Asean Investor

Canada shifts trade focus to Southeast Asian countries

ASEAN_Investor
Publish date: Tue, 20 Aug 2013, 09:50 AM
Marc Djandji, CFA is the Editor-in-Chief of The ASEAN Insider, a subscription-based monthly investment newsletter committed to finding compelling investments backed by powerful structural trends in Southeast Asia. He is also a co-Founder and Partner of ASEAN Strategy Group Ltd., an independent investment banking boutique focusing on cross-border M&A and corporate finance advisory for companies in the small to mid-market segment in Southeast Asia.

OTTAWA - An often-overlooked but hugely important Asia-Pacific trading bloc will launch a trade and investment mission to Canada in 2014, The Vancouver Sun has learned.

The mission, to be announced this week at the annual gathering of trade ministers of the Association of Southeast Asian Nations in Brunei, underscores Canada's increased emphasis on the 10-nation alliance of 605 million people.

Trade Minister Ed Fast said China remains Canada's top bilateral trade priority among emerging markets, and the proposed Trans-Pacific Partnership (TPP) trade deal with the U.S., Japan, Australia and other Asia-Pacific countries heads the list of multilateral efforts to expand Canada's trade outside traditional markets.

Southeast Asian

But the Harper government, criticized in the past for not paying close enough attention to ASEAN, is ramping up efforts to play a greater role in the region.

ASEAN is holding its annual ministerial meeting this week in Brunei, with Canada participating as an observer. The alliance is made up of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar (Burma), Philippines, Singapore, Thailand and Vietnam.

China may be the Asia-Pacific's juggernaut, but ASEAN economies are booming and countries like Indonesia and Burma have something China doesn't have - relatively young populations.

"We're certainly not going to abandon China as our second largest trade partner. There's so much yet to be done in that relationship," Fast said.

"But when we look at Southeast Asia and look at how young their population is ... it's absolutely imperative that Canada broaden its horizons beyond China to include Southeast Asia, because there are tremendous opportunities there."

The ASEAN members plan to agree this week to send a "road show" of government officials and business executives to Canada to promote the region to Canadian businesspeople.

Fast will also attend in Brunei a ministerial meeting in advance of negotiations of countries involved in the TPP, including the U.S., Japan, Canada, Mexico, Australia, New Zealand, Brunei, Chile, Malaysia, Peru, Singapore and Vietnam.

The U.S. is pushing aggressively to conclude TPP negotiations by the end of the year, though trade analysts consider that objective overly optimistic.

Fast will distribute in Brunei a commissioned report on Canadian trade and investment opportunities in the ASEAN region, where a number of major global manufacturers have moved as a result of rising wages in China.

The report, based on a survey of Canadian trade officials and executives in the region, doesn't specifically cite China's demographic challenges due to the one-child policy. But it states that ASEAN's "youthful population will generate a demographic dividend for years to come."

Canada's exports to AESAN countries in 2012 totalled just over $5 billion, up 15 per cent from 2010, with sales dominated by fertilizers, machinery, cereals, wood pulp and electrical and electronic equipment. Imports, including machinery, rubber and electronic equipment, were $10.8 billion.

More significantly, Canadian investment in ASEAN countries totalled $7.7 billion in 2011, 50-per-cent more than the $5 billion invested in mainland China and India combined.

The report noted that ASEAN countries are attempting to close a new agreement by 2015 that is intended to remove remaining trade barriers.

Talk of a Canada-ASEAN free trade deal, however, would be "premature," Fast said. Instead, Canada is hoping to launch free trade negotiations soon with Thailand, Canada's largest ASEAN trade partner with $3.3 billion in Canadian exports in 2012.

"We see Thailand as a gateway into the larger region," Fast said.

The report doesn't shy away from concerns about major barriers for Canadian companies in a number of the ASEAN countries.

While Singapore is one of the least corrupt countries in the world, other ASEAN members are among the world's worst in terms of graft, according to Transparency International.

"In most of the emerging ASEAN markets corruption ranks among the top three business impediments. Infrastructure deficiencies and inept bureaucracy are also major challenges," the report states bluntly.

"In some industries/countries the business culture may be difficult to comprehend, let alone succeed in."

It also stresses that Canadian firms need to seek out a local partner who is not "reputationally challenged."

Fast urged Canadian executives to seek out the help of Canadian trade officials based on ASEAN countries in order to vet potential partners and learn of other potential challenges.

"Canadian companies should not assume that doing business abroad is going to be like doing business at home," he said.

"They have to be clear there will be new challenges, there will be a high level of due diligence that is required, but the returns will be remarkable."

BY PETER O?NEIL, VANCOUVER SUN

The post Canada shifts trade focus to Southeast Asian countries appeared first on Asean Investment | Marc Djandji Blog.

Discussions
Be the first to like this. Showing 0 of 0 comments

Post a Comment