January 5, 2014 1:00 pm JST

Firms gear up as Asean eyes single market by end of 2015

Railway carriages wait in a Kuala Lumpur suburb. Nippon Express has launched a railway container transport service to meet growing demand for transportation of goods.

TOKYO -- The Association of Southeast Asian Nations is putting on a last spurt in the coming two years toward the goal of creating a single market at the end of 2015.

     The group will step up the elimination of tariffs within the regional bloc and the facilitation of member states' mutual entry into the services sector to launch the Asean Economic Community (AEC), which is expected to activate a giant market of 600 million people.

     Many businesses have already begun preparations to capitalize on the creation of the borderless market.

Manufacturers moving into full gear

Nippon Express, a top Japanese logistics services firm, has begun a railway container transport service between Malaysia and Thailand. The first train of 26 carriages carried mostly plastic auto parts, made by Honda Motor in Malaysia, from a Kuala Lumpur suburb over a distance of 1,600km to the Japanese automaker's plant near Bangkok for installation in Honda cars.

     Nippon Express has been engaging in trucking services between the two countries, operating a fleet of 200 trucks in Malaysia alone. But the volume of goods has increased so much that the company is unable to keep up with the growth in demand for its service, said Yasunori Takahashi, head of Nippon Express operations in South Asia & Oceania.

     To meet the demand, Nippon Express launched the BK1600 railway container transport service capable of transporting a much larger amount of goods than trucks but in the same three-day period.

     Asean has been cutting tariffs within the bloc by stages since the 1990s to stimulate economic activity in the region.

     Thailand, Malaysia and four other members of the 10-nation bloc eliminated almost all tariffs among them in 2010, although customs procedures still take time. Vietnam, Laos, Cambodia and Myanmar, which joined Asean later than the founding members, will abolish tariffs on most goods at the end of 2015 when the AEC is launched.

     Almost all tariffs are slated for elimination in 2018.

     A large number of manufacturers, such as Honda, have operational base in different locations within Asean but can operate them like a single plant as a result of advances in trade liberalization in the regional bloc. Trade within Asean has been the foundation of the region's economic growth, increasing 60% in value from 2009 to $601 billion in 2012.

     When new Asean members are fully incorporated into the regional network of trade, it will greatly affect member economies and businesses.

     The Economic Research Institute for ASEAN and East Asia, a Jakarta-based international research and policy recommendation organ, estimates that the gross domestic product of Asean may double from its current level to $4.5 trillion in 2020.

     Thailand, Laos and Vietnam concluded reciprocal agreements by 2009 before the establishment of the AEC. Under the accords, trucking companies registered in Laos are allowed operate freely in Thailand to the west and Vietnam to the east without the need for reloading goods onto different trucks when they crossed national borders.

     Major Japanese logistics services company Nissin has begun transport services covering the three countries by taking advantage of the accords.