Business Stakeholder Consultations and Free Trade Agreements in Asia: Impact and challenges

By Apoorva Singh Vishnoi

Asia House Fellow Apoorva Singh Vishnoi has conducted research on stakeholder consultations between the business world and governments for free trade agreement (FTA) negotiations.

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FTAs are becoming increasingly complex and requires the involvement of stakeholders that will be impacted by the agreements. This paper sets out to examine the effectiveness of stakeholder consultations in incorporating business feedback into FTA negotiations in two developing countries, Vietnam and Indonesia, and compares this to two more developed economies, the EU and Australia.

The research identifies seven key challenges faced by the governments as well as businesses in making these consultations effective in Vietnam and Indonesia:

1. Difficulty in identifying and engaging with the right stakeholders: In most cases, Vietnam and Indonesia engage in consultations only with those stakeholders they have identified as “relevant” or “legitimate”, making the consultation process restrictive and exclusive.
2. Businesses generally lack awareness and knowledge about FTAs: Unless they are already involved in the process, businesses in the two countries are often unaware that FTA negotiations or stakeholder consultations are taking place and lack a clear understanding of the issues under consideration.
3. Transparency in stakeholder consultations: There is an inherent struggle between transparency and confidentiality both in trade negotiations and consultations. This affects the general public’s ability to determine if they will be affected by a given FTA and stakeholders’ ability to provide relevant and useful feedback.
4. Limited participation of SMEs in the consultation mechanism: Small and medium-sized businesses (SMEs) are far less likely to be involved in consultations than large companies and associations.
5. Business leaders are passive, not proactive: The relative passivity of the business community in Vietnam and Indonesia takes two forms: one is a lack of high-quality input (e.g. survey responses) and another is a failure of business leaders to advocate for their interests in FTAs.
6. FTAs are complex and businesses lack access to research capabilities: Smaller industry associations and businesses in Vietnam and Indonesia have limited access to research expertise since most lack the resources to hire trade experts or develop in-house capacity to engage in wide-ranging issues common in FTAs.
7. Businesses focus solely on goods exports: Businesses in Vietnam and Indonesia tend to focus primarily on goods exports and tariff lines and show little interest in topics such as services or investment.

The paper then offers the potential pathways for the governments and businesses in Vietnam and Indonesia to explore when dealing with these challenges to ensure that negotiation positions can better reflect business needs during FTA talks.

Beyond analysing the difficulties and solutions, the paper offers a rare glimpse into the often-secretive world of stakeholder consultations in two of Asia’s most active FTA-negotiating developing countries. The paper also reveals surprising commonalities in the conduct of stakeholder consultations among Australia, Indonesia and Vietnam, contrasting with the more “ideal” standard offered by the EU.

It is hoped that the paper sets off conversations on the importance of stakeholder consultations in the developing world.

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