Asean

Association of Southeast Association of Southeast Asian NationsAsian Nations

ESTABLISHMENT AND MEMBERSHIP

•It was established on 8 August 1967. •In Bangkok by the five Countries namely Indonesia, Malaysia, Philippines, Singapore, and Thailand.

-Brunei Darussalam joined on 8 January 1984-Vietnam on 28 July 1995-Laos and Myanmar on 23 July 1997-Cambodia on 30 April 1999

The Establishment of ASEAN

Bangkok, 8 August 1967

Goals of ASEAN To accelerate the economic growth, social progress and cultural

development in the region. To promote Regional peace Stability Southeast Asian studies & Active collaboration and mutual assistance on matters of common interest in

economic, social, cultural, technical, scientific and administrative fields. To provide assistance to each other in the form of training and research

facilities in the educational, professional, technical and administrative spheres.

To collaborate more effectively for greater utilisation of their agriculture and industries, expansion of their trade, improvement of their transportation and communications facilities and raising of the living standards of their peoples.

To maintain close and beneficial cooperation with existing international and regional organisations.

CHALLENGES

The financial crisisThe haze across parts of the region andThe Cambodia question.

ASEAN Surveillance ProcessTo prevent a recurrence of the financial crisis, the ASEAN finance ministers agreed

in October 1998 on a framework for closer consultations on economic policies called the ASEAN Surveillance Process.

ELEMENTS:- Monitoring of global as well as regional and national economic and financial

developments. To keep track of the recovery process To detect any sign of recurring vulnerability in the ASEAN financial systems

and economies. Provides a forum at which ASEAN finance ministers exchange views and

information on developments in their domestic economies, including policy measures carried out and the progress of structural reforms.

ASEAN + 3 Financial Cooperation

In recognition of the financial interdependence in East Asia, ASEAN has stepped up its cooperation with China, Japan and the Republic of Korea. 

The Chiang Mai Initiative

In May 2000, the ASEAN+3 finance ministers agreed to establish a regional financing arrangement called the “Chiang Mai Initiative.” It consists of two components: an expanded ASEAN Swap Arrangement and a network of bilateral swap arrangements among ASEAN countries, China, Japan and the Republic of Korea.

The haze across parts of the region

Transboundary Haze Pollution on 10 June 2002 was signed by ASEAN Member Countries (10) in Kuala Lumpur, Malaysia. The Agreement is the first regional arrangement in the world that binds a group of contiguous states to tackle transboundary haze pollution resulting from land and forest fires. It has also been considered as a global role model for the tackling of transboundary issues.

The Agreement requires the Parties to the Agreement:

(i) Cooperate in developing and implementing measures to prevent, monitor, and mitigate transboundary haze pollution by controlling sources of land and/or forest fires, development of monitoring, assessment and early warning systems, exchange of information and technology, and the provision of mutual assistance;

(ii) Respond promptly to a request for relevant information sought by a State or States that are or may be affected by such transboundary haze pollution, with a view to minimizing the consequence of the transboundary haze pollution; and

(iii) Take legal, administrative and/ or other measures to implement their obligations under the Agreement.

The Agreement establishes an ASEAN Coordinating Centre for Transboundary Haze Pollution Control to facilitate cooperation and coordination in managing the impact of land and forest fires in particular haze pollution arising from such fires. Pending the establishment of the Centre, ASEAN Secretariat and ASEAN Specialized Meteorological Centre (ASMC) co-performed the interim functions of the Centre.

The Agreement entered into force on 25 November 2003. To date, nine Member Countries, namely Brunei Darussalam, Cambodia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Viet Nam, have ratified the Haze Agreement.

Opportunities of ASEANOpportunities of ASEANASEAN is observed to be an evolving

economic powerhouse and has been gaining lot of attraction with the international investors and enterprises.

Among the growing economic uncertainty in the well developed markets, the regional association comprising largely of developing nations is brimming with opportunities in all sectors. It is especially important for companies operating in the infrastructure sector.

..contd ASEAN Business Outlook Survey 2011, conducted by

The American Chamber of Commerce in Singapore in collaboration with many other related associations and chambers, revealed that American companies expect the ASEAN market to become increasingly important for their businesses.

The survey polled 327 senior executives from US companies in Cambodia, Indonesia, Malaysia, Singapore, the Philippines, Thailand and Vietnam.

73% of the survey respondents said they expect ASEAN's importance to their business will increase over the next two years, with 85% of them planning to expand their business in ASEAN.

..contd

Trade accounts for nearly 100% of aggregate gross domestic product across ASEAN – the region lives or dies on the dynamism of trade and depends on investment to fuel growth. ASEAN has made significant progress in this area by implementing the ASEAN Free Trade Area (AFTA) and reducing over 95% of tariffs to 0-5% across member countries. To compete for investment, technology and entrepreneurism ASEAN knows it must follow through on similar pacts to liberalize investment rules, trade in services and tear down non-tariff barriers

ASEAN has a significant commodity and natural resources sector. Malaysia and Indonesia combined produce 85% of the world’s crude palm oil, the major edible oil consumed in China and in India. ASEAN countries are also responsible for about 80% of global rubber production. Malaysia and Indonesia have oil reserves of 9bn barrels. Indonesia has coal reserves of more than 4,000mn tonnes and has become one of the key suppliers of thermal coal to both India and China, two of the world's fastest growing energy markets. Its geographic location, close to both countries, gives Indonesia a competitive advantage in terms of the costs of transporting coal.

