEAN receives almost 100 billion U.S. goods and services exports, which support directly or indirectly more than 560,000 American jobs. By state, California (14 billion USD) and Texas (13 billion USD) are the largest exporting U.S. states to ASEAN. North Carolina’s trade with ASEAN was ranked 14th at 1.6 billion USD. (How and Why ASEAN Matters -4) In terms of investment, ASEAN is the number one destination for U.S. investment in Asia with almost 190 billion USD. This is more than with Japan at 134 billion USD, China at 51 billion USD, Hong Kong at 48 billion USD, South Korea at 35 billion USD, and India at 28 billion USD. (How and Why ASEAN Matters -5) ASEAN is a choice destination for regional and international investors. Investors enjoy profitable operations and are committed to deeper engagement in the region, which is reflected in strong reinvestment and sustained growth in foreign direct investment (FDI). In 2011, ASEAN FDI stock exceeded 1 trillion USD compared with only 266 billion USD in 2000. If we look at stock investment between ASEAN and the U.S. from 2001-2012, the value had considerably increased. ASEAN investment in the U.S. increased at an average annual rate of 28% and the total value in 2012 is 27.5 billion USD. The U.S. investment in ASEAN increased at an average annual rate of 9% and the total value was 190 billion USD. (How and Why ASEAN Matters -6) Overall, the growth of investment from ASEAN into the U.S. exceeded that of other regions in the world. It’s a 1,440% increase from 2001-2012. (ASEAN Secret of Success -7) So why businesses get so much success in ASEAN? The American Chamber of Commerce in Singapore and U.S. Chamber of Commerce have just launched the ASEAN Business Outlook Survey 2015. Respondents from 588 U.S. companies that are members of the American Chamber in ASEAN countries have listed some of their top reasons why they plan to expand their current locations in ASEAN are: 1. Diversified customer base (49%) As an open society, ASEAN is a region of diversity with different markets, varying levels of economic development, and diverse culture, making it one of the most competitive regions in the world today. Diversity leads investors to a wide range of opportunities and an expansive list of possibilities. Investors find complementarily among ASEAN’s mix of markets. There is room for small, medium, or large enterprises. There is a long list of possible industries to go into depending on the country’s strengths and needs. 2. Availability of trained personnel/efficient manpower (39%, ASEAN workforce is a key factor that attracts investors to the region. Human resources range from productive and cost-competitive labor, highly-skilled industry practitioners, and licensed professionals. Labor force participation rate in ASEAN is estimated at 70%. 3. Reasonable production costs (34%) As a free market economy, ASEAN provides an effective platform for investors to utilize and maximize its value chain. ASEAN’s entry into different free trade agreements enable companies to tap and trade with supporting industries and suppliers based in the region and in partner countries. Access to goods, raw materials, or product components for final assembly and production increased as tariff for more than 5,000 product lines were reduced to 0-5%. The varying levels of economic development in ASEAN coupled with each country’s industry specialization allow greater complementation among local and multinational companies (raw material supply and high value chain) and locational complementation between member countries (labor force and natural resources). 4. Stable government and political system (33%) Continuity of government and political stability help businesses to be able to plan ahead and set their business strategies without unexpected interruption. And despite changes in government, there remains the continuity of policy that is pro-business and open market economy. 5. Adequate laws and regulations to encourage foreign investments (23%) Privileges and incentives for foreign direct investment in ASEAN help the foreign business to easily start up their businesses and get high return of investment. (AEC - What is it? -8) What more, then, will the ASEAN Economic Community (AEC), which will take into effect the end of this year, bring? The AEC is the realization of a single market and production base – with free flow of goods, services, investment and skilled labor, and a freer flow of capital. It aims to make ASEAN a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.