B H Doing Business in the AS International Business Collection I ASEAN Countries N S. Tamer Cavusgil • Michael R. Czinkota • Gary Knight Editors Balbir B. Bhasin Southeast Asia is home to the ten ASEAN nations of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philip- pines, Singapore, Thailand, and Vietnam. Collectively they comprise a huge market of over half a billion people, with a total land area of 4.5 million square kilometers, a combined Doing Business domestic product in excess of US $1.5 trillion and total trade of over US $1.54 trillion. It is the most dynamic and fastest growing region in the world but also has some of the world’s in the ASEAN most distinctive cultures and business systems. DOI If you want to do business in the ASEAN nations, you’ll need this book. The authors really can help you succeed by N G BU Countries becoming familiar with this unique business world includ- ing political and business systems, cultural idiosyncrasies, S I management practices, social structures, legal frameworks, NESS government priorities, potential competition, establishing I relationships and selecting partners, and dealing with cor- N TH ruption and other ethical pitfalls. E ASEAN COU Dr. Balbir B. Bhasin is the associate professor of internation- al business at the John F. Welch College of Business, Sacred Heart University in Connecticut and Luxembourg. He holds the Master of International Management (MIM) degree (with Distinctions) from the prestigious Thunderbird School of N TRI Global Management in Glendale, Arizona, and a PhD in inter- ES national business from the University of South Australia in Balbir B. Bhasin Adelaide. Balbir Bhasin grew up in Singapore and has lived and worked in most of the Southeast Asian countries. He is multicultured and multilingual and has been both in the pub- lic and the private sectors there. He currently advises compa- nies eager to benefit from the opportunities in emerging Asia. International Business Collection S. Tamer Cavusgil • Michael R. Czinkota • Gary Knight Editors ISBN: 978-1-60649-108-9 90000 www.businessexpertpress.com 9 781606 491089 www.businessexpertpress.com Doing Business in the ASEAN Countries Doing Business in the ASEAN Countries Balbir B. Bhasin Doing Business in the ASEAN Countries Copyright © Business Expert Press, LLC, 2010. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means—electronic, mechanical, photocopy, recording, or any other except for brief quotations, not to exceed 400 words, without the prior permission of the publisher. First published in 2010 by Business Expert Press, LLC 222 East 46th Street, New York, NY 10017 www.businessexpertpress.com ISBN-13: 978-1-60649-108-9 (paperback) ISBN-13: 978-1-60649-109-6 (e-book) DOI 10.4128/9781606491096 A publication in the Business Expert Press International Business collection Collection ISSN: 1948-2752 (print) Collection ISSN: 1948-2760 (electronic) Cover design by Jonathan Pennell Interior design by Scribe Inc. First edition: December 2010 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America. Abstract This book is a practical and comprehensive guide to doing business in the newly emerging economies of the Association of Southeast Asian Nations (ASEAN), consisting of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, The Philippines, Singapore, Thailand, and Vietnam. Collec- tively these countries comprise a huge market of over half a billion peo- ple, a combined domestic product in excess of US$1.49 trillion, and total trade of over $1.54 trillion. The region’s economy is the fastest growing in the world. It has distinctive business cultures and systems. Each coun- try has a unique business environment and its own level of development. Familiarity with the business, political, social, and cultural environ- ment of the country is essential to succeed in doing business there. This book provides such insights into understanding the ASEAN region. It gives information on each country’s history, geography, and demography; the political and economic environment; the legal framework, including procedures for starting a business; cultural intricacies, including religious issues, language, beliefs, and customs; business etiquette and attitudes; management and working styles; and negotiation strategies. It provides guidelines on establishing relationships, selecting business partners, and dealing with corruption and other ethical pitfalls. For further explora- tion into an issue, links to web resources are also given. Information and insights on each ASEAN country will enable the reader to evaluate better the risk factors in order to make meaningful decisions. Keywords Association of Southeast Asian Nations (ASEAN), Asian cultures, busi- ness opportunities, business strategy, cross cultural communications, doing business in Asia, emerging markets, foreign direct investment (FDI), global business, global strategy, international management, inter- national marketing, international marketing research Contents Introduction . 1 Chapter 1 The ASEAN Community . 5 Chapter 2 Brunei . 13 Chapter 3 Cambodia . 25 Chapter 4 Indonesia . .39 Chapter 5 Laos . .53 Chapter 6 Malaysia . 69 Chapter 7 Myanmar . .89 Chapter 8 The Philippines . 103 Chapter 9 Singapore . .121 Chapter 10 Thailand . 139 Chapter 11 Vietnam . .155 Chapter 12 Doing Business in ASEAN . .173 Notes . 193 References . 199 Index . 207 Introduction Doing business in a foreign country requires awareness, consideration, and evaluation of risks that are unique to its environment. This neces- sarily involves knowledge of the politics, economics, legislation, and of course, the social and cultural traits of the community. These are factors external to the business enterprise, which plans to operate in the foreign country, and can directly affect all outcomes. This book throws light on the business environment of the Associa- tion of Southeast Asian Nations (ASEAN) region and its 10-member countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. The book’s framework is simple, yet allows for examination of the region’s complexity. First it introduces the ASEAN community, then each country’s environment is examined, and fi nally the entire region’s business climate is integrated by arraying clusters with parities. Chapter 1 introduces the ASEAN community by tracing its history and examining its current demographics. It outlines aims and objectives of the association. While describing the market and its potential, a detailed account of the ASEAN Free Trade Area (AFTA), which is on its way to total integration with removal of most tariffs and quotas, is provided. Also enumerated are the numerous free trade agreements the grouping has concluded with the United States, Australia, New Zealand, China, India, Japan, Korea, and the European Union (EU). These trade agreements illus- trate the advantages of doing business in ASEAN. Finally, the signifi cance of ASEAN to the United States, EU, and Asia is summarized. Chapters 2 to 11 explore each ASEAN country. Each chapter begins with a table that provides basic data of the country. This is followed by a general background to enable a deeper understanding of the country’s past and to allow for an appreciation of where it is now, which is often a result of how it got there. Important information on population, the size of the country, its people, languages, religions, natural resources, and challenges it faces is provided. This is followed by a detailed examination 2 DOING BUSINESS IN THE ASEAN COUNTRIES of the business environment, which necessarily includes the political, economic, and legal system of the country. The political system includes the executive, the legislature, and the judicial structures. An assessment is made of the stability of the political system and attention is drawn to issues of concern. The analysis of the economic system of the country looks at the structure of the economy and its openness to foreign par- ticipation. The main sectors that are common to all the countries (agri- culture, industry, and services) are explicated. Graphs provide a picture of the quality and quantity of trade and the relative importance of vari- ous trading partners. This allows for evaluating the country’s productivity and the availability of resources and its needs. An analysis of the country’s legal system follows. This is a summary of structures and levels of juris- diction and the process of appointment of judges. The independence of the judiciary and fairness of the country’s treatment of foreign investors and business organizations is also explored. The introductory overview of each country is followed by an exami- nation of the prevailing sociocultural environment and the business culture. The country’s ethnic makeup and composition, identity and orientation, social structure and classes, values and beliefs, attitudes and priorities, languages and dialects, religions and religious practices, tradi- tions and customs, and the worldview are examined. This is followed by an exploration of the country’s business culture, including orientations in business approach; time and space; meetings and greetings; practices such as exchange of business cards and gift giving; manner of address- ing senior offi cials and colleagues; use of English and other languages in business and government; social dress and business attire; response to modernization, globalization, and