Key features

As part of the agreement, ASEAN Member States (AMS) have agreed to progressively eliminate or reduce their customs duties on goods originating from Hong Kong. For example, Singapore commits to binding all its customs duties at zero while Thailand will eliminate customs duties of about 85 per cent of their tariff lines within 10 years and reduce customs duties of about another 10 per cent of their tariff lines within 14 years. Other AMS have also similar commitments at varying levels and timeframes. The tariff reduction commitments cover different kinds of Hong Kong commodities, including jewelry, articles of apparel and clothing accessories, watches and clocks, toys, etc.

Hong Kong businesses involved in the provision of services will also benefit. Through the FTA, they can expect the removal or reductions of various restrictions such as types of legal entity, foreign capital participation, number of service providers or operations, value of service transactions, and number of persons employed, etc. For example, Thailand and Viet Nam allow Hong Kong enterprises to have foreign capital participation of up to 50 per cent or even full ownership in many sectors.

AMS will also make it easier to enter their borders to conduct business. There will be arrangements to facilitate temporary or longer term stays for business visitors, intra-corporate transferees, specialists/experts/professionals and contractual services suppliers.

TID has highlighted that some of the sectors liberalized for Hong Kong by the AMS include commitments that exceed those made under the multilateral agreement of the World Trade Organization. For example, Thailand will open arbitration services and electronic mail services; Singapore will open technical testing and analysis services and adult education services; Laos will open specialty design services, retailing services, and certain services of trading for own account or for account of customers under financial services; and Myanmar will open a significant number and wide range of services sectors

Tackling the ASEAN consumer

According to research by the Hong Kong Trade Development Council (HKTDC), ASEAN is a huge consumer market with growing income and expenditure. With a combined population of more than 660 million, ASEAN is the world’s third most populous market after China and India. It also has a young workforce with some 60% of its population under the age of 35. HKTDC believes that the young demographics and positive economic trends will set average ASEAN disposable income and consumer expenditure towards growth in the coming years.

So what are the tastes and spending preferences of ASEAN consumers? Despite the diversity of the markets, HKTDC found some commonalities in a 2017 survey it conducted of middle-income consumers from across 7 large ASEAN cities, namely Bangkok, Kuala Lumpur, Manila, Jakarta, Surabaya, Ho Chi Minh City, and Hanoi.

Notably, the top categories of expenditure of ASEAN consumers went to: “Travel and Leisure”, “Health, Beauty and Wellness” and “Consumer Electronics”, reflecting the desire of the consumers to upgrade their lifestyle and enjoy better quality products as their incomes rise.

There is likely still a lot of room for Hong Kong businesses looking to penetrate ASEAN markets. HKTDC’s survey shows that while local brands still dominate domestic markets, many of the middle-class consumers may be looking to try foreign brands as their incomes continue to rise. In fact 68% of respondents indicated that they prefer imported or international brands to locally produced or domestic brands.