Overview
The ASEAN Business Entity (ABE) initiative was first introduced by ASEAN-BAC Malaysia in 2023 and subsequently adopted as a Legacy Project by ASEAN-BAC Indonesia. Its core objective is to strengthen intra-ASEAN trade and investment while giving concrete meaning to the ASEAN identity for businesses. The proposal envisions ABE as a new classification of companies, recognized by ASEAN member states (AMS), that would be eligible for targeted regulatory flexibilities and incentives to support cross-border operations.
Each AMS retains sovereignty to define its own criteria and concessions for ABE, allowing flexibility while ensuring alignment with regional integration goals. Malaysia, as ASEAN Chair in 2025, is well-positioned to lead this effort by piloting the scheme domestically, beginning with regulatory support for the free movement of skilled employees. This phased approach aims to create momentum for broader regional adoption and position Malaysia as a frontrunner in shaping ASEAN's next stage of economic integration.
The ABE Concept
The ASEAN Economic Community (AEC), which came into effect in 2015, promised the free flow of goods, services, investment, skilled labour, and a more unrestricted flow of capital. Yet, despite these ambitions, progress has been uneven. Non-tariff barriers remain stubbornly high, restrictions on the movement of labour and capital persist, and intra-ASEAN trade and investment remain modest compared to ASEAN's global engagements. In 2023, intra-ASEAN trade accounted for only about 23 percent of total trade, while intra-ASEAN investment made up just 17 percent of overall foreign direct investment in the region (ASEAN Statistical Brief, 2024). These figures highlight a persistent gap between aspiration and reality. Businesses continue to face significant challenges in scaling across ASEAN borders, struggling with divergent regulations, restrictive fiscal incentives, foreign ownership limitations, and differing capital control regimes.
Against this backdrop, the ASEAN Business Advisory Council (ASEAN-BAC) has introduced the ASEAN Business Entity concept as a pragmatic solution to overcome these structural barriers (ASEAN BAC, 2025). The ABE is envisioned as a new category of company, officially recognized by ASEAN member states, that would be eligible for regulatory flexibilities and incentives to facilitate regional operations. Crucially, the ABE does not seek to replace national sovereignty; instead, it empowers each member state to define its own criteria for recognition, while still ensuring that designated firms enjoy preferential treatment in areas critical to regional expansion. The purpose is to spur intra-ASEAN trade and investment, reduce dis-synergies from fragmented regulations, and make the ASEAN identity more meaningful and practical for businesses.
Criteria for Qualification
Under the proposed concept, qualifying companies would be expected to demonstrate a strong regional footprint. Suggested criteria include:
Investments and/or operational presence in at least four ASEAN countries, ensuring that beneficiary firms have genuine regional integration.
At least 30 percent ASEAN shareholder base, to anchor ownership within the region.
Active participation in priority sectors such as financial services, energy, transportation, and tourism which are critical to ASEAN's long-term growth.
Demonstrated potential to contribute significant foreign direct investment (FDI) to the host economy, thereby supporting development objectives.
Commitment to the Sustainable Development Goals (SDGs), in alignment with ASEAN Vision 2045, ensures inclusive and sustainable business practices.
By setting these standards, ASEAN ensures that the firms benefiting from ABE status are not only regionally embedded but also aligned with the broader developmental vision of the community.
Benefits of ABE Status
The benefits extended to companies with ABE status are designed to address the main operational challenges that have hindered intra-ASEAN business expansion. These benefits include greater ease in the movement of skilled professionals, simplified access to internship and rotational training programs, liberalized rules for outsourcing back-end operations, improved conditions for the flow of capital, and more flexible shareholding requirements. Additionally, fiscal incentives tailored to ABE firms could encourage further investments and partnerships, creating a differentiated class of companies that truly embody the ASEAN spirit of cooperation and integration.
