Exporting to the ASEAN region: Considerations for Canadian agri-food companies
This page has considerations and recommendations for Canadian agri-food companies interested in exporting to markets in the Association of Southeast Asian Nations (ASEAN) region.
Note: This information was commissioned and overseen by the High Commission of Canada to Singapore and was prepared by a consultant. Although every effort has been made to ensure that the information is accurate, Agriculture and Agri-Food Canada (AAFC) assumes no liability for any actions taken based on the information contained herein.
Understand the individual market characteristics
The ASEAN countries are by no means a homogenous group of markets. Each is characterised by varying degrees of market protection, market maturity, industrial structure, income levels and cultural norms. Comparing GDP per capita, Singapore is 13 times more affluent than Vietnam; an equivalent comparison is Canada and Papua New Guinea.
Given the very different levels of economic and industrial development, entry strategies should be tailored accordingly. Although market entry for many agri‐food companies would be via a distributor or the agent of trading company, it remains important to visit the region to develop and maintain a rapport with business partners and reveal first‐hand the core socio‐economic dynamics and agri‐food consumption patterns.
Consider the competitive advantage of Canada's free trade agreements
Canada will gain a competitive advantage in certain ASEAN countries from our membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Among the ASEAN member countries, Vietnam, Singapore, Malaysia and Brunei have signed onto the CPTPP agreement, with Vietnam and Singapore ratifying it.
For example, under the CPTPP, tariffs for the Vietnam market will be reduced or eliminated on all but a few tariff lines. Canadian exporters should familiarize themselves with any competitive advantage that is to be gained when compared to non‐CPTPP members, such as the US or South American countries. Canadian exporters should make certain that Vietnam importers are also aware of these reduced tariffs rates. Learn more about this agreement at CPTPP for Agri-Food Exporters.
Canada does not currently have a free trade agreement (FTA) with ASEAN as a grouping, as do Australia, New Zealand and China. Nor does it have any bilateral FTAs, such as the US has with Singapore, Australia has with Thailand, Indonesia and Singapore, and the EU is about to conclude with Vietnam. In 2017, Canada and ASEAN member states agreed to launch exploratory discussions for a possible Canada-ASEAN FTA. On September 10, 2019, it was announced that these discussions concluded; learn more at: Exploratory discussions for a possible Canada-ASEAN free trade agreement.
The agri‐food sector has been identified as a priority sector for ASEAN integration. The ASEAN Economic Community (AEC) is expected to lift intra‐ASEAN trade. As such, there is a potential threat from competitive products produced locally and from agri‐food manufacturers that decide to invest in the region as a result of the larger perceived market opportunity. Bilateral free trade agreements provide additional opportunities to competitors.
Promote Canada's food safety credentials
Canada's reputation as a safe source for a wide variety of agri‐foods should be promoted. Food safety is a growing concern in emerging ASEAN markets, with the level of public anxiety spiking whenever there is a high‐profile food safety incident.
Food ingredient safety is also important for policy-makers concerned about their country's agri‐food export ambitions. Potentially complicating the issue is the increasing number of new trade agreements, rising urbanisation changing patterns of demand and production, increased use of agricultural inputs such as antibiotics and pesticides and sometimes poorly regulated or illegal imports.
Mitigate transport costs and consolidate for critical mass
Canada reportedly faces higher transport and logistics costs when exporting to ASEAN than some key rivals such as Australia. This problem is exacerbated by the small volumes for some Canadian product categories.
Many smaller Canadian exporters may find the logistical and pricing challenges of exporting to ASEAN's relatively fragmented markets quite daunting. Consolidating shipments may help to achieve economies of scale and gradually build a critical mass of products to achieve commercial viability. Selling directly to large end users could help. There are also Canadian based consolidators who can provide this service for a fee. Exporters may need to be flexible in minimum order volumes in order to gain a foothold into the ASEAN market.
Do not underestimate price sensitivity
With their low average household incomes, ASEAN's emerging markets, including the Philippines and Vietnam, are very price sensitive. Third-country competition and promotion in Southeast Asian markets is vigorous and adds to pricing pressures; examples include:
- Brazil, the US, Australia and Europe for pork
- Australia, Russia/Black Sea, South America and US for wheat
- A variety of countries for animal feed and feed ingredients
For example, Canada faces stiff competition in the high-end pork market from pork products that enjoy some geographic indication connoting brand value, which in turn facilitates pricing power. Examples include Iberico pork from Spain/Portugal, Kurobuta from Japan and Danish bacon. Canada has yet to achieve this kind geographic indication for its pork. Exporters must understand the price sensitivity in their ASEAN market of interest, and recognize that significant branding efforts may be required to build market share for premium products.
Be mindful of religious considerations in many ASEAN markets
For example, pork is haram, forbidden to the region's Islamic communities, and the prohibition on the consumption of pork will limit and/or complicate market penetration for pork products. Similarly, some markets within ASEAN may have requirements - or consumer preferences - for certain products to obtain halal certification in order to sell in that country.
Here is a summary of ASEAN's Muslim populations:
- Indonesia – 87.2%
- Brunei – 78.8%
- Malaysia – 61.4%
- Singapore – 14%
- Philippines – 5.6%
- Thailand – 4.3%
- Vietnam – 0.1%
Source: The Central Intelligence Agency (CIA) World Factbook
Be aware of market access requirements
Canadian exporters must be aware of market access restrictions that may impact their ability to export their products to ASEAN countries, including each country's individual import requirements as well as the sanitary and phytosanitary requirements associated with their exports.
Exporters should work with their local importer to ensure all regulatory, labelling and import requirements are met before shipping products. The Agriculture and Agri-Food Canada Single Window contact for Agri-Food Trade Services and the Canadian Trade Commissioner Service can also provide assistance in identifying considerations for each market.
Screen distributors and import agents
Distributors should be screened carefully. One per ASEAN market will most likely be needed. New market entrants can work with Canada's Trade Commissioners to gain insight on potential distributors. It is also advisable to network with other agri‐food companies that have an established presence in the region to gain from their market knowledge and experience. Another option is to explore opportunities to sell directly to end users.
Even when exporters and importers are ideally matched, the decision process and or product registrations in ASEAN countries can still be lengthy, taking a year or more. Exporters must be prepared to invest the time, energy and money necessary to build their market in the ASEAN region.
Take advantage of the single window for market access services
Contact AAFC's Market Access Secretariat at email@example.com for questions relating to agri-food trade with the ASEAN region.
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