• Trade liberalization and financial integration in Asean

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    Jose V. RomeroPart II

    An important goal of Asean Economic Community is to facilitate, liberalise and make its intra-regional trading activities more transparent.

    In this regard, Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand have already eliminated import duties on 99.65 percent of traded tariff lines since 1 January 2010. In order to facilitate a free flow of goods and to promote a regional production network in Association of Southeast Asian Nation (Asean), its member countries have already adopted the Trade Facilitation Work Programme in 2008 and the Trade Facilitation Indicators in 2009.

    Asean is also working towards the establishment of an ASEAN Trade Repository (ATR) by 2015. The ATR, among others, will carry information on tariff nomenclature; preferential tariffs offered under the Asean Trade in Goods Agreement (ATIGA);

    Rules of Origin; non-tariff measures; national trade and customs laws and rules; documentary requirements; and lists of authorised traders of Member States. The ATR and the information contained therein will be accessible through the Internet to economic operators like exporters, importers, traders, as well as government agencies and the interested public and researchers.

    With a view to achieving a more expeditious clearance and release of containerised shipments by Customs authorities, Asean member countries are developing the Asean Single Window (ASW), which would provide an integrated partnership platform among government agencies and end-users in the movement of goods throughout the region.

    In efforts to achieve the above goals customs administrations in the Asean Member States have also embarked on the acceleration of modernisation of Customs techniques and procedures with the main thrust to enhance trade facilitation and to protect the society. This has contributed to reducing both the time required for release of shipments from customs control and processing costs. Asean Customs Administrations are also working in partnership with industries and businesses to strengthen and improve the level of service and compliance.

    Standards Harmonisation
    Different standards or technical regulations in excess of what is needed can behave as technical barriers to trade. As such, the harmonising of standards, technical regulations and conformity assessment will play a key role in trade facilitation.

    Aligning regional with international standards and practices is therefore a serious concern on the part of the Asean. This is due to the fact that divergences in national product standards often act as impediments to the international trade in goods. In order to promote deeper economic integration between economies towards the realisation of the Asean Economic Community by 2015, harmonisation of product standards and technical regulations, and mutual recognition of test reports and certification are thereby deemed necessary.

    Agreement on Services (AFAS)
    The service industry on which the Asean community relies upon to enhance its Gross National Product has been rightfully the object of deep interest on the part of the Asean community. Accordingly the community has produced an Asean Framework Agreement on Services (AFAS).

    Its aims are the following:

    • Enhance cooperation in services among Asean Member States (AMS) in order to improve the efficiency and competitiveness of Asean services industries, diversify production capacity and supply, and distribution of services;

    • Eliminate substantial barriers to trade in services; and

    • Liberalise Trade in services by expanding the depth and scope of liberalisation beyond those undertaken under the General Agreement on Trade in Services of the World Trade Organization.

    Moreover a system of Mutual Recognition Arrangements (MRA) in the services sector has been arrived at. An MRA enables the qualifications of services suppliers that are recognised by the relevant authorities in their home country to be mutually recognised by other signatory member states. This helps to facilitate the flow of professional services providers in the region, in accordance with relevant domestic rules and regulations.

    Comprehensive Investment Agreement (ACIA)
    In response to the more competitive global environment with a view towards enhancing Asean’s attractiveness as an investment destination, creating a free and open investment regime and meeting economic integration goals. ACIA represents a comprehensive investment agreement covering Manufacturing, Agriculture, Fishery, Forestry, Mining and Quarrying, and Services incidental to these five sectors.

    Accordingly member states have approved The Asean Comprehensive Investment Agreement (ACIA) resulting in the consolidation and revision of two Asean Investment Agreements: the 1987 Asean Agreement for the Promotion and Protection of Investments (also known as the Asean Investment Guarantee Agreement or Asean IGA) and the 1998 Framework Agreement on the Asean Investment Area (commonly known as “AIA Agreement”), as well as related Protocols.

    The consolidation of the two agreements above has produced the proposed scheme for financial integration in Asean.

    Under the Asean Economic Community Blueprint, Asean envisages achieving integrated financial and capital markets by 2015. A well-integrated and smoothly functioning regional financial system, with more liberalised capital account regimes and inter-linked capital markets, will facilitate greater trade and investment flows in the region.

    Financial integration in Asean is facilitated through the following initiatives:
    1 Financial Services Liberalisation: progressive liberalisation of financial services by 2015.

    2 Capital Account Liberalisation: removal of capital controls and restrictions to facilitate freer flow of capital, including elimination of restrictions on current account transactions and FDI and portfolio flows (inflows and outflows).

    3 Capital Market Development: build capacity and construct the long-term infrastructure for development of ASEAN capital markets, with a long-term goal of achieving cross-border collaboration between the various capital markets in Asean.

    The Chiang Mai Initiative Multilateralisation (CMIM) is a US$120 billion multilateral currency swap facility designed to (i) address short-term liquidity difficulties in the region; and (ii) supplement existing international financial arrangements.

    The Chiang Mai Initiative (CMI) conceived a framework for liquidity support comprising an expanded Asean Swap Arrangement (ASA) and a network of bilateral swaps (BSAs) among Asean and the plus three countries.

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