Transcript Advanced Higher

Advanced Higher
Business Management
New Topic - ASEAN
What? Association of Southeast Asian Nations
Established on 8 August 1967 in
Bangkok, Thailand, with the signing of
the ASEAN Declaration (Bangkok
Declaration) by the Founding Fathers
of ASEAN, namely Indonesia,
Malaysia, Philippines, Singapore and
Thailand.
Why?
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To accelerate the economic growth, social progress and cultural
development
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To promote regional peace and stability
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To promote active collaboration and mutual assistance in the economic,
social, cultural, technical, scientific and administrative fields
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To provide assistance to each other in the form of training and research
facilities
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To collaborate effectively for the greater utilisation of their agriculture
and industries
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To promote Southeast Asian studies
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To maintain close and beneficial cooperation with existing international
and regional organisations
Who?
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Brunei Darussalam
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Cambodia
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Indonesia
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Lao PDR
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Malaysia
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Myanmar
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Philippines
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Singapore
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Thailand
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Vietnam
Members
of ASEAN have a
combined population
of more than
580 million
Southeast Asia represents amazing opportunities for
UK business. It's a strategic region, where economic
growth and development is expected to exceed the
global average for the foreseeable future.
The Association of Southeast Asian Nations (ASEAN) is a
growing economy, currently ranked as the 7th largest
economy in the world.
Foreign direct investment (FDI) inflows into Asia reached
US$440 billion in 2013.
UK-ASEAN trade, investment and technology cooperation is
expanding rapidly alongside this, creating new business
opportunities for companies from both countries.
Two way flows of trade are important for all our
economies.
UKABC - The UK-ASEAN Business Council
UKABC was launched in November 2011 to facilitate a step
change in the level of trade between the UK and Southeast
Asia, and through this contributing towards UKTI’s (UK Trade &
Investment) ambition to support 50,000 SMEs and increase UK
exports to £1trn by 2020.
The UKABC runs a programme of awareness raising outreach
activity aimed at improving understanding of the business
opportunities in the ASEAN region, as well as giving practical
advice and guidance on how to go about doing business there.
The Business Council also provides roundtable and structured
business-to-business networking opportunities with senior
political and commercial decision makers who are visiting the
UK from Southeast Asia.
The ASEAN Economic Community (AEC)
Regional economic integration is the goal by
2015. AEC envisages the following key
characteristics:
(a) a single market and production base,
(b) a highly competitive economic region,
(c) a region of equitable economic
development, and
(d) a region fully integrated into the global
economy.
The ASEAN Economic Community (AEC)
The AEC areas of cooperation include
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human resources development and capacity building;
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recognition of professional qualifications;
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closer consultation on macroeconomic and financial
policies;
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trade financing measures;
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enhanced infrastructure and communications
connectivity;
The ASEAN Economic Community (AEC)
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development of electronic transactions through eASEAN;
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integrating industries across the region to promote
regional sourcing;
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and enhancing private sector involvement for the
building of the AEC.
In short, the AEC will transform ASEAN into a region with
free movement of goods, services, investment, skilled
labour, and freer flow of capital.
EU and the ASEAN
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ASEAN as a whole represents the EU's 3rd largest trading
partner outside Europe (after the US and China) with
more than €235 billion of trade in goods and services in
2012.
 The EU is ASEAN 3rd largest trading partner after China
and Japan, accounting for around 13% of ASEAN trade.
 The EU is by far the largest investor in ASEAN countries.
EU companies have invested an average €13.6 billion
annually in the region (2005-2012).
 The EU's main exports to ASEAN are chemical products,
machinery and transport equipment. The main imports
from ASEAN to the EU are machinery and transport
equipment, agricultural products as well as textiles and
clothing.
EU and the ASEAN
Besides the trade negotiations with individual ASEAN
members, the EU cooperates closely with the ASEAN
region as a whole. Cooperation is maintained through:
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an EU-ASEAN Dialogue which includes discussions on
trade and investment issues at ministerial and senior
economic officials levels.
 the EU and the ASEAN Secretariat conduct seminars
on topics such as regional economic integration,
liberalisation of services, technical barriers to trade
and trade facilitation.
China - How has China affected UK
Economy?
The rapid growth of China’s economy has had various
effects on the UK economy – some positive and some
which have created challenges and problems for the
UK.
Lower Goods Inflation
Chinese economic growth has been characterised by
low priced manufactured goods.
