Only one in four Asian exporters use free trade agreements signed between governments in the region on average, research by HSBC and Economist Intelligence Unit reveals. Complexity in the specific regulations as well as scant marketing efforts by governments deter companies from using them more widely.

Researchers earlier this year surveyed 800 exporters across eight Asian countries, which have signed 50 bilateral and multilateral free trade agreements between them. Yet, only 26% of respondents said they make use of FTAs when exporting. The percentage is even lower in China, Singapore, Australia and Malaysia.

Nearly half (45%) of exporters cite complexity of agreement terms as the major deterrent to using FTAs. A third say that the markets covered by the FTAs their governments sign are not attractive to their business. About 44% have limited or no understanding of FTAs, which many of them attribute to the fact that these agreements are insufficiently publicized.

The findings corroborate past research that show particularly smaller companies do not have the resources to take full advantage of provisions in FTAs. A survey conducted by the Asian Development Bank Institute in 2011 and 2012 revealed just 29% of respondents indicated they had made use of FTA regulations, while another survey in the Philippines in 2010 found that a lack of information about the agreements presented the biggest obstacle to their use.

FTAs typically require businesses to make an application with their local trade and industry authorities for the issuance of a certificate of origin to prove that their export goods have indeed originated from a signatory of the FTA. Interpreting these rules of origin can present a headache to smaller enterprises, especially when exported goods contain materials that were produced in countries outside of the FTA jurisdiction.

Noel Quinn, group general manager and head of commercial banking, Asia-Pacific at HSBC, notes that the vast majority of companies using FTAs report an increase in exports. "86% of exporters [using FTAs] have already seen a benefit to their business as a result of the FTAs signed," he explains.

"There are three principal benefits of an FTA. Firstly, they can reduce the cost of exporting to a country by reducing tariffs. Secondly, they can simplify processes by cutting some of the bureaucracy and import processes [thereby shortening] the trade cycle. Thirdly, they can open up a market to an exporter that was previously closed."

Ronnie Yeoh, general manager of Singapore-based New Quantum Holdings, agrees: "FTAs open up more markets to us, especially those previously protected. Asean-originated goods can flow more freely within the region as well as to China," he says.

Yeoh refers to the Asean-China Free Trade Agreement (ACFTA) which was signed in 2002 and has reduced tariffs on more than 7,000 products traded between the countries that are part of the agreement to date. With the scheduled reductions of Cambodia, Laos, Myanmar and Vietnam in 2015, the largest free trade area in the world by population and third largest by trade volume will be finalized.

"More needs to be done in terms of explaining FTA regulations, to both SMEs and MNCs," Yeoh adds. "We still have a lot of misunderstanding on what each regulation actually represents."

Despite the currently limited use of FTAs, 78% of companies hope their government will sign more agreements, including with larger economies. About 73% want more support in terms of education and advice on FTAs.

The focus of the survey was on small and mediums sized enterprises with 80% of respondents recording annual revenues of between US$50 million and US$150 million. The countries covered by the research include Australia, China, Hong Kong, India, Indonesia, Malaysia, Singapore and Vietnam.