ASEAN 2025: Forging Together Ahead

ASEAN Leaders recently unveiled a road map to a common community for the next decade. In this article, we have a few highlights of the report as well as the key achievements of the AEC.

 

Click here to read the full copy of the ASEAN Vision 2025: Forging Ahead Together which contains the Kuala Lumpur Declaration and also the new AEC Blueprint 2025.

HIGHLIGHTS:

 
 
  • The 10 leaders signed a document declaring the establishment of an ASEAN Community from Dec 31st and another entitled 'ASEAN 2025: Forging Together Ahead' that laid out the vision for the next 10 years. 
  • ASEAN will now attempt to complete measures unfinished in an eight-year plan by the end of 2016 after missing the end 2015 goal
     
  • Officials have not commented on progress of economic community 'ASEAN 2025: Forging Together Ahead', aims to create a community that is "politically cohesive, economically integrated, and socially responsible".
     
  • This month's ASEAN Progress Report showed that as of end-October the grouping had implemented  79.5% of measures committed under the AEC and among prioritized measures the rate was 92.7%. Below is an excerpt.
 
Since its adoption in 2007, the AEC Blueprint has been implemented towards the formal establishment of the AEC in 2015. Integral to this journey is the monitoring process: tracking the implementation and key achievements of the AEC Blueprint.
 

Key Achievements

 
Towards a Single Goods Market
 
Under the goal of creating a single market and production base are the central themes of the free flow of goods, services, investment, skilled labour as well as freer flow of capital.
 
For goods, the aim has been no less than to eliminate trade bottlenecks; that has involved the daunting task of removing tariffs, reducing paperwork and cutting the waiting times of getting products to market, with the added benefit of reducing risks associated with consigning goods.
 
Significant progress has been made in tariff elimination. Pursuant to the commitments made in the AFTA in 1992, and later in the ATIGA in 2010, Member States have eliminated import duties among themselves by 2010 for the ASEAN-6 (Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand), and – by
2015 with flexibility to 2018 – for the CLMV (Cambodia, Lao PDR, Myanmar and Viet Nam). To date, the ASEAN-6 have virtually eliminated their intra-regional tariffs, with 99.2% of tariff lines at 0%. For the CLMV, the figure stands at 90.86% giving an ASEAN average of 95.99%.
 
 

“Tariff elimination alone does not create an open market”

 
 
Tariff elimination alone, however, does not create an open market. Benefitting from intra-regional trade  preferences can be made easier, among other factors, with continuous simplification of Rules of Origin (ROO) as well as the ASEAN SelfCertification Project. Under the Self-Certification scheme, the primary responsibility
for origin certification is met by traders and manufacturers. This energises regional trade links by giving certified exporters the freedom to declare that their products have satisfied ASEAN origin criteria, which allow them to benefit from trade preferences under ATIGA. All 10 Member States are now on board on one of the two Self-Certification Pilot Projects. Concerted efforts are underway to establish the ASEAN-wide self-certification scheme.
 
Trade facilitation also continues across borders, with five Member States having tested the exchange of trade data and information (ATIGA Form D) using the ASEAN Single Window (ASW) platform through their national single windows. The ASW creates a single point of entry where trade-related documents and information can
be submitted to speed up customs clearances and reduce transaction times and costs. The Protocol on the Legal Framework to Implement the ASW (PLF) was signed by the Finance Ministers in 2015.
 
Transparency and resulting business certainty is central to ASEAN’s trade facilitation agenda. The work on establishing an ASEAN Trade Repository (ATR), documenting trade and customs laws and procedures accessible in the public domain, was authorised under ATIGA and is a major highlight in facilitating the free flow of goods. The ATR is expected ultimately to contain trade-related information such as MFN tariffs, preferential tariffs offered under ATIGA and other ASEAN FTAs, ROO, non-tariff measures (NTMs), national trade and customs laws and rules. It will also contain comprehensive procedures and documentary requirements, administrative rulings, best practices, and a list of authorised traders.
 
Once all national trade repository (NTR) web portals are established and connected by the ATR they will contribute to lower business costs, extend regulatory transparency and greater certainty in business dealings. Further, the ATR could also serve as a support mechanism for implementing other AEC initiatives such as addressing the barrier effects of non-tariff measures.
 

“Transparency and resulting business certainty is central to ASEAN’s trade facilitation agenda”

 
 
Removing Barriers to Trade through Facilitative Standards and Conformance
 
As standards compliance increasingly become a prerequisite to participate in production networks, ASEAN is also putting in place measures to reduce technical barriers to trade, including mutual recognition arrangements (MRAs), along with harmonisation of standards, technical requirements and development of guidelines.
The ASEAN MRAs were developed within a framework agreement and were implemented with the aim of eliminating barriers to trade. 
 
So far, ASEAN has concluded three sectoral MRAs, namely for electrical equipment and electronics (EEE), cosmetics and medicinal products, while others are in the works for prepared foodstuffs, automotive, and building and construction sectors.
 
