During the year under review, the Committee on Finance and Banking (COFAB) continued its work in considering new initiatives to further enhance ASEAN economic cooperation in finance, banking, taxation, customs, and insurance matters. The Second Special COFAB Meeting was held in Pattaya, Thailand, in October 1987 preceded by the Meeting of COFAB Study Group on ASEAN Tax Training Institute in Bangkok in September 1987. The guidelines for the procurement of external financing for ASEAN Projects such as AIPs, AICs and AIJVs formulated by COFAB were adopted by the Nineteenth Meeting of ASEAN Economic Ministers in Singapore in July 1987. The Sixteenth COFAB Meeting was held in Chiang Mai, Thailand, on 24 - 26 May 1988 to follow-up and implement the programme of action approved by the Third ASEAN Summit Meeting. The COFAB Meeting also considered the reports of subsidiary bodies under its purview. On-going projects and activities of COFAB were also in progress.
New Initiatives for ASEAN Cooperation in
Finance and Banking
At the Third ASEAN Summit Meeting in Manila in December 1987, the Heads of Government agreed to accelerate cooperation in the field of finance and banking to support and facilitate growing intra-ASEAN trade and investment activities.
To enhance ASEAN capabilities in the insurance industry and to retain reinsurance business within ASEAN, the ASEAN Insurance Council initiated the establishment of the ASEAN Reinsurance Corporation by upgrading the existing ASEAN Reinsurance Pool. With the approval of the ASEAN Insurance Commissioners and the AEM and the endorsement by the Heads of Government, the ASEAN Reinsurance Corporation is expected to be incorporated by mid-1988 with an initial authorized capital of US$ 10 million and a paid-up capital of US$3 million, shared equally among the six-country shareholders.
Other measures to enhance intra-ASEAN cooperation in the field of finance and banking are:
i) Increased Role for ASEAN Currencies in Intra-ASEAN Trade and Investment - The ASEAN Central Banks and Monetary Authorities have taken step in permitting the use of ASEAN currencies for intra-ASEAN trade which could be extended to intra- ASEAN investment. While the private sector was encouraged to avail them- selves of the use of ASEAN currencies, the ASEAN Central Banks and Monetary Authorities were requested to examine existing administrative practices to facilitate the use of ASEAN currencies for intra-ASEAN trade.
ii) The Intra-ASEAN Model of Double Taxation Convention with the attached confidential administrative notes would be used as a guide in negotiating with third countries for the conclusion of the agreement on the avoidance of double taxation.
iii) The enhancement of the efficiency of tax and customs administrators would be undertaken through in-house, intra- service and in-depth training programmes with possibilities for exchange of information and policy analysis, and possible long-term developments in greater mutual technical assistance.
Recognizing the importance of having close cooperation with the Asian Development Bank (ADB), the Heads of Government also agreed that a working relationship between ASEAN and the ADB could be explored.
In this regard, the Fourth Meeting of the 21st ASC in Bangkok. 15 - 17 March 1988, also considered the issue and decided to refer the matter to COFAB for its views and comments on the technical aspects of an ASEAN - ADB working relationship in the context of how such a relation could benefit ASEAN.
Cooperation on Customs Matters
The ASEAN Working Group on Customs Matters (AWGCM) at their Eleventh Meeting in Bali in August 1987 continued to improve all areas of customs work in promoting intra-ASEAN trade and economic cooperation and also consider new initiatives to further enhance such cooperation.
Brunei Darussalam hosted, for the first time, the Twelfth AWGCM Meeting in Bandar Seri Begawan, in April 1988. The Meeting discussed the implementation of the Heads of Government's directives and reviewed the progress made in various projects and activities. The ASEAN Training Programme Coordinator has been appointed to coordinate the implementation of customs training programme for the next two years. Upon signing the Notification of Adherence by the Controller of Royal Customs and Excise, Brunei Darussalam on 15 April 1988 officially acceded to the ASEAN Customs Code of Conduct.
The AWGCM has achieved its task in the simplification and harmonization of customs procedures and the standardization of customs forms i.e. the Air Passanger Baggage Declaration, the Import, Export and Transhipment Forms. It also agreed to continue studying the ASIAN Customs Code of Conduct for further improvements.
As a new direction, the AWGCM emphasized that customs administrations of ASEAN member countries would strive to work more closely with the private sector to effectively facilitate the flow of trade, attract investments and boost industrial development.
The AWGCM continued to update information on existing practices in the field of prevention, investigation and repression of customs offences and those involving drug trafficking. Information exchanges on customs procedures relating to import, export, drawback and warehousing system were also continued.
