Address by H.E. Ong Keng Yong
Secretary-General of ASEAN
at the Boao Forum for Asia Annual Conference 2003

2 November 2003
Boao, Hainan Province, China

“TOWARDS AN ASEAN SINGLE MARKET AND
SINGLE INVESTMENT DESTINATION”

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ASEAN has seen several severe challenges since 9/11. Terrorism, the war in Iraq and the outbreak of Severe Acute Respiratory Syndrome (SARS) threatened our economies and undermined the growth prospects.

ASEAN has responded to these challenges by staying cohesive and by accelerating and deepening its economic integration.

At the Bali Summit in October 2003, the ASEAN Leaders signed the Declaration of ASEAN Concord II (Bali Concord II) to reaffirm ASEAN as a concert of Southeast Asian Nations, bonded together in partnership, in dynamic development and in a community of caring societies and to create an ASEAN Community by 2020.

The ASEAN Community would be supported by the three pillars of political and security cooperation, economic cooperation, and socio-cultural cooperation.

The ASEAN Security Community would bring ASEAN’s political and security cooperation to a higher plane, and would ensure that ASEAN Member Countries live in peace with one another and in peace with the world in a just, democratic and harmonious environment.

The establishment of an ASEAN Economic Community (AEC) will make ASEAN a single market and production base with free flow of goods, services, investment, skilled labor and freer flow of capital by 2020.

The AEC will turn the diversity that characterizes the region into opportunities for business complementation making it a more dynamic and stronger segment of the global supply chain. The AEC will be realized by strengthening existing initiatives and embarking on new initiatives to enhance economic integration.

Free Flow of Goods

Since January 1, 2003, the six original signatories to the ASEAN Free Trade Area (AFTA) have brought down their tariffs on 99.60 percent of the products included in the AFTA process to the 0-to-5 percent level. ASEAN also agreed to abolish tariffs by 2010 for ASEAN-6 (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) and 2015 for ASEAN-4 (Cambodia, Laos, Myanmar and Vietnam). ASEAN continued to make its industrial cooperation scheme more relevant, which has attracted a growing number of multinational companies. The transaction in this scheme amounted to more than US$1 billion a year. ASEAN has completed its harmonized tariff nomenclature and will implement it by January 2004.  We are concluding mutual recognition arrangements and harmonizing product standards and technical regulations for a number of product groups to reduce the transaction cost of doing business in ASEAN.

As a step towards the AEC, ASEAN has decided to fast track 11 priority sectors for integration. Among the measures for these sectors include zero tariffs, removal of non-tariff barriers, faster harmonization of product standards and mutual recognition of test reports and certification, faster customs clearance and simplified customs procedures. Concrete action plans will be worked out during the course of 2004.  (The 11 priority sectors are: automotive, wood-based products, rubber-based products, textiles/ apparels, agro-based products, fisheries, electronics, air travel, tourism, ICT/e-commerce and healthcare)

Free Flow of Investments

ASEAN continues to provide investors with a competitive and attractive environment for investment and business operations.  The ASEAN Investment Area (AIA) is to ensure that investments flow freely within the region and be treated without discrimination.  The AIA arrangement would allow investors to harness the various complementary advantages of ASEAN countries in order to maximize business and production efficiency at lower costs.

In addition to manufacturing, agriculture, mining, forestry and fishery sectors, and services incidental to these sectors, ASEAN has agreed to expand the AIA coverage to include more sectors and speed up the opening of sectors currently on the sensitive list. ASEAN also agreed to establish a network of ASEAN free trade zones (FTZs) so that companies could structure their manufacturing processes across different ASEAN countries to take advantage of their comparative strengths. 

Free Flow of Services and Professionals

ASEAN has concluded 3 packages of services commitments following the signing of the ASEAN Framework Agreement on Services (AFAS) in 1995. The AFAS was aimed at substantially eliminating restrictions to trade in services among ASEAN countries in order to improve the efficiency and competitiveness of ASEAN services suppliers. Seven sectors of importance to ASEAN were selected for services liberalization. Recognizing the significance of the services sector, ASEAN has agreed to work towards achieving a free flow of services earlier than 2020 (the original target tied to ASEAN Vision 2020). In order to achieve this goal, ASEAN agreed to set clear targets and schedules of services liberalization for each sector and each round. ASEAN also agreed to adopt the ASEAN Minus X formula for services liberalization so that countries which are ready could liberalize first and the others will join in later.

