In work to promote the competitiveness of micro enterprises and SMEs, it is critical that an appropriate analytical framework is used. The framework needs to identify competitive advantages among micro enterprises and SMEs in target industries, design a commercial upgrading strategy for the industries (to turn competitive advantage into competitiveness), and develop a strategy to ensure the sustainability of competitiveness over time.

K.I.Asia believes that the value chain framework is an important tool in competitiveness enhancement and micro enterprises and SME development work. This framework shows the end markets of the value chain, the vertical linkages between actors from input supply to final market, the horizontal linkages amongst cooperating actors, the business enabling environment within which the chain operates and the supporting markets (both cross-cutting and sector-specific), which provide finance and business services to value chain actors.

In late 2007, K.I.Asia began work as the key local partner in a consortium led by Nathan Associates Inc. to work on the U.S. Agency for International Development’s (USAID) multi-sector development assistance program to help the Association of Southeast Asian Nations (ASEAN) reach its goal of establishing a peaceful, prosperous and stable community of nations – the ASEAN Community – by 2015. The program is known as “ASEAN Development Vision to Advance National Cooperation and Economic Integration”, or ADVANCE. It is designed to strengthen the ASEAN Secretariat as an institution, provide assistance to select ASEAN sub-regions and member nations, and facilitate greater economic integration and improved governance within the region.

The ASEAN-US Enhanced Partnership, launched in July 2006, identified regional economic integration as one major area for ASEAN-US cooperation. Under ADVANCE, the US Agency for International Development (USAID) launched the “ASEAN Competitiveness Enhancement” (ACE) Project in February 2008. ACE provides support to ASEAN’s efforts to integrate its less developed members into the regional economy. The ACE Project works with the private sector in selected ASEAN value chains to bring ASEAN closer to its goal of an Economic Community by 2015.

The ACE project aims to enhance the competitiveness of priority sectors by focusing on:

Ø  Improving the competitiveness of selected supply chains that present opportunities for intra-regional trade;

Ø  Catalyzing changes in national and regional business environments that facilitate the competitiveness of the selected supply chains and increase momentum to reduce trade barriers; and

Ø  Generating, sharing, and managing lessons learned from the project to assist the private sector to take advantage of trade and growth opportunities.

The project will be implemented over five years (2008-2013). In its initial phase, it is targeting the Textile and Apparel and Tourism sectors. These target sectors were selected through a comprehensive supply chain analysis of the twelve ASEAN priority sectors identified in the Vientiane Action Plan.

The textiles and apparel sector offers many opportunities for enhanced integration and competitiveness within ASEAN. Apparel is one of ASEAN’s leading exports and requires a complex supply chain. Every link in the supply chain—from agents and buyers to suppliers of fibers and fabrics—are present in ASEAN member states. Nevertheless, intra-ASEAN trade in these products is disappointingly low. Decision makers in all segments of the industry see greater ASEAN integration as essential for growth and competitiveness. Even small gains in integration have the potential to create intra-ASEAN trade worth billions of dollars.

CONSTRAINTS AND PRIORITIES:           

The ACE Project has identified several key constraints and priorities for increased regional integration in ASEAN’s textiles and apparel sector including: 

Ø  Information flow.  ASEAN lacks adequate industry coordination and regional market linkages including weak business-to-business market information;

Ø  Workforce skills. Buyers and industry leaders have indicated that skills must be improved throughout the industry.

Ø  Lead Times. The textile industry requires ever shorter lead times. Because most ASEAN manufacturers source fabric from China or elsewhere in Asia, such short lead times are becoming more difficult to achieve.

Ø  Productivity. The industry suffers from low productivity and production volumes.

Ø  Research and Development and Innovation. There are limited R&D capabilities, product development skills and fabric sampling capabilities, which hinder the industry’s ability to innovate and remain competitive in the global market. In addition, there is limited financing from local banks for investment in new equipment.

The ACE Project will work in close cooperation with the ASEAN Federation of Textiles Industries (AFTEX) and the ASEAN Secretariat Working Group on Textiles to minimize these constraints.  The project team will take advantage of recent legal and regulatory reform and advocate for further policy change in support of shared objectives. The Project and its partners will work to further integrate the ASEAN Textiles and Apparel supply chains by increasing cross border linkages, reducing lead times and improving product capabilities. On June 17th, 2008, the ACE Project signed a memorandum of understanding with the AFTEX, which reflects the industry’s strong support for the objectives and goals of the ACE project.

PROJECT OBJECTIVES IN THE TEXTILES AND APPAREL SECTOR

Ø  Enhanced ASEAN image and reputation in the Global Market as a reliable, full-package provider of textiles and apparel.

Ø  Increased integration of ASEAN Textile and Apparel supply chains.

