Dato’ Sri Nazir Razak, Group Chief Executive – CIMB Group, Co-Chair of ASEAN Business Club, Malaysia
Mr. Patrick Walujo, Managing Partner, Northstar Pacific Group, Co-Chair of ASEAN Business Club, Indonesia
Ladies and Gentlemen
More than ever at this juncture of ASEAN’s Community building process, with two more years before 2015, the private sector has a critical role in ASEAN’s on-going efforts toward regional economic integration. I would like to thank the CIMB ASEAN Research Institute (CARI) and the ASEAN Business Club for their kind invitation to meet with ASEAN’s business community this morning.
Building the Legal and Institutional Frameworks for Economic Integration
When talking about ASEAN’s economic integration, all too often the focus is on the progress and the expected outcomes, though rightly so. Little is said about the framework and the process. Understanding the institutions and processes is also key to understanding the outcomes of our integration efforts.
The work of regional economic integration is primarily coordinated through the ASEAN Economic Community (AEC) Council, which ensures the implementation of the AEC Blueprint and coordinates the work of the different economic sectors. Presently, there are 12 key sectoral-ministerial bodies under the AEC whose work cover the whole gamut of ASEAN economic cooperation – from trade facilitation, services and investment, financial integration, agriculture and forestry, energy, science and technology, telecommunications, transportation, tourism, among others. With more than 700 meetings a year for the ASEAN Economic Community alone, by about 100 sectoral bodies – from working groups to ministerial meetings – ASEAN Member States have invested countless resources – manpower, expertise, funds and time – for these ASEAN initiatives.
With such massive undertaking, ASEAN has also been supported by our Dialogue Partners. The technical assistance and capacity building programmes, at both regional and national levels, have augmented and enhanced the collective and individual efforts of Member States.
The imperative for ASEAN to deliver on its goals is indeed formidable. However, it bears noting that since the vision of an ASEAN Economic Community was articulated in 2003, ASEAN has gradually built on foundation of legal and institutional frameworks that provide an enabling environment for regional economic cooperation.
Trade in Goods and Elimination of Barriers to Trade
Ladies and Gentlemen,
The ASEAN Trade in Goods Agreement (ATIGA) has made substantial progress in achieving tariff reduction and elimination among the ASEAN Member States. To date, tariff s among the ASEAN- 6 countries (Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand) have been reduced to zero for 99.65% of the tariff lines; with the remaining either in the Sensitive/Highly Sensitive List of agreed agricultural products or in the General Exception List of banned products. For CLMV countries, almost 98% of the tariff lines have rates ranging from zero to 5%.
However, the success in reducing tariff rates is not significantly reflected in the rate of increase in real-intra ASEAN trade. Among other factors, this can be attributed to the existence of non-tariff barrier elements in the national trading and investment regimes of ASEAN Member States.
Knowing that if this is not robustly addressed, it can lead to a stagnation of intra-ASEAN trade and investment and, eventually, derail the ASEAN market integration process, ASEAN has been implementing many initiatives to address these non-tariff barriers.
The regional work plan to address Non-Tariff Measures (NTMs) and eliminate impediments to trade will begin to be implemented soon. ASEAN is continuously looking into simplifying the requirements of ASEAN Rules of Origin (ROO) as well as the implementation of the ASEAN-wide Self-Certification System for Rules of Origin. Once the latter is implemented, registered exporters will be given the right to self-certify export documents themselves thereby expediting the export process across ASEAN. Another significant initiative undertaken is the setting up of the ASEAN Trade Repository and the National Trade Repository by 2015, which should provide the current trade-related information of each ASEAN Member State under one trade portal for anyone to access.
Under customs integration process, the establishment of the ASEAN Single Window (ASW) is on track for live implementation in 2015. Currently, seven countries have been involved in the pilot project, successfully testing the electronic exchange of ATIGA Form D and the ASEAN Customs Declaration Document (ACDD). The remaining three countries are in the process of developing and operationalizing their national single windows (NSWs) with the aim of eventually being part of the ASEAN Single Window system. To operationalize the ASEAN Single Window, the related legal working group is now finalizing the draft legal protocol, which will eventually provide the legal support for the live exchange of electronic documents. To further enhance the customs integration process, the ASEAN Member States have ratified the new Custom Agreement and endorsed 15 Strategic Procedures for Customs Development to serve as a trade facilitative measure to enhance Intra-ASEAN trade.
One of the biggest challenges of achieving the AEC is harmonizing the standards and conformance requirements in the ASEAN region. The harmonization process among the ASEAN Member States continues to take form towards the creation of a regional approach based on internationally accepted norms to address Technical Barriers to Trade (TBTs) in ASEAN. The harmonization is on going for all the Priority Integration Sectors (PIS) for which TBTs have been identified. ASEAN also continues to address the development gaps especially in the areas of technology, enforcement, testing facilities and regulatory reforms to facilitate the harmonization process.
Trade in Services and Investment
Ladies and Gentlemen,
Free flow of services and liberalization of investment policies are also key elements in realizing the ASEAN Economic Community. With the ultimate aim of removing restrictions to ASEAN service suppliers in providing services and establishing companies across borders within the region, ASEAN has made some significant strides ensuring that services liberalization is on track. Recognizing that investment is critical in the region’s productive capacity, ASEAN is mounting great efforts to create an enabling environment for business and investment. We need to attract and retain investment into and within the region, particularly where competition for investment is very high, with BRICS, Latin America and Africa, not to mention with our neighbors in Asia.
