China-ASEAN Business Cost Intelligence
Our ASEAN Briefing site has recently completed a detailed nine-part series on the cost of doing business in ASEAN compared with China. Written by Chris Devonshire-Ellis, the nine country comparisons detail cost of labor and taxes, together with bilateral trade profiles between China and Cambodia, Laos, Indonesia, Malaysia, Philippines, Thailand and Vietnam. Brunei was omitted from the series as it is of limited interest to foreign investors except in the oil and gas fields, while Singapore was compared directly to operational costs in Hong Kong.
Chris explains, “As the operational cost of doing business in China continues to rise, some of the ASEAN nations start to become attractive. But which ones? The ASEAN-China Free Trade Agreement impacts on some countries in different ways, and not all ASEAN members are in AEC compliance as yet. Plus there are labor issues such as education and workplace capabilities to consider. Also, some ASEAN countries wage levels are not so far behind China. So where to go as a China alternative is a complex issue.”
The series demonstrates that there is a developmental hierarchy amongst ASEAN nations. “We feel that Singapore and Malaysia are developing extremely well in hi-tech and back office capabilities”, continues Chris. “These are the support centers for ASEAN. Indonesia, Malaysia, Philippines, Thailand and Vietnam all have great potential for foreign investment manufacturing to then both re-export back to the China market under the ASEAN-China FTA, while Cambodia, Laos and Myanmar all face serious infrastructure issues and will take a decade to reach their potential.”
Concerning ASEAN’s regional trade, Chris highlights the Free Trade Agreements that ASEAN has with China, India and Australasia. “These are key game changers. The China-ASEAN FTA is already reshaping where and when China-based manufacturers and sourcing agents do business in Asia. Not everything can now be manufactured to quality standards and at inexpensive production costs in China. That agreement is shifting the global supply chain. The ASEAN-India agreement is still being developed; services have recently been added to that and this will assist Indian entrepreneurs. It would be possible, for example, for Indian investors to set up a manufacturing plant in ASEAN and then sell their production, duty free, to China. Australians too have been so concentrated on their recent FTA with China that their ASEAN FTA has largely been overlooked. Yet it is worth a huge amount to the Australian economy. The amount of iron ore required in ASEAN to upgrade infrastructure is double that which China committed in the financial crisis, and which in its own right has set off a mini construction boom. ASEAN and India are the next great Asian opportunities.”
The series can be accessed as follows:
This intelligence can also be matched with the launch of the Dezan Shira & Associates’ Guide to Doing Business in ASEAN,which includes details of the Free Trade Agreement with China and business case studies. It is available for free from the Asia Briefing bookstore.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
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