To date, among the key achievements, are: the development of MRAs on Bioequivalence study and Good Manufacturing Practice in the pharmaceutical sector. In the cosmetics sector, the introduction of the ASEAN Harmonised Cosmetic Regulatory Scheme and the Post Market Surveillance Notification System assure safety and quality information, harmonisation of 121 EEE standards and technical regulations, 47 test standards for rubber-based products, 15 technical requirements based on UN Regulations on automotive, 8 test method standards for cosmetics, and 955 Maximum Residue Limits (MRLs) in commonly-used pesticides for widely-traded crops as well as implementation of the ASEAN Cosmetic Directive by all Member States and the signing of the ASEAN Medical Device Directive.
 
Bolstering Productivity through Skills Mobility Key to leveraging productivity, including from the positive effects of FDI, is to build capacity in skills. ASEAN’s agenda addresses this by facilitating the free flow of skilled labour across the region, taking into account domestic regulations, and market demand. This has been particularly pressing given the fact that ASEAN’s population has doubled between 2007 and 2015, with a significant share of the ‘productive age’ population 
 
 

“Key to leveraging productivity is to build absorption capacity in skills”

 
 
MRAs are crucial policy tools for skilled labour mobility, facilitating trade by mutual recognition among the Member States for professionals that are authorised, licensed or certified by the respective authorities. Signed in 1995, the ASEAN Framework Agreement on Services (AFAS) provides the mandate for MRAs.
 
In total, eight MRAs have been concluded, namely on engineering services, nursing services, architectural services, framework for surveying qualifications, medical practitioners, dental practitioners, the framework for accounting services, and tourism professionals. The ASEAN MRAs adopt different approaches, reflecting the varying nature of these services and the realities of regulatory regimes across the Member States.
 
To date, more than 1,250 engineers are recorded within the ASEAN Chartered Professional Engineers Register, together with over 250 architects on the ASEAN Architect Register. Training toolkits designed to enable the mobility of skilled tourism professionals have also been put in place, and help the region’s drive to expand its tourism industry in conjunction with easier air travel. The full benefits of the MRAs can be realised through legal transposition and effective implementation.
 
 
A World Class Investment Destination
 
As ASEAN works toward building a collective identity as a single investment destination, gone are the days where investors see ASEAN as 10 stand-alone economies. The development of an ‘ASEAN investment strategy’ is increasingly common for existing and would-be investors, facilitated – among other factors – by the region’s framework for enticing investors and helping businesses operate in the region.
 
 
“Gone are the days where investors see ASEAN as 10 standalone economies”
 
 
Entered into force in 2012, the ASEAN Comprehensive Investment Agreement (ACIA) contains commitments to liberalise, facilitate, promote, and protect cross-border investment, based on international best practices. In line with their commitments in the ACIA, Member States exerted efforts to improve their investment regimes to help
create a competitive investment environment in the region.
 
The AEC also provides a business-supportive environment through regulatory frameworks that promote fair competition and freer flow of capital. To date, almost all Member States have in place consumer protection laws as well as competition laws. Work towards building an innovation-supportive environment is also enhanced
through co-operation and capacity building in the area of intellectual property (IP) rights.
 
The relatively stable macroeconomic fundamentals of the ASEAN economies, amidst global uncertainties, have induced foreign investors to shift their preferences to the region. Similarly, ASEAN’s reaffirmation of its commitment to deepen regional economic integration through the implementation of the AEC Blueprint provides
clarity about the region’s policy agenda, reducing policy uncertainties and enhancing foreign investors’ confidence.
 

“Implementation of the AEC Blueprint provides clarity about the region’s policy agenda, reducing policy uncertainties and enhancing foreign investors’ confidence”

 
 
Integrated Regional Financial System
 
Financial integration is a key catalyst for financial sector development, which, in turn, improves efficiencies and lowers the cost of capital. In ASEAN, financial integration aims to achieve a well-functioning regional financial system with more liberalised financial services, capital account regimes and inter-linked capital markets, to facilitate greater trade and investment in the region.
 
In general, the ASEAN financial environment is bank-dominated. Acknowledging that role, the ASEAN Bank Integration Framework, approved in 2014, seeks to establish a more integrated regional banking sector led by a network of Qualified ASEAN Banks.
 
 

“Financial integration aims to achieve a well-functioning regional financial system with more liberalised financial services, capital account regimes and inter-linked capital markets”

 
 
In the capital market, financial liberalisation is pursued with a long-term goal of achieving cross-border collaboration among the various capital markets of ASEAN. The stock exchanges of a number of ASEAN States have collaborated to form the ASEAN Exchanges, promoting ASEAN capital markets and offering more opportunities to investors across the region. The ASEAN Trading Link, launched in September 2012, provides investors with easier and more seamless access into the markets of Malaysia, Singapore and Thailand from one single access point.
 
