Trade in Services in ASEAN

Services is a sizeable and continuously expanding component of GDP in ASEAN economies.  As of 2016, services sector represents between 37% and 74% of ASEAN Member States’ Gross Domestic Product (GDP).

Chart 1
Services as Percentage of GDP, 2016

Chart 1
(Source: ASEANStats, 2015)

Despite a decrease of trade volume during the 2008-2009 global economic crisis, ASEAN’s services export grew from US$ 113.4 billion in 2005 to US$ 305.9 billion in 2015, at an annual average growth rate of 11.6%; while ASEAN’s services import also increased from US$ 140.8 billion to US$ 311.6 billion, at an annual average growth rate of 9.2%.

Chart 2
ASEAN’s Export and Import of Services

Chart 2

(Source: ASEANStats, 2016)

Travel, transport, and other business services dominate the export and import of services of ASEAN in general.  ASEAN’s export is dominated by travel services, while ASEAN’s import is dominated by transport services.  In the distant fourth place, ASEAN’s export is also contributed by financial services, while ASEAN’s import comes from charges for the use of intellectual property.  These services sectors are classified based on IMF Balance of Payments Manual, 6th Edition.

Chart 3
ASEAN’s Services Export by Sectors (2015)

Chart 3

(Source: ASEANStats, 2016)

Chart 4
ASEAN’s Import Export by Sectors (2015)

Chart 4

(Source: ASEANStats, 2016)

 

Services sectors also attracted substantial amount of Foreign Direct Investments (FDI) in the last decade reaching almost 50 percent of total FDI flow into ASEAN. (See figure B.1.3)

Chart 5 
FDI Inflow to ASEAN by Sector

Chart 5

(Source: ASEANStats, 2016)

 

ASEAN Framework Agreement on Service

Recognising the growing importance of trade in services, ASEAN Member States officially launched their joint effort to work towards free flow of trade in services within the region through the ASEAN Framework Agreement on Services (AFAS), which was signed on 15 December 1995 by ASEAN Economic Ministers (AEM) during the 5thASEAN Summit in Bangkok, Thailand.

AFAS aims at substantially eliminating restrictions to trade in services among ASEAN Member States to improve the efficiency and competitiveness of ASEAN services suppliers.

AFAS provides broad guidelines for ASEAN Member Countries to progressively improve Market Access, and ensures equal National Treatment for services suppliers in ASEAN. All AFAS rules are consistent with international rules for trade in services provided by the General Agreement on Trade in Services (GATS) of the World Trade Organisation (WTO). Liberalisation of services trade under AFAS shall be directed towards achieving commitments beyond Member States’ commitments under GATS, or known as the GATS-Plus principle.

 

What Has Been Achieved?

Following the signing of AFAS, officials of ASEAN Member States began negotiations to achieve the objective of AFAS to create a freer trade in services within the region. This was implemented through several rounds of negotiations, each round resulting in packages of commitments of each ASEAN Member State in each agreed economic sector/sub-sector and mode of supply.

The services negotiations are undertaken under the purview of ASEAN Economic Ministers (AEM). Following the decision of AEM at an Informal Meeting held on 28 June 1999 in Auckland, New Zealand, ASEAN Finance Ministers (AFMM) and ASEAN Transport Ministers (ATM) subsequently took the lead in the liberalisation of financial services and air transport services, respectively.

At present, ASEAN has concluded nine packages of commitments under the AFAS signed by the AEM through five rounds of negotiations since 1 January 1996. These packages provide for details of commitments of each ASEAN Member State in various services sectors and subsectors.

In addition, there has also been six additional packages of commitments in financial services under the AFAS signed by the AFMM (the second, third, fourth, fifth, sixth and seventh Packages of Commitments of Financial Services under the AFAS) and six additional packages of commitments in air transport under the AFAS signed by the ATM (the fourth, fifth, sixth, seventh, eighth and ninth Packages of Commitments on Air Transport Services under the AFAS).

 

ASEAN Economic Community (AEC) Blueprint

A significant milestone in the history of services liberalisation in ASEAN, as also in other economic areas in ASEAN, is the adoption of the ASEAN Economic Community (AEC) Blueprint by ASEAN Leaders at the 13th ASEAN Summit on 20 November 2007 in Singapore. Through the AEC Blueprint, ASEAN had formalised and stepped up its effort to further liberalise towards the goal of free flow of services, according to the bi-annual targets and thresholds laid out under this AEC Blueprint as well as additional parameters set forth by the Ministers.

Following the launch of ASEAN Community in 2015, ASEAN Leaders adopted the ASEAN Economic Community Blueprint 2025 during the 27th ASEAN Summit on 22 November 2015 in Kuala Lumpur Malaysia. In the area of trade in services, the ASEAN Economic Community Blueprint 2025 affirmed ASEAN’s intent to further broaden and deepen services integration, ASEAN’s integration into the global supply chains in both goods and services, and enhance ASEAN Member States’ competitiveness in services. It also stipulated that ASEAN’s next agenda is to negotiate and implement the ASEAN Trade in Services Agreement (ATISA) as the legal instrument for further integration of services sectors in the region.

All of these contribute to progressively deeper level and wider coverage of ASEAN Member States’ commitment to substantially eliminate restrictions to trade in services among them. Negotiations for the ASEAN Trade in Services Agreement (ATISA) are currently on-going.

 

Movement of Natural Persons (MNP)

In November 2012, ASEAN Economic Ministers (AEM) signed the ASEAN Agreement on Movement of Natural Persons (MNP) in Phnom Penh, Cambodia. The schedules of commitment under the MNP Agreement supersede Mode 4 commitments of the earlier AFAS packages.  The MNP Agreement enters into force on 14 June 2016 following completion of its ratification by all AMS. Pursuant to Article 7 of this Agreement, initial discussions to review the schedules of commitments under this Agreement has started.

 

Mutual Recognition Arrangements

Mutual Recognition Arrangements (MRAs) forms another important area of ASEAN cooperation on trade in services. MRAs are enabling tools to allow mutual recognition of qualifications of professional services suppliers by signatory ASEAN Member States to facilitate mobility of professional services providers in the region.

At present, ASEAN has concluded MRAs in 7 (seven) professional services:

ASEAN Member States are actively implementing these MRAs, which are now in various stages of progress.