ASEAN as a Single Production Base

Brunei Philippines Myanmar Singapore ASEAN Thailand Viet Nam

Cambodia Indonesia

Laos Malaysia

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 socioeconomic disparities

ASEAN Economic Community
Three Pillars

PoliticalPoliticalSecurity Security Economic Integration Economic

Socio- SocioCultural Cultural

ASEAN Economic Community

Single Market and production base

Competitive economic region

Equitable and economic development

Fully integrated region in the global economy

ASEAN Economic Blueprint

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 Integration Liberalization - Common Effective Preferential Tariff (CEPT) and Priority Integration Sectors (PIS) - ASEAN Framework Agreement on Services (AFAS) - ASEAN Investment Area (AIA) Facilitation - e-Customs/Single Window; Standardization and Harmonization; multi-modal transport; logistics; e-commerce Cooperation - Bridging Development Gaps - Sub-Regions/Growth Areas

Intra and Extra ASEAN Trade

ASEAN Priority Sectors

Automotive E-ASEAN

Rubber
Fisheries

ASEAN Priority Sectors
Electronics Air Travel

Agro-based

Textiles

ASEAN Priority Sectors

Logistics Healthcare

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

Elimination of Non-Tariff Barriers
Rules of Origin (40% value added) Trade Facilitation, customs union (single window)

Standards and Technical

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.)

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