Business competitiveness in the age of the Trans-Pacific Partnership and ASEAN Economic Community

What a difference 48 years makes. It was 1967 when Singapore was among the founding members of the Association of Southeast Asian Nations (ASEAN). Its GDP was around US$1.2 billion then; by Q1 2016 it is forecast to grow to US$331 billion, an increase of around 275 times – adjusted for inflation, about eight times. And as we enter into 2016 – when the Trans-Pacific Partnership (TPP) and the ASEAN Economic Community (AEC) are about to become political and economic realities, a collective ASEAN’s growth narrative is only just beginning.

The AEC and TPP will provide businesses with greater access to opportunities across borders. It also creates threats; competitors now have access to your home turf. Businesses can no longer worry only about competitors down the street; they now have to be concerned about their customers switching to products and services from companies as far away as Japan and the US, who are no longer restrained by trade tariffs and quotas.

In fact, the president of the SME Association of Malaysia recently noted that the TPP may force out at least 30 percent of Malaysia’s 650,000 SMEs.

How can businesses compete with potentially larger, more advanced, and cheaper counterparts? The answer, for many entrepreneurs and managers, is to disrupt their businesses' status quo with technology. Better to bring change to your own business, than be supplanted by a competitor.

A new hope

With a combined population of 625 million people and 2014 GDP of US$2.5 trillion, ASEAN or Southeast Asia is set to become the fourth largest economic community by 2030, says McKinsey. An anticipated 14 million new jobs will be created by 2025, as a result of AEC, says the Asian Development Bank. TPP, which involves SEA states Brunei, Malaysia, Singapore, and Vietnam as well as Australia, Canada, Japan, and the US, is the biggest trade agreement since the establishment of World Trade Organization in 1994.

The combined GDP of the TPP members is estimated at US$28 trillion. Both AEC and TPP will reduce tariffs and quotas, and allow businesses of all sizes to compete on a larger international stage, through cross-border trade.

The AEC and the TPP have far-reaching objectives to enhance businesses, trade, and economies. The AEC aims to transform ASEAN into a single market and production base, boosting its combined GDP and competitiveness. The TPP is looking to develop the digital economy and protect intellectual property rights.

But this could also serve as a Trojan horse; governments are creating larger markets for their companies by opening borders and economies, and at the same time exposing domestic businesses to foreign entrants. SMEs must evolve, and shift from short-term tactics to better business strategies and tools so that they climb up the value chain, ensuring long-term success and sustainability.

A $28 trillion pond

In the age of AEC and TPP, SMEs and enterprise must speed up expansion plans, penetrate new markets, handle increased trade activity, and manage coordination between regions and offices. They must learn to adapt to this new complexity; more ‘bums on seats’ will not provide the solutions.

Cloud technology – on-demand computing resources – is already changing the way businesses operate. Through virtual applications, SMEs and enterprises can eradicate outdated, redundant processes, streamline business processes, and increase productivity. Cloud also unlocks the power of data analytics, where businesses can identify and utilise key insights across sales, marketing, and human resources.

Planning for the next five or ten years already presents a difficult task. Recent signs of a slowing economy create uncertainty. The addition of TPP and AEC into this challenging mix requires small, medium, and large businesses and enterprises to be nimble and innovative while planning for growth.

IDC predicts that by the end of 2017, 60 percent of APAC 1000 enterprises will have digital transformation at the centre of their corporate strategy. IDC has also reported that 37 percent of Asia Pacific manufacturers are already utilising big data and analytics technologies to boost production quality management. This means the majority of APAC manufacturers are lagging behind, and they need to move faster and keep up the pace of innovation.

To continue prospering for the next twenty years, SMEs in Asia must innovate to stay relevant in this modernised landscape. Gartner has predicted that by 2017, one-fifth of all market leaders will lose their number one position to a company founded after 2000, due to a lack of digital business advantage. Those which adapt and modernise will emerge victorious in a growing $28 trillion pond.