The potential of EAC must be part of every biz plan
The ASEAN Economic Community is one of the three pillars of ASEAN as outlined in the ASEAN Vision 2020. Its goal is to implement economic integration measures for the creation of a single market, in which there is a free flow of goods, services, investment and a free flow of capital. In 2007, ASEAN leaders agreed to accelerate the establishment of the single market to 2015 and to move closer to an EU-style community of 600 million people.
The 2015 target to turn ASEAN into a rules-based organization, with harmonized trade and investment laws and rules, with hopefully a harmonized competition / anti-trust policy, and anti-corruption standards, is very ambitious. Five of the ten members of ASEAN have no anti-trust laws to protect them from economic predators and other financial fraudsters. These are the Philippines, Myanmar, Laos, Cambodia and Brunei. The Philippines, however, is moving ‘fair competition’ legislation in both Houses of Congress; it is trusted that we will have a law soon. The local and foreign business communities are asking for the legislation, and the Committee Chairs in the Senate (Senator Aquino) and in the House (Rep. Villar) are scheduling hearings. Anti-corruption is high on the agenda in the Philippines, given PDAF and other schemes; the Integrity Initiative is making progress in getting anti-corruption standards and practices into place, involving the private sector, the National government and the LGUs.
Of course, we have to realize the AEC will remain work in progress well after the magic date of 1 January 2016. Government meetings in preparation of the AEC are happening every month and are showing that the governments of the ASEAN member states are taking the integration seriously. But business cannot leave the integration process to governments and relax; the private sector has the global expertise and the resources to provide its part to make the AEC a reality. Why should the private sector do it? It will benefit most from the integration of a 600 million people market if they play their cards right.
What does business have to take into consideration?
Trade in goods – Before being updated and replaced in 2010 by ATIGA (ASEAN Trade in Goods Agreement), the ASEAN Free Trade Area (AFTA) had successfully implemented, ahead of schedule, the liberalization of trade and the reduction/elimination of tariffs applied to goods traded between ASEAN countries. ATIGA brings more transparency and flexibility to regional trade liberalization;it focuses not only on tariff liberalization and non-tariff measures, but it also includes matters related to simplification of Rules of Origin. In terms of Free Trade Agreements (FTAs) between ASEAN and external partners, the progress has been generally good. FTAs have been signed by ASEAN with China, India, South Korea, Australia and New Zealand. Discussions with the US regarding joining the TPP (Trans Pacific Partnership) and the EU regarding an FTA are being accelerated.
ASEAN Single Window – A cornerstone of creating a single market is the creation of the ASEAN Single Window for cross-border trade in goods. This will fulfill all import, export and transit related regulatory requirements. If information is entered electronically, then individual data elements need only be submitted once. Each ASEAN member had agreed to establish a National Single Window (NSW) by the end of 2012; in some countries, including the Philippines, the NSW is also work in progress.
Trade in services – In contrast to free trade in goods, which has calculable economic net benefits, the liberalization of trade in services often involves value-added or high-technology ‘intangible’ products, requiring the import of non-indigenous people and skills. Careful adjustment is needed with regard to benefits and disadvantages. The 1995 ASEAN Framework Agreement for Trade in Services provides the broad guidelines for ASEAN members to progressively improve market access and ensure equal national treatment for cross-border services suppliers. AFAS was updated in 2003.
Foreign direct investment – FDI is a key component of resource flows to ASEAN countries. Since 2000, FDI flows into ASEAN members grew at an annual average rate of 19 percent; unfortunately, the Philippines remains well below this average FDI growth. The common framework for encouraging FDI into ASEAN is found in the ASEAN Comprehensive Investment Area (ACIA). The main principles of the ACIA include:
1. Immediate opening up of all industries for investment, with some exceptions specified in the Temporary Exclusion List and the Sensitive List to ASEAN investors by 2010 and all other investors by 2020.
2. Granting immediate national treatment, with some exceptions as specified in the TEL and the SL, to all ASEAN investors by 2010 and to all investors by 2020.
Full realization of the ACIA for the ASEAN-4, with the removal of TEL in manufacturing, agriculture, fisheries, forestry and mining, was subsequently re-scheduled for 2015.
ASEAN remains an attractive FDI destination, with impressive growth rates and huge potential. If ASEAN memberscan hit the 2015 target for the creation of the AEC, the area can transform itself and improve the prosperity of its citizens, as well as becoming a key player in the international economy. As mentioned above, part of this harmonization process will also have to focus on competition / anti-trust policy and the fight against corruption. And, the potential of the AEC must be part of every company’s business plan.
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