2010 Apr 14
April 14, 2010

ASEAN treks towards integration

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ASEAN members have reported completing nearly two-thirds of work to lay down an integrated economic community by 2015 and have tagged streamlining trade processes and opening up the service sector as among the remaining tasks.

The economic bloc boasted of implementing 73% of the 124 target measures, including the lowering of tariffs as of end-2009, in a scorecard released at the close of the Association of Southeast Asian Nations summit last week.

The Philippines, in particular, will have to deliver on service liberalization and trade facilitation commitments to do its part in establishing a free trade area among the 10 Southeast Asian economies with shared output already at $1.5 trillion in 2008, the report stated.

Members would also do well to reduce trade costs and address development gaps within the group, an economist from the Asian Development Bank (ADB) said.

“As of 31 December 2009, 91 out of 124 AEC legal instruments have entered into force. This represents 73% of all AEC-related legal instruments, compared to 50% in 2002,” the report stated.

The report claimed significant progress in achieving a “single market and production base,” with 68 measures — or 82% — of the total policies in this area implemented by 2009 for the free flow of goods, services and investments.

It reported the most progress in the areas of “equitable economic development and integration with the global economy,” as ASEAN members have completed all measures up for implementation by 2009, such as programs to develop small enterprises in the region and trade pacts with various dialogue partners.

Meanwhile, in terms of ensuring a “competitive economic region,” only 50% of measures to improve competition policy, consumer protection and intellectual property rights protection have been implemented.

Moving forward, ASEAN members will have to focus on trade facilitation measures and non-tariff barriers, particularly by setting up one-stop shops for government processes, the report stated.

“All ASEAN member states must first operationalize their National Single Window (NSW). So far, ASEAN-6 countries — Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand — are at various stages of operating their respective NSWs,” it noted.

So far, the Philippines has already set up a “serviceable” NSW, although not all the needed state agencies have come on board yet, a local official who declined to be named said.

Ganesh Wignaraja, principal economist for ADB’s office of regional economic integration, similarly highlighted the need for such NSWs.

“More needs to be done in the next five years to achieve AEC targets. A single window system to improve trade facilitation will significantly reduce trade costs,” Mr. Wignaraja said via e-mail yesterday.

“Furthermore, a region-wide free trade agreement — be it ASEAN+3 or ASEAN+6 — needs to be concluded to mitigate possible Asian Noodle bowl effects of overlapping free trade agreements,” Mr. Wignaraja said.

ASEAN members have recently been studying how to harmonize various trade pacts brokered separately with dialogue partners China, Korea, Japan, Australia, New Zealand, and India.

The report also noted that the Philippines has yet to comply with the seventh round of service liberalization measures which would have allowed higher foreign equity ownership in select industries it volunteers. This comes as seven of the eight subsectors that the Philippines submitted for compliance was approved by the group, the local official said.

The report went on to urge the implementation of other measures that should have entered into force by 2009: the ASEAN Comprehensive Investment Agreement which is waiting for members’ respective “reservation lists,” the ASEAN Framework Agreement on the Facilitation of Goods in Transit, the ASEAN Multilateral Agreement on Air Services, and the ASEAN Multilateral Agreement on the Full Liberalization of Air Freight Services.

The report also called for Thailand’s ratification of the ASEAN Trade in Goods Agreement, which has only recently been made possible after it settled with the Philippines the issue on rice and sugar tariffs.

Transport infrastructure to complement trade — an area not measured by the scorecard — must be bolstered as well, the report said.

Mr. Wignaraja recommended adding another task to the list: “Much more Aid for Trade needs to be provided by richer ASEAN economies, particularly on regional infrastructure and trade finance to reduce development gaps.” –JESSICA ANNE D. HERMOSA, Reporter, Businessworld