Ø  Enhanced competitiveness of select ASEAN Textile and Apparel product corridors through reduced lead times and improved product capabilities (quality and innovation). 

ASEAN TEXTILES AND APPAREL VALUE CHAIN STUDY:

You can download a report on the study of ASEAN textiles and apparel value chains here.

Some 58 million international tourists traveled to Southeast Asia in 2007. Three country destinations together accounted for nearly three-quarters of those arrivals: Malaysia (18.3 million), Thailand (14 million), and Singapore (10.2 million). Three others accounted for another fifth: Vietnam (4.1 million), Indonesia (4.1 million), and Philippines (3.9 million). Cambodia (1.8 million) and Laos (1.3 million), two very recently emerging country destinations, made up most of the balance.

Southeast Asia’s tourism supply chain has two main routes: a southern circuit (Singapore, Malaysia, Indonesia, and/or Philippines), and a northern circuit (Greater Mekong Sub-region [GMS], centered on Thailand with travel to Vietnam, Cambodia and Laos). Regional tourists, those visiting more than one country in a single trip, usually select a product itinerary confined to one of these circuits.

In aiming to enhance the competitiveness of tourism, it should be noted that the supply chains are distinct from those in manufacturing sectors such as textiles and apparel. Instead of bringing the product to the market, the “market”—tourists purchasing services—are brought to the “product”—the attractions that tourists seek. Hence, in understanding the ASEAN countries’  tourism supply chain, the central issues tend to be the source and travel motivation of the flows of tourists, and the network of activities that serve and support the tourist throughout his/her itinerary.

The eco/cultural/adventure tourism supply chain operating in Southeast Asia’s Northern circuit (the GMS) is indicative of the potential and problems of ASEAN tourism.  Environment, cultural, and/or adventure travel represent the most prevalent tourism in the CLV countries.  These sectors are growing rapidly in all three, especially Cambodia and Laos.  These chains also seem to have the most pronounced “regional” linkages: tourists who seek environmental, cultural, and/or adventure attractions are most likely to circulate among multiple countries and pay a premium for high quality, unique experiences. Finally, such tourism seems most flexible in its packages and providers. SMEs dominate and their growth can be boosted, and local community involvement offers substantial additional net benefits.

 CONSTRAINTS:

The project has identified the following key constraints that ASEAN must overcome to facilitate growth and integration in tourism: 

Ø  Branding and Marketing:  There is low global awareness of Southeast Asia and the Greater Mekong Sub-region (Northern Circuit) as distinct, regional tourist destinations.

Ø  Workforce skills. Cambodia, Laos, and Vietnam all need more skilled workers, at all levels, in direct and indirect tourism activities (hospitality services, tour guides, managers, marketing, food management, logistics, etc.). Widespread lack of language skills compounds the problem.

Ø  Capacity of Small and Medium Enterprises. Small and medium enterprises (SMEs) are the backbone of the tourism sector, but too often SMEs have limited tourism-specific skills, such as product design and quality control, technology innovation, market research, promotion, as well as basic business skills.

Ø  Information flow. Stakeholders and policymakers in tourism are hampered by poor communication, not only between national or local associations and national tourism authorities, but also within sector associations and their members, and cross-border, between counterpart national organizations and individuals firms within regions.

Ø  Government tourism planning. Too often government views increases in tourist arrivals as the sole metric of success. Nearly all resources are utilized for promotions and activities that will fuel rapid, near-term growth, while planning and capacity-building to manage growth and preserve assets are neglected.

Ø  Air transport. Though improving, air travel capacity to and especially within Laos, Vietnam, and Cambodia is fairly limited. Vietnam Air and Lao Airways have virtual monopolies on some routes causing both quality and price to suffer. However, discount airlines (e.g., Air Asia) are beginning to break into some of the large markets. Liberalization needs to continue.

Ø  Border-crossing and visa requirements. Vietnam still requires application in advance for a visa, and slows down passage at all land border points. Both practices severely undercut creation of truly “regional” tourism supply chains integrating important Vietnamese destinations and sites.

The ACE Project, in close collaboration with the ASEAN Secretariat Working Group on Tourism, the ASEAN Tourism Association and the Mekong Tourism Coordinating Office will work to reduce the constraints to and enhance the competiveness of the ASEAN tourism supply.  A major focus will be knowledge management, branding, and marketing Southeast Asia and its Northern Corridor as tourist destinations.

Ø  Greater awareness and an enhanced image of Southeast Asia as a regional tourist destination and the Mekong Sub-region as ASEAN’s Northern Circuit (market positioning and branding).

Ø  Increased number of long-stay (10+ days) and above average spending ($100+) regional (minimum of two ASEAN countries) visitors.

ACE stands ready to assist the ASEAN Secretariat and the member countries to adopt and implement an ASEAN-wide tourist visa plan.