Singapore, 17 February 2011

“Towards a Vibrant ASEAN Economic Community 2015″

H.E. Lee Yi Shyan, Minister of State for Trade and Industry, Singapore

Dr. Alain Khaiat, Chairman of ASEAN Cosmetic Association

Mrs Le Chau Giang, President of the ASEAN Cosmetics Association

Distinguished Speakers and Participants

Ladies and Gentlemen

Good morning!

At the outset, let me congratulate the ASEAN Cosmetic Association for hosting this inaugural Cosmetic Leaders Forum with the theme of “Towards the ASEAN Economic Community”. This is indeed timely given the critical role of the private sector in driving ASEAN economic integration. ASEAN’s influence in the region and the world is gaining much traction due to its resilience during the recent financial crisis, concerted community building efforts in a rules-based setting and the central role it is playing and will play in the dynamic and evolving regional architecture comprising major players of the world.

I would also like to take this opportunity to thank the ASEAN Cosmetics Association for the invitation to me to deliver the opening remarks at this important forum. In many ways, I am highly encouraged by the leadership shown by the Association in holding this event and its role in forging and promoting integration of the cosmetic sector contributing towards the realisation of the ASEAN Economic Community (AEC) by the year 2015. In fact, I have no hesitation to say that the cosmetic industry is the most engaged with the public sector in ASEAN and serves as a model for other industries in ASEAN.

The ASEAN Leaders envisioned the AEC to be a dynamic and highly competitive single-market and production base which will be characterised by free flow of goods, services, investment, skilled labour, and freer flow of capital. The AEC aims to increase the prosperity of the region, create equitable economic development, and promote sustainable development thereby reducing poverty and socio-economic disparities within and across ASEAN Member States.

Achievements and Progress of the AEC

Let me take a few minutes to highlight to you the achievements and progress we are making towards the AEC of relevance to the cosmetic industry in the region.

The AEC has completed its first phase of implementation of measures for the period 2008-2009, and progressed to the second phase of implementation covering the period 2010-2011 under the AEC Blueprint. Two more phases are scheduled for implementation till the targeted realisation of the ASEAN Economic Community (AEC) in 2015.

Free Flow of Goods

In the area of free flow of goods, the ASEAN Trade in Goods Agreement (ATIGA), a single document that covers both the liberalisation and facilitation aspects, entered into force on 17 May 2010. It is an ASEAN Free Trade Area (AFTA) Plus agreement that provides predictability, consistency, and transparency for trade in goods and serves as a legal basis for dispute resolution for businesses in ASEAN. It will support the realisation of free flow of goods within ASEAN.

ASEAN has also achieved good progress in tariff liberalisation. As of 1 January 2010, Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, and Thailand have eliminated tariffs for imports of ASEAN originating products on 99.65% of trade tariff lines. Cambodia, Lao PDR, Myanmar, and Viet Nam have reduced tariffs on 98.86% of their traded lines to within the range of 0-5%. Average intra-ASEAN tariff for ASEAN-6 (Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand) have been reduced from 12.76% in 1993 to 0.05% on 1 January 2010. Average intra-ASEAN tariff among all ten ASEAN Member States was 1.06% in 2010.

In order to facilitate intra-regional trade and goods clearance an ASEAN Single Window (ASW) is in the making supported by the National Single Windows (NSW) of Member States. To facilitate the development of the ASW, standards for the inter-connectivity and inter-operability of National Single Windows have been developed. ASEAN is now in the process of signing a Memorandum of Understanding on the ASW Pilot Project, which will allow the exchange, in a test environment, of the ATIGA Form-D and ASEAN Customs Declaration Document between participating Member States. This will form the basis for the ASEAN wide architecture of the ASW.

Customs is indeed a key component of free flow of goods in ASEAN as we build the Single Market and Production Base. ASEAN is updating the Customs Agreement signed in 1997 to accommodate the provisions of ATIGA to further promote trade facilitation and realise the free flow of goods. ASEAN will also be signing Protocol 7 on ASEAN Customs Transit System under the ASEAN Framework Agreement on Facilitation of Goods in Transit (AFAFGIT) soon to further support trade facilitation efforts.