For us to be able to do this, we have to reduce and/or eliminate intra-regional barriers. Thus, ASEAN is improving the environment for ASEAN investors and service suppliers alike to have greater market access and national treatment.
This is being achieved through progressive or further liberalization under the ASEAN Framework Agreement on Services (AFAS) and the ASEAN Comprehensive Investment Agreement (ACIA). Under the ASEAN Framework Agreement on Services, to date 8 packages of commitments have been concluded since 1997 and we are now in the process of finalizing the 9th package. Under each package, the ASEAN Member States are opening up their services sectors for other Member States. Mutual Recognition Arrangement (MRAs) have been concluded to facilitate recognition of professionals, including accountants, architects, surveyors, engineers, dental practitioners, medical practitioners, nurses and tourism professionals. In November 2012, the ASEAN Agreement on Movement of Natural Persons was signed to facilitate the temporary movement of natural persons including skilled labor across the region in the areas of trade in services, trade in goods and investment.
On investment, the ASEAN comprehensive Investment Agreement seeks to improve the investment environment and make it more conducive to business. The ASEAN Member States’ reservations under the ACIA are expected to be reduced, as more sectors will be opened up for investment by 2015. In all these measures, we endeavor to ensure transparency, stability and predictability. Scheduling of commitments as well as non-conforming measures under these agreements and the relevant laws, regulations and guidelines are information that are all publicly available. There is greater access to information now, via the ASEAN website and our newly created Invest ASEAN website, which is specifically created for the business community.
For business and investment, protection is critically important. Hence one of the major pillars of the ACIA is investment protection. This is to ensure that investors and their investments fully enjoy the benefits of non-discriminatory treatment. Investors are guaranteed protection relating to treatment of investment, compensation against strife, transfers of funds, unlawful expropriation, and investor-state dispute settlement mechanisms, among others. Under the ACIA, ASEAN is also enhancing investment facilitation and promotion. Initiatives are being undertaken through regional projects that will help Member States address bottlenecks and red tape to investing in the region, thereby reducing the cost of doing business.
Private Sector Contribution to AEC 2015
Ladies and Gentlemen,
Being one of the cornerstones of the regional economy, the private sector plays a very important role in achieving the ASEAN Economic Community by 2015. Recognizing this, the AEC Council has called for all AEC sectoral bodies to engage the private sector in economic integration. To date, dialogue sessions and consultations with the private sector, from sectoral associations to business councils, have been a regular feature at all levels of ASEAN meetings. ASEAN has continuously fostered public-private sector engagement (PPE) to improve the coherence, transparency and synergies of government policies and business actions across industries and sectors in the region.
We also appreciate the increasing interest in ASEAN, where companies are setting up their own ASEAN affairs units or having ASEAN officers that keep abreast with ASEAN activities. We have also seen a growing number of business associations seeking to engage with the ASEAN sectoral-ministerial bodies and working groups. It would do well for the business community to seek possible avenues of cooperation with the relevant ASEAN bodies at the national and regional levels. Sharing the private sector’s valuable experience and insights from the ground will contribute to the on-going discussions on policy and programmes being undertaken by ASEAN. The ASEAN Business Club could consider liaising with the ASEAN Business Advisory Council (ABAC) in channeling their concerns and recommendations based on these studies for ASEAN’s consideration.
Continued engagement with the regional and national mechanism would eventually foster better understanding of the AEC’s legal and institutional process. Understanding AEC will manage expectations and dispel any misconceptions. Understanding AEC will also enable companies to see how they can contribute, paving the way for greater support and confidence in ASEAN’s economic integration efforts.
As what CIMB ASEAN Research Institute and ASEAN Business Club have done with the Lifting-The-Barriers Reports to be launched today, the private sector can carry out in-depth market analysis of the region to identify potential markets and challenges that adds value to the on-going discussion on how we can enhance the process of economic integration. With private sector partnership, we are seeing and are encouraged by the trend of cross-border investment in the region. B2B links, necessary synergies and complementarities and a knowledge-based economy will certainly help prepare us for AEC 2015.
The business community can play a greater role in assisting SMEs which are considered the backbone of many national economies in the region. The private sector can also assist the ASEAN Member States in implementing their commitments by providing much needed technical assistance, capacity building programs as well as other resources.
Yesterday, I had the opportunity to talk about the contributions that the corporations in the region can make through Corporate Social Responsibility or CSR. Through CSR, corporations undertake sustainable practices; respect and value the communities; and bolster the local economies they are operating in. CSR objectives are, in essence, the very same goals that ASEAN have for its peoples. When companies pursue Corporate Social Responsibility, they become real partners in building a people-oriented, people-centred ASEAN Community.
Ladies and Gentlemen,
The process leading to the ASEAN Community by 2015 has generated a lot of interest and has put tremendous pressure on ASEAN to deliver what it has committed to accomplish. With ASEAN credibility and centrality in mind, earnest effort have been undertaken to identify and focus on key deliverables for 2014 and 2015. Indeed, we see 2014 as the turning year, which will determine our ultimate achievement by 2015. For the next two years and beyond, we encourage ASEAN’s business community to join us in this journey of building a politically cohesive, economically integrated and socially responsible ASEAN Community.
I wish you all a successful Launching.