The 12th ASEAN Summit will take place on December 10-14, 2006, on Cebu Island in the Philippines, where 10 member countries will grant approval for the establishment of ASEAN Economic Community (AEC) by 2015, which would be five years earlier than the previous schedule set for 2020. The summit will push for the liberalization of 12 pilot areas of goods and services including 1)farm goods, 2) fishery products, 3) wooden products, 4) rubber products, 5) textiles and garments, 6) vehicles, 7) electronic products, 8) health products, 9) information technology, 10) tourism, 11) aviation, and 12) logistics. Logistics is the latest addition to the priority list as reductions in logistics costs would greatly contribute to lower international trade-related costs. ASEAN is now striving towards congealing into an ASEAN Economic Community (AEC) – a common market and manufacturing base where goods and services, investment, plus the movement of labor and capital will be liberalized.
ASEAN will accelerate the schedule for mutual elimination of tariffs on 9 areas of goods and services from 2010 in the ASEAN Free Trade Area (AFTA) agreement to 2007, where it would first be applied within the six founding member countries, i.e., Thailand, Singapore, Indonesia, Malaysia, the Philippines and Brunei. Meanwhile, the deadline for rescinding tariffs by the new ASEAN members of Laos, Cambodia, Myanmar and Vietnam will be brought forward to 2012 from the previously set 2015.
On this January 1, 2007, the custom tariffs on the initial nine categories of goods of the founding six ASEAN countries will fall to duty-free status per agreement. Goods that are subject to accelerated tariff reductions include electronics, which is a major ASEAN export, i.e., from Singapore, Thailand and Malaysia. These tariff waivers are projected to benefit the electronics industry because, apart from reducing the cost of goods, they will also attract international investors to invest in ASEAN instead of China or India.
For the service sector, which is also vital and has been carving out a larger role toward ASEAN economic growth, lately, so ASEAN aims to liberate services within the AEC by 2015. The first three fields of service that will be liberated will be tourism, aviation and logistics, which are projected to support higher growth in trade, services and investment within ASEAN, to include stimulating more intra-regional tourism and business cooperation. Featured among initiatives to speed up the liberalization of the service sector and investment are MRAs (Mutual Recognition Agreements) on the movement of skilled and occupational workers within ASEAN, liberating the service sector on logistics, setting a target to liberate aviation within ASEAN by 2008 and entering into an agreement on 14-day visa exemptions for ASEAN citizens to travel within the community.
However, for ASEAN to achieve the target of establishing the AEC within 2015, it will be necessary to solve problems and dismantle obstructions that impede the founding in many aspects as mentioned in the following:
- NTBs (Non-Tariff Barriers), e.g., quota restrictions, import licenses, and technical standards that ASEAN countries impose to protect their domestic industries, and are an important obstruction to intra-ASEAN trade.
- Overlapping economic development within the six founding ASEAN countries, as well as that in the four new ASEAN members, which may affect the liberalization of trade, service and investment in ASEAN may be contrary to the goal of founding the AEC because some member countries may slow plans for tariff reductions or defer their opening markets to protect domestic manufacturers first.
- Internal security, domestic political problems on unemployment within ASEAN countries are limitation to labor liberalization within ASEAN. In addition, the establishment of ASEAN Economic Community (AEC) would comprehensive cover liberalization of labor migration, particularly for skilled workers and professionals, differing from the European Union where labor migrates freely. Besides this, the differences in economic development of ASEAN members is an important reason that obstructs the establishment of an AEC. As a result, the goal of a common currency as the Euro of the EU is more difficult. Moreover, free movement of capital within ASEAN has been intentionally limited to control domestic stability within member states.
- ASEAN should proceed toward the goal of an economic assembly in order to create better economic relations within the group before gradually considering trade liberalization with other countries outside the region such as Japan on the East Asia FTA. Such FTA agreements will cover on 16 countries (6 ASEAN trade partner countries – plus China, Japan, South Korea, Indian, Australia and New Zealand) and would needs prudent consideration before implementation, because it may decrease the role and significance of ASEAN bargaining power.
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