Alignment with Global Trade Frameworks
The ABE concept is not only regionally relevant but also consistent with international trade rules. It aligns with existing ASEAN agreements such as the ASEAN Comprehensive Investment Agreement (ACIA) and the ASEAN Agreement on the Movement of Natural Persons (AAMNP), while also complementing global commitments under the World Trade Organization (WTO). Strategic exemptions under the WTO framework, including those for regional trade agreements, development considerations, and balance of payments, ensure that the ABE can be designed without contravening multilateral obligations (WTO, 2017).
Figure 1. Regional Trade Agreements and ASEAN's Integration Landscape
Source: ASEAN BAC, 2025.
This figure illustrates ASEAN's participation in overlapping free trade agreements, including ASEAN/AFTA, RCEP, and CPTPP, as well as FTAs with dialogue partners such as New Zealand, Australia, Japan, Korea, and China. Together, these agreements liberalise trade in services, reduce non-tariff barriers, and expand market access, positioning ASEAN as a single large open economy integrated into global value chains.
Beyond ASEAN's own frameworks, the ABE initiative resonates strongly with wider trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) (ASEAN, 2020). In particular, CPTPP provisions offer valuable reference points for ABE's design:
Free Movement of People: Temporary entry for business persons and recognition of professional qualifications support greater labour mobility across the region (CPTPP, 2018).
Free Movement of Capital: Investment liberalisation and financial services commitments promote cross-border investment flows, dividend repatriation, and economic integration.
By leveraging these provisions, ABE can accelerate ASEAN's journey toward becoming a single, open, and competitive economy, while reinforcing its attractiveness as a regional investment hub.
Implementation Roadmap and Policy Recommendations
The proposed implementation of ABE requires a phased approach. Malaysia, during its ASEAN Chairmanship in 2025, has the opportunity to lead by introducing the first phase of the initiative. This would focus initially on facilitating the free movement of people, with measures such as auto-approval work permits for skilled ASEAN nationals and simplified internship mobility programs. In subsequent phases, benefits could be expanded to include capital mobility, outsourcing rights, fiscal incentives, and relaxed shareholding requirements.
To ensure business impact, three operational flexibilities are recommended as priority measures:
Ease of movement of employees, to enable greater talent mobility across ASEAN.
Ease of back-end outsourcing to allow firms to optimize regional efficiencies and reduce costs.
Ease of movement of capital facilitates cross-border investment flows and strengthens financial integration.
A public-private task force coordinated under ASEAN-BAC would be critical in overseeing this rollout, ensuring that the scheme remains effective, transparent, and adaptable to evolving business needs.
For policymakers, the adoption of the ABE concept represents both an economic opportunity and a political statement. It signals ASEAN's willingness to innovate in the face of integration fatigue and to empower businesses as drivers of regionalism. For businesses, ABE offers a practical framework to overcome operational barriers and achieve economies of scale. For the people of ASEAN, it promises enhanced employment opportunities, stronger investment flows, and more resilient growth. By endorsing the ABE, ASEAN can strengthen its attractiveness as an investment destination while also reinforcing its long-standing commitment to sustainable and inclusive development.
Conclusion
In conclusion, the ASEAN Business Entity is a forward-looking initiative that transforms the ASEAN dream of economic integration into a business-led reality. It provides a pathway for firms to operate seamlessly across the region while respecting the diversity of national policies. If embraced and implemented effectively, ABE will mark a turning point in ASEAN's economic journey, bridging the gap between rhetoric and reality, and ensuring that the ASEAN identity is not just symbolic but truly functional for the businesses and people it serves.
References:
ASEAN Secretariat. (2020). Regional Comprehensive Economic Partnership (RCEP).
ASEAN Secretariat. (2024). ASEAN Statistical Brief – February 2024. Jakarta: ASEAN Secretariat.
ASEAN-BAC & PwC. (2025). ASEAN Business Entity (ABE): Making ASEAN scale a reality for business operations. [Presentation document]. ASEAN Business Advisory Council.
CPTPP. (2018). Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Signed 8 March 2018, entered into force 30 December 2018.
World Trade Organization. (2017). Trade Facilitation Agreement.
