Discussion Questions

What are the different legal systems faced by MNCs doing business across Asia?

  • Legal systems and their enforcement vary greatly across Asian countries. The main legal systems found in Asian countries are based on common law, theocratic/religious systems and civil law. For example, the Indian legal system is based on British common law, as is that in Australia, New Zealand, Bangladesh, Hong Kong, Myanmar, Nepal and Pakistan. Chinese law blends various influences in including the German civil law and Soviet-inspired socialist law. Customary law can be found in parts of Myanmar, Malaysia (using sharia law for personal law as, to some extent, Bangladesh and Pakistan do) and Indonesia, which also have influences of the Muslim law. Religious laws prevail to date in Afghanistan. Thailand, Laos, Cambodia and Vietnam predominantly use civil law systems, which can also be found, for example, in Azerbaijan, Uzbekistan and Russia.

Explain how trade liberalization serves as a tool for development in Asia.

Trade liberalization is the provision of preferential market access to partner economies and has been used as an effective development tool, and a means to achieve long-term political stability through economic collaboration. From a resource-based view, doing business within one’s home region strengthens intra-regional locational production network strategies. This stems from region-bound, firm-specific advantages (FSAs). This means that in a region, a firm excels through a higher productivity of comparable assets (tangible and intangible) than competitors, thanks to certain inherent capabilities that can help achieve scale economies, scope economies, and exploitation of national differences in nearby markets as well as arbitrage and externality benefits. The combination of FSAs with location-specific advantage (multiple country SAs) results in region-specific advantages (RSAs) that are immobile; all firms have access to the location and its region and will differ in the capability to leverage its potential value-added activities.

What is the CPTPP? How does it aim to help business in the Pacific Rim region?

  • The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a Free Trade Agreement (FTA) that seeks to integrate 11 countries at the Pacific Rim level. It came into force in December 2018 and aims to provide businesses with preferred market to Asia-Pacific-centric countries, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. CPTPP countries account for 13.5% of global GDP. It is an FTA, which typically provides reciprocal preferential access to trade within member countries, through a common tariff structure applicable to products originating among members so as to foster trade cooperation.