The price of items such as clothes and electronic goods
has consistently fallen, helping to maintain low inflation
in the UK.
This downward pressure on prices is particularly helpful
for consumers, who have experienced rising inflation in
areas such as energy and food in recent years.
The falling prices of electrical goods and textiles have
helped to increase UK living standards and have
enabled a higher percentage of income to be spent on
other goods and service
Service sector inflows
Trade between China and UK is not just a one way
process.
China is increasingly using its financial clout to buy
British goods and services. A good example, is
education. Many Chinese come to the UK to study.
China has also bought UK assets such as UK
government bonds.
Relative decline in manufacturing sector
The UK’s manufacturing sector has been in relative
decline since early 1980s. Chinese growth has, in a way,
speeded up this process as British firms with higher
labour costs become uncompetitive compared to
Chinese firms.
However, the manufacturing sector may have declined
anyway and up to recently job losses in manufacturing
sector have been absorbed into the service sector.
Arguably, it is not a problem if we do have a relative
decline in manufacturing. We should specialise in those
industries, which we are best at.
Higher price of raw materials
As well as contributing to lower goods inflation. You
could argue China’s growth is contributing to rising
prices of raw materials e.g. oil.
However, the rising price of oil is not just due to China,
but also supply disruption in the Middle East and other
factors. Also, the rising price of oil may encourage the
developments of greater fuel efficiency and alternatives
to oil which will benefit in the long run.
ACFTA –The ASEAN-China Free Trade Area

The ASEAN–China Free Trade Area (ACFTA) is a free
trade area among the ten member states of
the Association of Southeast Asian Nations (ASEAN)
and the People's Republic of China.
 The initial framework agreement was signed on 4
November 2002 in Phnom Penh, Cambodia, with the
intention to establish a free trade area among the
eleven nations by 2010.
 The free trade area came into effect on 1 January
2010.
 The ASEAN–China Free Trade Area is the largest free
trade area in terms of population and third largest in
terms of nominal GDP
Economic benefits to ASEAN & China
Enlarged Market Size and Enhanced Trade
Outright, this ACFTA creates an economic region with
1.7 billion consumers, a regional Gross Domestic Product
(GDP) of about US$2 trillion and total trade estimated at
US$1.23 trillion.
This makes it the biggest FTA in the world in terms of
population size.
Removal of Trade Barriers, Specialisation and
Enhanced Economic Efficiency
A key feature is the non-maintenance of quantitative
restrictions and the elimination of non-tariff barriers.
The removal of these trade impediments will lower the
costs of trade transactions, further increase ASEANChina trade and enhance economic efficiency.
As low-cost imports under the FTA flow from one
member to another, specialisation in production
ensues, thereby boosting real income in both ASEAN
and China as resources flow to sectors where they can
more efficiently and productively utilised.
Improved Investments Prospects
The formation of an ASEAN-China Investment Area
should also aid in generating more investments for
ASEAN.
Not only will more ASEAN and Chinese companies be
willing to invest within the integrated market, since
market risk and uncertainty are lowered, but US,
European and Japanese companies, which are
interested in making inroads into the Asian market, will
also be attracted to invest in the integrated market.
ASEAN YOU TUBE CLIP
 ASEAN
CHINA’S ECONOMY YOU TUBE CLIP
 China's Economy
Possible Exam Question
 Why would organisations like Hilton
Hotels wish to expand into China. (4)
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Solution
China is the world’s second biggest economy – means increased number of people
with disposable income; business travellers need accommodation to do business.
Emergence of a newly rich middle class – people with a higher disposable income;
middle class people will be likely to holiday.
Easing of restrictions on movement by the Chinese authorities – allows people the
chance to travel within China so they need hotels to stay in.
Tourism in China has greatly expanded – increased number of people visiting china.
World's hottest inbound tourist markets – people are keen to visit so high number.
China is the third most visited country in the world – huge number of people who
require accommodation.
The number of overseas tourists was 55.98 million in 2010 – most of these people
will need hotel rooms.
First international hotel company to enter China in 1984 – lack of competition.
Operating profits in Europe and the Middle East
Useful links
 http://www.thebusinesschannel.tv/index.
php/uk-asean-business-councilprogramme-series
 http://www.mckinsey.com/Insights/Public
_Sector/The_keys_to_succeeding_in_ASE
AN?cid=other-eml-alt-mip-mck-oth-1410