In addition, ASEAN intends to conclude Mutual Recognition Arrangements (MRAs) for qualifications in major professional services by 2008 to facilitate free movement of professional/skilled labor/talents. ASEAN also agreed to liberalize the healthcare, air travel and electronic commerce sectors by 2010. To encourage intra-ASEAN tourism, ASEAN nationals would be exempted from visa by 2005. For international travelers, ASEAN will harmonize the procedures for issuing visas by 2004.

Freer Flow of Capital

In August 2003, ASEAN’s Finance Ministers agreed on the Roadmap for Integration of ASEAN in Finance, covering four areas: (i) Capital Market Development; (ii) Liberalization of Financial Services; (iii) Capital Account Liberalization; and (iv) ASEAN Currency Cooperation. The implementation of the ASEAN finance roadmap will assist in the promotion of ASEAN trade and investment flows.

Other Important Measures

Other areas of ASEAN cooperation such as human resource development and capacity building will be enhanced to support the realization of the AEC. ASEAN will be binding closer as a region through transportation and energy linkages.  Concrete measures are taken towards the realization of the ASEAN Highway and Singapore-Kunming Rail Link (SKRL). ASEAN transport facilitation agreements covering transit and inter-state transport of goods, as well as multimodal transport operations, to support AFTA and improve transport logistics in the region are being implemented.  A Roadmap for ASEAN Competitive Air Services Policy is under consideration. The ASEAN Power Grid and the Trans-ASEAN Gas Pipeline Network are being institutionalized.

In the implementation of e-ASEAN Agreement, concrete steps are being taken in advancing ICT market integration and trade facilitation, promoting universal access to ICT infrastructure and services, developing ICT skills and competencies and creating a more secure cyberspace and ICT in ASEAN.
To advance the AEC, ASEAN agreed to strengthen its institutional mechanisms and this would include the improvement of the existing ASEAN Dispute Settlement Mechanism to ensure expeditious and legally binding resolution of any economic disputes.

Outward Looking ASEAN

ASEAN remains open to the global economy.  It is strengthening its linkages with other countries and regions, especially with its larger neighbours. 

Last year, ASEAN and China concluded a Framework Agreement on   Economic Co-operation, including commitment to establish an ASEAN-China FTA within 10 years. During the ASEAN Summit in Bali, we concluded two more framework agreements. The ASEAN-Japan Framework on Closer Economic Partnership commits both parties to establish an FTA by 2012; and the Framework Agreement with India which commits both parties to establish an FTA by 2011. At the Bali Summit, ASEAN welcomed the proposal of the Republic of Korea (ROK) to study the possibility of an ASEAN-ROK FTA.

With the US, a region-wide Trade and Investment Framework Agreement (TIFA) between ASEAN and US is being finalized. The Trans-Regional EU-ASEAN Trade Initiative (TREATI) to revitalize the ASEAN and EU relations has been launched by the EU in July 2003. ASEAN and Australia and New Zealand (or CER) are implementing the AFTA-CER Closer Economic Partnership to further promote trade, investment and regional economy between the two regions.

ASEAN Member Countries are engaging the private sector and business bodies in Southeast Asia and beyond to know more about the concerns of the business community and to undertake appropriate policy responses.

Conclusion

The results from the Bali Summit of ASEAN Leaders represent ASEAN’s renewed commitment to integrate the regional economy towards the realization of the AEC and to cooperate substantively to ensure a politically stable region. While integrating internally, the various FTA arrangements represent ASEAN’s outreach to the rest of the world.

Many operational difficulties remain. Nevertheless, ASEAN Member Countries are determined to enhance their economic competitiveness and to integrate themselves into a single market and production base. Some may argue that what has been decided is still not enough. Yet, I believe the ASEAN Member Countries are moving in the right direction and are about to shift from second gear to the third.