ASEAN as a Single Production Base

ASEAN as a Single Production Base

Brunei

Cambodia

Indonesia

Laos

Malaysia

Philippines

Myanmar

Singapore

Thailand

Viet Nam

ASEAN

ASEAN Vision 2020

ASEAN Summit (Kuala Lumpur, December

1997)- transform ASEAN into a stable,

prosperous and highly competitive region

with equitable economic development, and

reduced poverty and socio-economic

disparities

ASEAN Economic Community

Political-

Security

Socio-Cultur

al

Economic

Three Pillars

Political-Security

Socio-Cultural

Economic Integrati

on

ASEAN Economic Community

ASEAN Attraction

•Population of approximately 600 million people (8.8% of the world’s population);

•In 2010, ASEAN’s combined nominal GDP had grown to US$1.8 trillion;

•If ASEAN were a single entity, it would rank as the ninth largest economy in the world.

ASEAN Attraction

• large market with robust growth rate above the world average.

• rich natural resources, a major player in the world or Asia-Pacific in a number of food crops, high value crops, wood, rubber, oil & gas, fisheries.

• ASEAN countries have successfully positioned themselves in the more attractive industries in the world (Mckinsey)

• ASEAN economies of varying development stages present opportunities for complementary regional production networks.

• It has world class dynamic firms.

ASEAN Free Trade Area

Intra-ASEAN IntegrationIntra-ASEAN Integration

LiberalizationLiberalization - Common Effective Preferential Tariff (CEPT) and Common Effective Preferential Tariff (CEPT) and Priority Priority Integration Sectors (PIS)Integration Sectors (PIS) - ASEAN Framework Agreement on Services (AFAS)- ASEAN Framework Agreement on Services (AFAS) - ASEAN Investment Area (AIA)- ASEAN Investment Area (AIA)

Facilitation Facilitation - e-Customs/Single Window; Standardization and - e-Customs/Single Window; Standardization and Harmonization; multi-modal transport; logistics; Harmonization; multi-modal transport; logistics; e-commercee-commerceCooperationCooperation

- Bridging Development Gaps- Bridging Development Gaps - Sub-Regions/Growth Areas- Sub-Regions/Growth Areas

Intra and Extra ASEAN Trade

ASEAN Priority Sectors

Automotive

E-ASEAN

Rubber

Fisheries

ASEAN Priority Sectors

Electronics

Agro-based Textiles

Air Travel

ASEAN Priority Sectors

Healthcare

Logistics Tourism

Wood-based

Status of ASEAN Integration

ASEAN has started to become integrated, mainly due to market forces & partly due to ASEAN regional FTA.

Intra-industry intra-ASEAN linkages strongest in electronics & relatively strong in healthcare products & automotive industries (Austria).

Intra-industry intra-ASEAN trade linkages are weak or at best mild in agri-based, fisheries, rubber-based & wood-based industries (Austria).

Status of ASEAN Integration

ASEAN has great market fragmentation.

ASEAN needs technological premium & far more efficient logistics to leverage over other regional blocks’ economies of scale.

ASEAN countries need to accelerate industrial upgrading as well as integrate more

A single market and production base

Elimination of Tariffs

ASEAN Trade in Goods Agreement (ATIGA)ASEAN has essentially been well on track to

achieving the elimination of tariff on trade among the ASEAN Member States (AMSs).

At least 99 percent of tariff lines are 0 percent in

ASEAN-6, with an average CEPT rate of 0.5 percent in 2011.

Nearly 99 percent of all tariffs in the newer AMSs are already in the 0-5 percent range, with the average CEPT rate by 2011 of only around 2.6 percent

Elimination of Non-Tariff Barriers

The operationalization of the AEC Blueprint mandate to eliminate non-tariff barriers (NTBs) has proven to be much more difficult.

Because they are varied, rather complex, and not very transparent, the way the NTMs are implemented can make them significant non-tariff trade barriers.

Because virtually all NTMs have objectives other than protection, the challenge is to pick out those NTMs that have much greater probability of being used as a trade protection instrument and minimizing their trade barrier effects.

ASEAN used a voluntary approach to eliminate NTBs, wherein AMSs would offer NTBs to be eliminated. Malaysia and Thailand offered a few for elimination; however, no other AMSs offered.

Rules of Origin (ROO)

Putting in place ROO which are responsive to the dynamic changes in global production processes so as to: facilitate trade and investment among ASEAN Member Countries; promote a regional production network; encourage development of SMEs and the narrowing of development gaps; and promote the increased usage of the AFTA CEPT Scheme (AEC Blueprint).

All the ASEAN + 1 FTAs (ACFTA, AKFTA and AJCEP, AANZFTA and AIFTA) adopt the general 40 percent local/regional value added (RVA) rule, with full cumulation. They also provide for alternative rule using Change in Tariff Classification (CTC) for certain products.

