INTRODUCTION Agreement with China will create trillion-dollar market in ten years
Asean speeds integration

Tariffs on information and communications products will disappear within five years

ew impetus has been added to the drive by the members of the Association of South East Asian Nations towards economic integration and increased competitiveness. With the downturn in the global economy, exacerbated by the terrorist attacks on the United States, and with China’s entry into the World Trade Organisation, Asean’s 10
member states are redoubling their efforts to attract trade and investment.
Earlier this month, they took a giant step forward for their collective future by agreeing with China to create a free trade area within 10 years. The agreement, made at a regional summit in Brunei, aims to form the biggest free trade area in the world, a trillion-dollar market of an estimated two billion people which will fire up the Asean economies.

Completion of Asean’s own free trade area (Afta) has already been advanced from 2008 to 2002 and it has been agreed to accelerate the Asean Investment Area agreement (AIA) for non-Asean investors.
Bilateral trade between the Asean states and China has been steadily rising, reaching $30.3 billion in the first three quarters of 2001, a rise of 6.8 per cent over the same period last year. The combined free trade area will create a bloc with a gross domestic product of $2 trillion and a two-way trade of $1.2 trillion.
Key areas identified as central to future cooperation are: agriculture, IT, human resources and future investment. The summit, known as Asean+3, also made a recommendation that the free trade area should eventually be extended to include Japan and Korea. This will be considered at a further summit next year.
The six original members of Asean – Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand – were tiger economies in the 1990s, but today they find themselves facing new challenges and Asean itself has grown with the addition of new members: Myanmar (Burma), Cambodia, Laos and Vietnam.

Recovery from the financial crisis of 1997-98 had hardly begun when the slowdown in the US economy stopped Asean’s growth almost dead in its tracks. With Japan’s economy stagnating for the best part of a decade, and the European Union market growing more slowly than expected, the impact on Asean economies has been severe.
Completion of Afta is seen as a vital step to revitalising the trade bloc. Product standards and customs procedures are being harmonised. And to support investment and create investment opportunities, plans are being drawn up to develop major highway and rail connections.
Under the AIA agreement, non-Asean investors would be free to invest in manufacturing, agriculture, forestry, fisheries and mining. The agreement brings the deadline forward from 2020 to 2010 for the six founder members of Asean and 2015 for the remaining four members.

Asean’s secretary-general, Rodolfo Severino, says that integrating the regional economy will enlarge the market, foster competition, achieve economies of scale, attract investments and promote efficiency and growth.
“In the face of continuing economic adversity, the countries of the world must seek to bring down barriers to trade, investments and technology and proclaim their willingness to help the weaker among them to strengthen their
capacity to compete,” he says.
The average common effective preferential tariff (CEPT) rate for the six leading Asean countries is 3.21 per cent. To bridge the differential between the member states, it has been agreed to unilaterally extend tariff preferences to the newer members to January next year. This will benefit them by extending preferences to nearly $400 million of their exports each year.

Completion of Asean’s own free trade area has been advanced to 2002

“In the six original signatories to the Afta agreement, which are the region’s leading trading nations, tariffs on 90 per cent of the products included in the Afta process have already gone down to the 0 to 5 per cent level, well before the target year of 2002,” says Mr Severino. “And we are removing tariffs altogether on information and communications technology (ICT) products over the next five years.”
The secretary-general points out that the Asean nations have “unequivocally embraced” ICT. All members have signed the e-Asean framework agreement and regional pilot projects have been endorsed. Comparative studies on e-commerce laws are being undertaken.
The region is being bound closer together through transportation and energy linkages and plans are being made to connect the countries of mainland South East Asia and southern China with a highway network and a railway.
“We have a framework agreement to facilitate the flow of goods and we have drawn up the texts of agreements on multi-modal and inter-state transport,” says Mr Severino. “Masterplans are being worked out for the Asean Power Grid and Trans-Asean Gas Pipeline Network.”

Pitak Intrawityanunt, deputy prime minister, says Asean can become more competitive and attractive to investors

Mr Severino has called on representatives from the US-Asean Business Council, American and Japanese vehicle manufacturers and industrial and technology leaders to “take advantage of resources of Asean economies as a single production base and market”.
As a leading member of Asean, Thailand is at the forefront of the region’s bid to regain its position as a major area of investment and trade in the world.
“Asean has been established for over 30 years, but we have not yet reached the point where we would like to be,” says deputy prime minister Pitak Intrawityanunt. “We can be more competitive and attractive to foreign investment.

Surakiart Sathirathai, minister of foreign affairs, wants to strengthen relationships with China, Korea and Japan

“Geographically, we are in a very good location. We are a very big market, especially in automobiles. Investors can use Thailand as their production base to sell automobiles to neighbouring countries or worldwide markets.”
Minister of foreign affairs Surakiart Sathirathai is in no doubt that Asean is moving in the right direction. “We want to strengthen the relationships among Asean countries and with China, Korea and Japan,” he says.
“We would like to see a forum where South Asian countries, Asean and those three countries can get together to exchange views and see if we have a common position. It would be great if we can speak with one voice.
“We have initiated plans to link the road network from Thailand to Laos and China, and from Thailand to Angor Wat in Cambodia. We have also discussed joint development of overlapping areas of the Gulf of Thailand. Instead of talking about sea boundaries, we will be talking about possible joint ventures in oil exploration and exploitation.”