..contd

ASEAN GDP projected to grow from US$1.7 trillion in 2010 to US$4 trillion in 2025

Demographics are positive, with a rising share of population in the working-age bracket

Singapore poised to benefit from growth of Asia’s high-net-worth population

ASEAN is exciting in part because it’s a melting pot of different types of economies. On the one hand, you have a developed economy like Singapore; on the other hand you have emerging economies, such as Vietnam and Indonesia, that offer very exciting growth opportunities.

If you look at Indonesia, for example, it has the largest population in the region, with 238mn people, and at the same time it is very rich in agriculture and commodity resources, which feed very nicely into growing markets like China and India. Or Thailand – agriculture for instance. Thailand is also a major exporter of auto parts and large trucks for the region.

Singapore – ASEAN’s Biggest Opportunity Singapore, one of the most developed members of ASEAN and

located at the heart of ASEAN, is an ideal base to tap the opportunities in the bloc.

Elaborating further on the Singapore advantage, it is culturally synonymous with most of the ASEAN economies. It offers a world class business infrastructure, enterprise eco-system, financial services framework, legal regime and more importantly a highly attractive tax regime.

Singapore corporate tax rate at 17%, is one of the lowest but notably, for qualifying regional bases activities such as strategic business planning and development, marketing control, planning and brand management, and technical support services, will qualify for a concessionary corporate tax rate of 15% under the Regional Headquarters Award scheme. This gives a strategic edge for companies that decide to incorporate Singapore subsidiary companies to act as regional base. Given the mounting stature of ASEAN in global economy it is expected to see more international businesses to incorporate Singapore companies .

..contd Singapore went from a third world nation to a first

world nation in one generation. In the first quarter of 2011, its GDP overtook that of Hong Kong, something that was unthinkable ten years ago, when Singapore’s GDP was just 55% of its rival’s.

With no natural resources and a small population, Singapore has managed to carve out a niche for itself in financial services, biomedical, and high-end manufacturing. To give an example, today the two dominant Singapore shipyards manufacture close to 40% of the offshore oil platforms in the world – an amazing feat given that Singapore itself does not produce a single drop of oil!

In financial services, Singapore has become the “Switzerland of Asia” because of its strong legal and investor-protection framework.

ASEAN ICT There are many opportunities for a strong ASEAN ICT

(Information & Communication Technology) sector as the world ICT market continues to grow steadily .

To enhance its competitiveness, ASEAN should expedite the integration of the ICT sector.

ASEAN should also call for a strong commitment of member countries to narrow their internal digital divides.

An integrated ASEAN ICT sector would require integrated policies and regulations on the use of ICT, a regional physical infrastructure t hat includes adequate internet connectivity, a pool of skilled ICT professionals and an integrated ICT labour market.

..contd In ASEAN today, ICT is a growth industry

and is a good opportunity as it currently employs 11.7 mn people and contributing more than 32 mn USD or 3% to ASEAN’s GDP.

ASEAN governments have to ensure to provide ICT services to un-served as well as underserved areas.

ASEAN is able to provide a sizeable skilled workforce for carrying out the ICT transformations

…contdThrough ICT, trade and investment could

be enhancedASEAN has always kept environment

friendly approach. ICT has been able to accomplish the same.

Creation of Innovation Centres of Excellence & Research & Development (R&D) centres for ICT development due to the infrastructure and enough workforce

The India ASEAN Free Trade Agreement (FTA) was signed in Bangkok on August 13, 2009, and came into effect from January 1, 2010 with Malaysia, Thailand and Singapore. It is expected to be in place with all member countries by 2016.

The FTA collectively covers a market of nearly 1.8 billion people and proposes to gradually slash tariffs for over 4,000 product lines.

Currently the FTA is restricted to trade in goods while negotiations for a similar agreement for services are currently under way

Benefits of FTA Benefits of FTA Increase in Incomes/Growth: An FTA expands trade volumes among member

countries and tends to increase incomes/growth of the members. Intuitively,

starting from a situation of tariff-distorted trade, the elimination of tariffs allows

each member to specialize in the production of the goods in which it has a

comparative advantage and trade those goods in exchange for imports of

other goods from fellow members.

Achievement of Economies of Scale: An FTA, by eliminating tariffs, expands a

member country‟s export market thereby allowing it to expand its scale of

operations and lower its average cost of production.

Reduction of Monopoly Inefficiencies: If inefficient monopolies exist in the

domestic market, then increased competition from foreign products dampen

domestic monopoly inefficiencies, if not eliminate them altogether.

