How Swedish companies operating in Southeast Asia overcome trade obstacles

Abstract: As the globalization continues to intensify, companies around the world are increasingly looking for business opportunities outside the borders of their home country. In order to be successful and take advantage of low cost opportunities offered in other countries the need for free trade agreements is something all companies should be lobbying for. The majority of the Southeast Asian countries are considered underdeveloped and compared to most European countries they are far behind when it comes to political as well as economical developments. Besides, European and Asian countries have very diverse historical backgrounds and peoples’ behaviors differ a lot causing culture clashes and nontariff barriers to trade to arise. With the purpose of studying how Swedish companies operating in Southeast Asia can overcome trade obstacles and what impact an EU-ASEAN FTA may have when doing business in the region, the authors have carried out in-depth interviews with five Swedish companies based in Singapore. The thesis covers the different issues Swedish companies face when trading with counterparties in the region and answers the below stated research questions: - Which are the main obstacles for Swedish companies to trade within Southeast Asia? - How can Swedish companies operating in Southeast Asia overcome these obstacles to trade from a management perspective? - What impact can the current EU-ASEAN FTA have on Swedish companies’ potential to succeed in doing business in Southeast Asia? The interviews have been put in perspective with the help of theories within obstacles to trade, cultural diversity, economic integration, and FTAs and the main conclusion from the thesis is that all interviewed companies face at least some barriers to trade when operating in the region. Most companies said to have little or no exposure to the tariffs laid out in the region. Only those companies trading frequently with Europe, China, and India regarded tariffs as a somewhat critical obstacle. However, all companies stressed the non-tariff barriers as more severe, especially bureaucracy and time-consuming trade procedures with excessive regulations and administrative practices. Corruption and certain cultural differences were other major obstacles to trade. There are several ways to overcome existing obstacles to trade through management practices. One way is to educate and inform the workers about the cultural differences and the specific business procedures in the countries. Managers should also try to make use of the local employees that possess valuable knowledge about the market. A deeper economic integration through EU and ASEAN will eliminate tariffs among the member countries and harmonize business procedures and regulations. With this free trade liberalization, non-tariff barriers to trade will also be reduced as countries and cultures become more unified. The majority of the interviewed companies said they believe they would have little or no use of a potential EU-ASEAN FTA. As the companies are all based in Singapore, which is considered a very liberal and business friendly country, this could be the reason not seeing the actual benefits of collaboration. Nevertheless, all companies agreed the benefits of a potential collaboration to be more than just lower tariffs and pointed to increased integration between people and greater knowledge and understanding between the countries.