Free Flow of Services and Skilled Labour

In the area of services, all ten ASEAN Member States have fulfilled the commitments for the 7th Package of Commitment under the ASEAN Framework Agreement on Services (AFAS). The Agreement contains commitments in at least 65 services sub-sectors. ASEAN is concurrently working on fulfilling their commitments for the 8th Package of Commitments that was signed in October 2010, which has higher levels of foreign equity participation.

On mobility of labour, ASEAN has concluded seven professional services MRAs in the areas of Engineering Services, Architecture Services, Nursing Services, Medical Practitioners, Dental Practitioners, Accountancy and Surveying. The respective bodies are at various stages of implementing these MRAs. ASEAN is also looking at an agreement on the Movement of Natural Persons in ASEAN.

Free Flow of Investments

In the area of investments, ASEAN Member States are currently completing their domestic procedures to enable the ASEAN Comprehensive Investment Agreement (ACIA) to enter into force soonest possible. The ACIA is a single investment document covering the liberalisation, promotion and protection of investments by ASEAN investors and ASEAN-based foreign investors. ASEAN is also working on an approach to reduce/eliminate investment restrictions in the effort to attract more investment, increase competition and benefit the economies of ASEAN.

ASEAN Cosmetics Industry

Let me now focus on the dynamic sector of cosmetics. ASEAN’s exports of cosmetic and toiletries comprising essential oils, perfumes, cosmetics and personal care amounted to US$5.07 billion in 2009 compared with almost US$5.0 billion in the previous year, an increase of 1.5%. Meanwhile, imports recorded a slight decline of 4.0% from US$4.79 billion in 2008 to US$4.59 billion in 2009. However, total imports of cosmetic and toiletries in 2009 were still higher than 2007 which was at US$3.96 billion. No doubt, the cosmetics industry in the region remained resilient despite the global economic downturn due to the financial crisis.

As all of us are aware, the domestic market is largely dominated by international brands, both through imports and by contract manufacturing for multinational companies. Although there is an encourag

ing sign in the growth of locally owned and produced cosmetics and personal care products, they have yet to gain significant market share domestically both at individual ASEAN Member States level and regionally. It is therefore important for industry players to work hand-in-hand with the ASEAN Member State governments in balancing the increase of FDIs and growth of locally owned and produced products in an increasingly borderless regional market.

In a broader perspective, despite our efforts to move towards free flow of goods by removing tariffs, there appears to be an inverse relationship between the reduction and elimination of tariffs and the increase in technical barriers to trade such as mandatory product regulations and conformity assessment procedures imposed on products in the context of protecting the interests of consumers at large at individual Member State’s level. This trend can become an obstacle to ASEAN’s goal of achieving free movement of goods within the region and a disincentive for the creation of an enabling environment that is conductive to attracting investments into the region. How could we achieve a balance of these conflicting interests?

The answer lies in the adoption of common standards, technical regulations and conformity requirements among Member States. This will reduce bureaucracy, boost investors’ confidence and increase investments and trade in the region. In the context of the cosmetics industry, the implementation of ASEAN Harmonised Cosmetic Regulatory Scheme, which is aimed at promoting product safety and the environment, is a laudable initiative by both the ASEAN governments and the industry. In fact, I would like to commend the cosmetic industry through its close engagement with the public sector for being instrumental in coming out with the ASEAN Cosmetic Directive – the first of such a directive in ASEAN. It is an historic document. The ASEAN Cosmetic Directive has served as a push for local companies to meet international regulations and increase competitiveness and providing for the opportunity to penetrate the regional and global markets. It is hoped that the momentum to increase the competitiveness of the cosmetic sector will continue through innovative initiatives propelled by public-private sector joint efforts.

ASEAN Cosmetic Industry and Intellectual Property Rights

The growth of the cosmetic industry is also dependent on having a good set of Intellectual Property Rights regulations and laws. This will ensure ASEAN remains as a competitive region where the cosmetic industry will thrive.

