Capitalising on the Benefit and Opportunity in an ASEAN Open Market
THE PROPOSED ESTABLISHMENT OF AN ASEAN (ASSOCIATION OF SOUTHEAST ASIAN NATIONS) ECONOMIC COMMUNITY (AEC) AT THE END OF 2015 HAS CREATED SUBSTANTIAL EXPECTATIONS FOR ECONOMIC GROWTH AND STRUCTURAL IMPROVEMENT. A.M. BEST’S MARKET REPORT TITLED “MARKET PROSPECTS IMPROVE FOR INSURERS AHEAD OF ASEAN INTEGRATION” PUBLISHED LAST YEAR, EXAMINED THE MEMBER NATIONS’ RELATIVE REGULATORY SYSTEMS AND ECONOMIC FUNDAMENTALS.
However, given the current lack of progress, it appears unlikely that the AEC will be in place by the end of the year. The insurance sub-sectors identified for liberalisation by member countries have yet to achieve the original target outlined in the AEC blueprint published in 2008. Regardless of this timeline, the insurance industry has reached common ground on recognising the benefit of building a stronger regional bloc to attract new business and improve resilience to potential external shocks. This report looks at the region’s readiness to achieve AEC’s goals to create a single market and production base, and the implications for the insurance industry from this gradual transformation. While those insurers from participating countries have positive expectations about the collective benefits of AEC, there remains a gap to achieving an open market which would comprise of a free flow of goods, services, investment, capital, and labor. The free flow of services, including financial services, will have the most direct impact on the insurance industry by allowing insurers to build a commercial presence, sell products, and move professionals across the region. Indirectly, the free flow of goods, investment, and capital will also impact an insurers’ potential growth and other related developments. As the region moves towards integration, A.M. Best believes the progressive initiatives and changes coming to the insurance industry will be beneficial in the long run as companies have to avail themselves to the possible opportunity and challenge.
NARROWING THE GAP
The Association of Southeast Asian Nations (ASEAN) is a geopolitical and economic organisation comprising Brunei, Cambodia, Myanmar, the Philippines, Laos, Indonesia, Malaysia, Singapore, Thailand and Vietnam. It is a region of diversified economic, social and political backgrounds. The economic gap is apparent between more developed ASEAN 6 (Singapore, Malaysia, Thailand, Indonesia, the Philippines and Brunei) and frontier CLMV (Cambodia, Laos, Myanmar, and Vietnam).