To cope with the rapid increase of travellers by air passing through customs check. points in each member country, the customs administrations of some ASEAN member countries have adopted the "Dual-Channel System" or "Red & Green Channels" to expedite and facilitate the clearance of travellers and their baggage’s, This system is listed in the Annex to the Inter- national Convention on the Simplification and Harmonization of Customs Procedures, also known as the Kyoto Convention. The Malaysian customs administration introduced the system at the Subang International Airport and the Bayan Lepas International Airport since June 1983. The Royal Thai Customs also adopted the system and started using it in March 1985. As the system has resulted in the speedy clearance for both passengers and baggage’s, the Indonesian Customs Administration has also started using the dual channel system in April 1987. To prevent smuggling of dutiable goods through the green channel, occasional spot checks would be made on suspicious cases.
On tariff structure, the Customs Administration of each ASEAN member country has worked towards the transposition of its tariff onto the Harmonized System (HS) which is a commodity classification system developed by the Customs Cooperation Council (CCC). The HS will serve as an integrated internationally accepted commodity coding system that will standardize classification of goods and services and facilitate the conduct of international trade. The HS will eventually be used as a reference for the GATT New Round of MTN and the ASEAN PTA. Malaysia and Thailand started implementing the HS on 1 January 1988, Indonesia and Singapore will introduce it on 1 January 1989. Brunei Darussalam is in preparation process to convert the CCCN to Harmonized System.
To fight against customs fraud, the AWGCM has adopted a uniform format for reporting customs fraud. The format would be used by member countries for the purpose of exchanging information on a quarterly basis. Bilateral discussions on ways and means of customs enforcement between member countries sharing common borders were also encouraged.
The AWGCM also formulated the project on Customs Training and Development in close cooperation with UNCTAD. This project would be financed by UNDP. Canada also extended its assistance to AWGCM through the training course on Computer Application for ASEAN Customs Administrations.
The AWGCM will continue to strengthen its cooperation in line with the current needs of all member countries.
Cooperation in Insurance
There was a fruitful discussion and exchange of views and experiences during the Thirteenth Meeting of the ASEAN Insurance Commissioners (AICS) in Singapore in October 1987. The AICs reviewed the progress in the implementation of the various recommendations made at the last Meeting and expressed satisfaction with the substantial progress made particularly in the following areas:
i) Mortality Studies of Assured Lives
Mortality tables had been published for several ASEAN countries based on the experience of assured lives in their respective countries. For the first time, these tables would allow ASEAN life insurance to underwrite business based on mortality experience in ASEAN countries.
ii) Insurance Education and Training
The UNDP had allocated US$400,000 to finance a comprehensive training programme for ASEAN insurance supervisory staff for the period 1988 - 1991.
iii) Study Visit to Japan
The Japan - ASEAN Cooperation Promotion Programme (JACPP) Committee had allocated US$ 34,700 to finance a study visit to Japan in 1988 by ASEAN insurance officials. The visit would focus on the insurance supervisory system and market practices in Japan.
iv) Unified Forms of Insurance Statistics
Summaries and analyses on the performance of ASEAN insurance industries had been published. These publications would serve as a useful basis for a comparative analysis of ASEAN insurance industries.
The AICs commended the ASEAN Insurance Council (AIC) for the substantial progress made in the formation of the ASEAN Re- insurance Corporation which would be launched by 1 July 1988 upon the endorsement of the Third ASEAN Summit. The AICs therefore supported in principle AIC's proposal that equity investments in the ASEAN Reinsurance Corporation be treated as "approved assets" in their respective countries.
The AICs also agreed:
i) to continue supporting the construction of standard life tables based on the experience of the respective life insurance industry; and
ii) to continue pursuing insurance co- operation with Australia, Canada, the EEC, Japan, New Zealand, US and UNDP.
Cooperation in Tax Matters
The Meeting of COFAB Study Group on ASEAN Tax Training Institute was held in Bangkok in September 1987 to consider new initiatives in cooperation on tax matters.
In order to enhance tax administration efficiency, COFAB agreed to set up an ASEAN Tax Training Programme with Thailand as the Programme Coordinator. In carrying out its task, the Programme Coordinator would be governed by existing guidelines. For the purpose of drawing up suitable training programmes, the Coordinator would be guided by suggestions and recommendations made by the ASEAN Working Group on Tax Matters (AWGTM).
The possible topics for the training programme would be (i) Tax Treatment of Leasing; (ii) Value Added Tax (VAT); and (iii) the US Income Tax Reform. The matter would be further discussed at the Eight Meeting of the AWGTM scheduled to be held in Singapore in the middle of 1988.
For more information, please refer to the project details