In this regard, the ASEAN Member States have taken unilateral measures to tackle counterfeiting activities, fake goods and copyright issues which are of concern to industries, including the cosmetics industry. However, intellectual property regulation without effective implementation is likely to be a toothless tiger in deterring these errant activities. It needs to be supported by public awareness and coordinated enforcement. Both local and multinational players could play a pertinent role in educating consumers and the general public on benefits of buying original goods, in particular the aspect of product safety for cosmetics. Industry players could also contribute to creating a coordinated approach to IP enforcement by identifying sources of key knowledge and expertise, sharing information and expertise, spreading best practice on the handling of IP rights violation, as well as establishing strategic coordination and liaison with enforcement agencies.

In this context, ASEAN has also made efforts to facilitate the application of intellectual property rights. The ASEAN Patent Search and Examination Cooperation (ASPEC) and the ASEAN IP DIRECT were two major deliverables in 2009-2010. ASPEC is the first regional patent cooperation project that will make it easier for entrepreneurs, particularly SMEs, and inventors to obtain patents on their innovations in the region. Meanwhile, ASEAN IP DIRECT is a directory of IP-related resources and services available in ASEAN Member States to serve as a useful and comprehensive “one-stop” resource for businesses and other interested parties. It provides information pertaining to ASEAN Member States’ IP legislation, dispute resolution bodies, sources for grants/loans and government incentives for investment in technology and R&D, technology transfer/licensing offices, rights management organisations and IP awareness and public education.

The private sector could also embark on improving support to the industry by increasing research and development (R&D) activities. ASEAN is currently developing the ASEAN Cosmetic Testing Laboratories Network and the private sector can provide support this initiative, for example in providing technical expertise.

ASEAN Cosmetic Industry and ASEAN Free Trade Agreements

Let me now touch on the external dimension of ASEAN integration, which is an important pillar of the AEC, which will plug ASEAN into the global economy. ASEAN has established free trade agreements with major trading partners namely China, Japan, Republic of Korea, India as well as Australia and New Zealand, which have been all realised in 2010.

Under the ASEAN-China Free Trade Area more than 89% of all tariff lines of ASEAN-6 and China could now be traded duty-free. The ASEAN-China Trade Negotiating Committee has recently established Working Groups on SPS and TBT to develop Chapters on SPS and TBT under the Trade in Goods Agreement. I would encourage the ASEAN Cosmetics Association and national industry associations to work with the respective ASEAN government agencies in this important effort.

As for the ASEAN-Korea Free Trade Area, the ASEAN-5 countries (Brunei, Indonesia, Malaysia, the Philippines and Singapore) and Korea have eliminated tariffs on almost 100% of products they have included in the Normal Track. With Japan, the ASEAN-Japan Comprehensive Economic Partnership Agreement is now in force and agreements on trade in services and investment are being negotiated. The ASEAN-India Trade in Goods Agreement also entered into force and both sides are currently negotiating agreements on trade in services and investment. The ASEAN-Australia-New Zealand which is also now in operation is the most comprehensive FTA agreement ASEAN has concluded and includes an SPS and TBT Chapters.

All these FTAs create a larger market for ASEAN products and services, attract foreign direct investments and promote economic co-operation that would help narrow the development gap among ASEAN Member States. Businesses are encouraged to take advantage of the opportunities provided by these FTAs. In this regard, I would also like to urge industry players in the region, through national industry groups and ASEAN Cosmetics Association, to play a more proactive role in developing common standards, technical regulation and conformity assessment requirements not only within ASEAN but also between ASEAN and FTA partners.

Conclusion

It goes without saying that it is the responsibility of both the ASEAN governments and business community in the region to nurture and develop our Leaders’ vision of a dynamic and thriving AEC into a reality by the year 2015. The ASEAN Member States are exerting maximum efforts to ensure the AEC is achieved in the year 2015. The Member States are also enhancing their national coordination mechanisms to support the economic community building efforts.

Meanwhile, inputs and feedback from the private sector on a continuous basis are important for ASEAN policy makers to assess the imp

act and effectiveness of the policies and measures undertaken. This is where the cosmetics industry has been playing an important role and will need to continue to play its part in progressing AEC 2015 goals. In this context, I would urge and encourage regional and national industry associations to further intensify efforts to achieve our common endeavour to create a fully integrated ASEAN single market and production base.

On this note, I wish all of you a fruitful forum.

Thank you.