ASEAN Economic Community Overview

An agreement between two or more countries to reduce or eliminate tariffs on goods traded between them.

FTAs typically start with eliminating tariffs on products that already have low tariffs. Then, over time, a set schedule is followed to remove tariffs on all goods within the agreement.

Even with an FTA, member countries still maintain their own tariffs on goods imported from outside the agreement.

A digital trade agreement that promotes cooperation in areas like AI and makes it easier for businesses to operate across borders.

The DEPA was the first trade agreement to focus solely on digital issues. It was created by Singapore, New Zealand, and Chile.

DEAs aim to help businesses by reducing costs and improving access to markets.

The UK-Singapore Digital Economy Agreement (UKSDEA) was the first digitally-focused trade agreement signed by a European nation.

The Singapore government is using DEAs along with FTAs to solidify its position as a leading tech and e-commerce hub.

The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade and encourages the reduction of trade barriers.

The WTO was established in 1995, taking over from the General Agreement on Tariffs and Trade (GATT). It aims to promote free trade and reduce trade barriers between member countries.

The WTO has a dispute resolution mechanism where countries can bring charges against each other for unfair trade practices. These disputes are usually resolved through negotiation but can also be settled by a panel of experts.

The WTO makes decisions through consensus, meaning all member countries must agree on a decision before it is implemented.

The World Bank is a financial institution that supports developing countries by providing loans, grants, and technical assistance to help them improve their economies and reduce poverty.

The World Bank uses funds from member contributions and borrowings in international financial markets to help countries make improvements to their infrastructure, healthcare, education, and other areas.

The World Bank provides low-interest loans, zero-interest credits, and grants to developing countries to support their economic development.

The World Bank offers policy advice, research, and technical assistance to developing countries to help them build sustainable economies.

Aimed at boosting the economy, social progress, and cultural development within the region to create a foundation for a prosperous and peaceful community.

Focused on promoting regional peace and stability by emphasizing respect for justice and the rule of law among member countries.

Encouraging active collaboration and mutual assistance in various sectors like economics, society, culture, technology, sciences, and administration.

Providing mutual assistance in the form of education, professional training, and technical & administrative expertise to further develop each member state.

Encouraging collaboration to boost growth in agriculture, industry, and trade to enhance the living standards of ASEAN citizens.

Dedicated to promoting research and understanding of Southeast Asian cultures and societies.

Maintaining positive and beneficial partnerships with international and regional organizations to explore further cooperation.

Aimed at creating a unified market through regional economic integration, envisioning ASEAN as a single market with a competitive edge, equitable development, and global integration.

Analyzing the political environment is crucial for international businesses as it directly impacts their operations and sustainability in a foreign country.

Political factors encompass a broad range of aspects, including economic policies, social policies, technological and environmental policies, all setting the stage for how businesses operate.

The political strength and influence of a country significantly impacts the success of international firms, determining their ability to operate effectively.

Political factors are often considered the initial focus in PESTEL analysis, because they form the foundation upon which other factors operate. However, this isn't always the case, as other factors might be more critical depending on the specific company, product, or industry.

Companies may prioritize a country with a strong political environment because it ensures greater control over their operations, including areas like local management hiring and export regulations.

A country's political environment can influence the perception of products, leading companies to seek locations associated with quality or luxury to attract customers.

Companies often expand into countries where their key clients are present to maintain strong relationships and support their growth.

To avoid losing out on lucrative opportunities, companies may expand into markets where their competitors are active, staying competitive in key regions.

Assessing economic factors in a country helps international firms understand the potential risks and opportunities for their businesses. It provides information on things like market size, consumer spending, infrastructure development, and political stability. This helps them make informed decisions about entering a new market, investing in a new location, or expanding their operations.

This refers to the level of cooperation between the host country's government and the home country's government where a company originates. It includes aspects like trade agreements, visa policies, and government-to-government partnerships, all of which can significantly impact a company's business operations in a new market.

The legal environment includes factors such as freedom of speech, strength of the judiciary, protection of property rights, and the stability of regulations. It's essential for businesses to understand these legal factors because they can influence costs, risks, and investment decisions.

This refers to the impact of events like terrorism on businesses operating in a country. Factors like the costs of security, insurance premiums, and potential disruptions to business operations can be significant. Understanding these risks is crucial for businesses evaluating the potential for success in a particular location.

This factor assesses the frequency and severity of labor disputes and the potential for industrial unrest. It helps companies understand the level of labor stability and potential risks to their operations.

This measures the potential for protests, riots, and other forms of violence that can disrupt business operations. Analyzing this factor helps companies assess the risk of social unrest and its potential impact on their investments.

This assesses the overall costs associated with criminal activities, such as theft, fraud, and extortion. It helps companies understand the potential for economic losses due to crime and the need for additional security measures.

This looks at potential conflicts between neighboring countries that could impact business operations. The risk of refugees or instability can affect businesses in both source and destination countries.

This factor considers the impact of weather changes on a country, including natural disasters like earthquakes, hurricanes, and floods, as well as climate change such as global warming and pollution.

These events can be devastating, causing widespread damage and loss of life.

This refers to long-term changes in global temperatures and weather patterns, often caused by human activities.

This includes air and water pollution, which can have detrimental effects on human health, the environment, and businesses.

The 2011 earthquake and tsunami in Japan caused significant economic damage and disruptions to supply chains.

The 2015 haze crisis in Southeast Asia caused widespread health problems, economic losses, and disruptions to business operations.

Extreme weather patterns can significantly impact tourism, agriculture, transportation, and health, leading to increased costs and disruptions in business operations.

Businesses may face higher costs due to tougher environmental regulations and increased demand for disaster preparedness.