In an effort to raise corporate governance standards and practices among the Public Listed Companies (PLCs) in ASEAN, the ASEAN Capital Markets Forum (ACMF) launched the ASEAN Corporate Governance Scorecard. More recently, retail investors in Malaysia, Singapore and Thailand will benefit from an increase in the choice of funds for investment with the operation of the ASEAN Collective Investment Schemes (CIS) Framework for CIS cross-border offerings. To date, 11 funds have been recognised as Qualifying ASEAN CIS by the current participating Member States.
 
 
Towards a Connected AEC
 
A competitive economic region is a connected region. In a world of global value chains, production spans distant locations and across multiple borders. To stay competitive, transport time and distribution costs need to be reduced through infrastructure development as well as efficient and enhanced institutions.
 
Spanning diverse topographies, from archipelagic Indonesia and the Philippines, to a land-locked Lao PDR and the single island city state of Singapore, ASEAN requires an integrated approach to connectivity. Efficient logistics and distribution services are an important source of regional competitiveness, particularly for perishable and other time-sensitive goods. To achieve this requires support for physical infrastructure like
highways, airports and rail links, power grids and gas pipelines as well as improving cross-border agreements and institutional connectivity.
 
 

“To stay competitive, transport time and distribution costs need to be reduced”

 
 
The ASEAN Highway Network is a vital infrastructure and logistics component, which supports trade facilitation, investment opportunities and tourism. The SingaporeKunming Rail Link (SKRL) is a development project linking ASEAN with China over a total length of 7,000 km. Work towards the completion of such flagship infrastructure
projects, which have been identified as priorities in ASEAN’s transport co-operation, will continue after 2015. 
 
The liberalisation of passenger and cargo air services in the region is intrinsic to regional integration. It provides the necessary facilitation for movement of goods and people in an era where time dictates competitiveness. That has led to the ASEAN Open Skies Policy as part of the ASEAN Single Aviation market. Successive agreements provide competitive scope for expansion and opportunities for air travel within the region for service providers, as well as offering more destinations and lower fares for consumers. These have also contributed to the development of low-cost carrier operations, which now account for more than half of all airline capacity in the region.
 
A core dimension of ASEAN connectivity is information communications technology (ICT), recognised as a key driver in the region’s economic and social transformation. A strong ICT infrastructure with pervasive connectivity in ASEAN enables the creation of a business-enabling environment that is conducive to attracting and promoting trade, investment and entrepreneurship. As a region, ASEAN will prioritise efforts in bridging 
the digital gap. This ensures that all communities and businesses can benefit from ICT adoption to enable an innovative, inclusive, and integrated ASEAN. Early gains in ICT initiatives include the reduction in international mobile roaming rates within ASEAN.
 
 

“A strong ICT infrastructure with pervasive connectivity enables the creation of a business-enabling ASEAN environment”

 
 
An Inclusive and Participatory AEC for Enterprises of All Sizes
 
Comprising over 90% of enterprises in ASEAN, and responsible for generating employment for the majority of ASEAN’s working population, SMEs form the backbone of ASEAN economies.
 
It follows that a key component of the AEC is to enhance the competitiveness and expansion of SMEs, particularly through improved access to finance, markets, human resources, information and advisory services, technology and innovation.
 
To support SMEs’ participation in global value chains, ASEAN has put in place the ASEAN Benchmark for SME Credit Rating Methodology, the SME Service Centre, the ASEAN SME Policy Index and the ASEAN Common Curriculum for Entrepreneurship, among other measures.
 
The ASEAN SME Guidebook towards the AEC 2015 has been published to enhance awareness of the AEC as well as the facilities and market opportunities for SMEs that are available in the region.
 
A well-positioned region at the centre of global production networks, ASEAN has relied on its competitive workforce, resources, knowledge and skills, as well as diverse strengths and potentials to integrate into the global economy. The region also seeks to make the most of trade and investment links with major regional economies through the “ASEAN+1” free trade and comprehensive economic partnership agreements
(FTAs/CEPs) with China, Japan, the Republic of Korea, India, Australia and New Zealand.
 
ASEAN has elevated these partnerships by asserting its centrality and taking a lead in negotiations towards the Regional Comprehensive Economic Partnership (RCEP), an FTA involving ASEAN and its six FTA partners.
 
Starting in 2013, negotiations for this ASEAN-led agreement are expected to be substantially concluded by the end of 2015, with further technical work to continue into 2016. RCEP is aimed at achieving a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement between ASEAN and FTA  partners. With combined GDP of about US$22.7 trillion, about 30% of global output, the RCEP also has the potential to transform the region into the world’s largest integrated market of about 3.4 billion people (or nearly half of the world’s population).
 
 

“RCEP is aimed at achieving a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement between ASEAN and FTA partners”

 
 
When concluded, RCEP is expected to deliver tangible benefits to businesses through potential improvements in market access, trade facilitation, regulatory reform and more trade-facilitative rules of origin. It will mark the early success of ASEAN as a collective and pro-active player in global trade and economic governance.
 
 
 
-END-
 

CLICK HERE TO READ:  A Blueprint for Growth - ASEAN Economic Community 2015: Progress and Key Achievements

 
 
 
 
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