Rules of Origin (ROO)

Rules of Origin (ROO)

Rules of Origin (ROO)

Trade facilitation (Customs Union)

Efficient trade facilitation is a prerequisite to a well functioning single production base in the ASEAN region.

ASEAN aims to establish a working ASEAN Single Window (ASW) in the whole region, arguably the earliest regional single window in the world.

There is a huge gap in the degree of customs modernization between Singapore, which is one of the world’s best, and Myanmar and Laos where much remains to be done to satisfy the criteria of a modern and efficient customs.

Consequently, there is large difference in the number of days to import or export among AMSs.

Trade facilitation (Customs Union)

Five AMSs (Thailand, Philippines, Indonesia, VietNam, and Brunei Darussalam) have live implementation of their NSWs already, with an on-going gradual expansion of government agencies to be linked to NSWs, and two others (Singapore and Malaysia) on advanced stages of development. The last three (Lao PDR, Myanmar and Cambodia) are still in the early stages of NSW implementation.

The AMSs trade facilitation initiatives appear to be bearing fruit already even if they are still very much underway. There has been reduction in the number of days to import and export in some countries especially in Thailand.

Standards and TBT

Varying standards and difficulties in conformity assessments are a serious deterrent to a more integrated ASEAN economic community.

The key challenge for standards and conformance in the ASEAN is how to craft a regime in the region that minimizes the trade barrier effect of national standards, conformity assessment procedures, and technical regulations on the one hand while at the same time enhances the competitiveness of producers in the region on the other hand.

The general approach in the ASEAN as embodied in the AEC Blueprint is a combination of harmonization, transparency and capacity building focusing on the twelve (12) priority integration sectors.

Two-Pronged Strategy

Two-pronged ASEAN integration strategy:(1) Government-led:

Harmonization of policy & regulatory environment & streamlining of procedures

Cooperation in capacity building, information sharing, logistics & infrastructure, R & D.

(2) Private sector-led:

Industry by industry regional complementation, upgrading & integration strategy & program in the context of East Asia integration.

Way Forward Towards a Dynamic Integrated ASEAN

NEEDED: stronger private sector leadership, participation and commitment to regional integration and complementation initiatives

NEEDED: private sector investment at the regional level on technical analysis and coordination on the details of regional industrial complementation, cooperation and integration

Way Forward Towards a Dynamic Integrated ASEAN

NEEDED: widespread dissemination of the regional complementation, integration and cooperation programs at the national and local levels.

NEEDED: institutionalized private sector, government and academe collaborative mechanism at the regional and national levels

Integrated and Dynamic ASEAN

I. Address market fragmentation in ASEAN: • Accelerate streamlining of customs proceeding

*Implementation of ASEAN Single Window*Simplify ASEAN Rules of Origin*Green lane system for CEPT products*Simplified, improved & harmonized customs declaration form

• Accelerate regional standards harmonization, certification & Mutual Recognition Agreements

*Clear targets & schedule for harmonization of standards

*Strengthen certification capability & deepen MRAs

Integrated and Dynamic ASEAN

II. Facilitate ASEAN industrial upgrading

• Enhance the value added of the clusters & expand the value chain

• Regional resource pooling & cooperation on scarce “mission critical” resources for industrial upgrading such as scientists and highly skilled technical manpower

• Deepen capital market development & maintain robust structural & macroeconomic foundations for good investment climate.

Integrated and Dynamic ASEAN

• Accelerate preparation of, & ensure strong & widespread private sector participation & consultation on, the ASEAN industry by industry regional complementation, upgrading & integration plans & programs.

• Negotiate concertedly for improved market access & fair competition rules with dialogue partners.

• Negotiate concertedly for stronger technical cooperation support from dialogue partners, especially for the poorer ASEAN members.

• Institutionalize private sector participation at the regional level on ASEAN trade negotiations with dialogue partners

Challenges of Deepening Integration

ASEAN’s accelerated integration plans are poorly disseminated & have little private sector “buy-in” so far.

ASEAN strategic action plans on the priority industries are not well known to stakeholders.

ASEAN strategic action plans leave much to be desired with respect to private sector involvement and commitments.

Challenges and Opportunities for Philippines

Competition

Efficiency and specialization

Expanded market –both for

inputs and outputs

Secure trading environment

Philippine Industry concerns

Tariff level is not the main issue

Lack of efficient and globally competitive

industrial infrastructure (power, fuel,

transportation, ports development, and education

and skills development) resulting to high cost of

doing business

Complicated and costly administrative

requirements such as Import Commodity

Clearance (ICC) for locally manufactured goods

Lax enforcement of anti-smuggling and anti-

dumping measures

Philippine Industry concerns

Weak monitoring of the standards of products in

the market, thus allowing for cheaper but low

quality products to proliferate

Small number of support programs (i.e. incentive

programs/financial package) especially for small

enterprises

Poor administration of FTAs (e.g. ROO

compliance, transshipment violations, standards

compliance, etc.)

Thank you!