Availability of Greater Product Variety: The opening up of free trade increases

trade flows and expand the variety of products available to consumers in the

home country.

Negative Effect of Free Trade Negative Effect of Free Trade AgreementAgreement

Trade Diversion: Trade diversion refers to the possibility of an FTA member country switching its import supplier from a more efficient (low cost) country to a less efficient member country resulting in an inefficient allocation of resources.

Dumping: Dumping refers to the practice of a foreign country selling its product in the home market at a price that is lower than its “fair value”.

Unemployment: The reduction of tariff barriers leads to greater competition in the domestic market for the imported product leading to loss of market share and laying off of workers in that sector.

Excessive Dependence: Free trade can result in the shutting down of a number of industries that are unable to compete with cheaper imports.

No of FTA in ASEAN Countries as 2010

Source: Asian Regional Integration Centre website

Factors that helped behind emergence of FTA

The deepening of market-driven economic integration – Asian policymakers have realized the potential of FTAs in reducing trade barriers, harmonizing rules, standards and regulations and the long term economic benefits that these can bring in and have embarked on a mission to foster greater economic integration in the region through trade pacts

The success of European and North American economic integration initiatives - The successes of initiatives for economic integration in Europe

The Asian financial crisis - The financial crisis of 1997-98 that rocked the economies of East Asia has been an eye-opener to the fact that the region needs to strengthen regional economic cooperation in order to sustain economic growth along with stability. Fear of exclusion has also prompted many nations to join the FTA bandwagon.

Slow progress of the WTO DOHA negotiations - The WTO Doha Development Round commenced on November 2001 as an initiative to promote trade-led growth in developing countries. The negotiations were primarily centered on two key areas: agriculture and non-agricultural market access.

Challenges in FTA in Asia Challenges in FTA in Asia Low utilization of rates of FTA: A free trade agreement bestows

numerous benefits like preferential tariffs, market access, and new business opportunities for partner economies

Coverage of Agricultural Goods in FTA: Another potential problem with Asian FTAs is the suboptimal level of liberalization in agricultural products. Lack of political will and pressure to the pressures from the farm lobbies and social concerns.

Rules of Origin (ROO): Rules of origin are used to determine the country of origin of a product for purposes of international trade. They are used to determine which goods will enjoy preferential tariffs to prevent trade deflection among FTA members

Conclusion The India-ASEAN FTA is significant because it is the first multilateral

FTA that India has negotiated till date Over the last six years, the hurdles faced by the India-ASEAN FTA Began with objections that India had more than 1,400 items on the

sensitive or negative list. ASEAN countries the engine of liberalization and regulatory reform has

to be home-driven with governments taking unilateral, measures in response to internal and external conditions. In essence, it not only compares and contrasts trade policies in individual Southeast Asian countries.

India ASEAN cooperation covers the economic, political, security and development dimensions with a number of mechanisms established to promote dialogue and cooperation in these areas.

Vigorous and sustained interaction between ASEAN and India would help both parties in maintaining a high growth path and meet their development objectives

The fear of India losing its multilateral economic deal resounds in therising closeness between the two regions i.e., China and ASEAN

India’s Commitment India Commitment

I. Normal Track - Applied Most Favored Nation tariff rates will be reduced and subsequently eliminated in accordance with the following schedule:

(i) Normal Track 1- 70% of the total tariff lines of which tariff rates will be reduced/ eliminated by 2014.

(ii) Normal Track 2 - 9% of the total tariff lines of which tariff rates will be reduced/ eliminated by 2017.

II. Sensitive Track (i) Sensitive Track 1- 11% of the total tariff lines with applied MFN tariff rates above

5 per cent will be reduced to 5 per cent by 2017. (ii) Sensitive Track 2 - 0.5% of the total tariff lines with applied MFN tariff rates at 5

per cent will be maintained; however, applied MFN tariff rates which are below 4 per cent, will be eliminated by 2020.

III. Special Products- Applied MFN tariff rates for special products (including crude and refined palm oil, coffee, black tea and pepper) will be reduced to 37.8-50 per cent by 31 Dec. 2019. (crude and refined palm oil, coffee, black tea and pepper)

IV. Exclusion List – Applied MFN tariff rates for 489 products remains the same and shall be subject to an annual tariff review with a view to improving market access.coconut, cotton, milk/dairy products, wheat, paddy/rice, sugarcane, apples ..

AGREEMENT ALREADY COMPLETED

Agreement of Cooperation with Nepal to Control Unauthorised Trade Agreement on Economic Cooperation between India and Finland Agreement on South Asia Free Trade Area SAFTA Asia Pacific Trade Agreement APTA CECA between The Republic of India and the Republic of Singapore Comprehensive Economic Cooperation Agreement between India and Malysia Global System of Trade Preferences GSTP India Chile PTA India Afghanistan PTA India ASEAN Agreements India Bhutan Trade Agreement India Japan CEPA India Korea CEPA India MERCOSUR PTA India Nepal Trade Treaty India Sri Lanka FTA SAARC Agreement on Trade in Services SATIS Treaty of Transit between India and Nepal