1. The thrust of ASEAN economic cooperation can be summarised thus:

(i) the implementation of the ASEAN Free Trade Area (AFTA);

(ii) the development of the region into a global base for the manufacture of value-added and technologically sophisticated products geared towards servicing the region and world markets; 

(iii) the enhancement of the industrial efficiency of the region through exploiting complementary location advantages based on the principles of market sharing and resource pooling;

(iv) the enhancement of the attractiveness of the region for investment purposes and as a tourist destination; 

(v) cooperation in enhancing greater infra-structural development which will contribute towards more efficient business environment; and

(vi) ensuring that the rich resources (minerals, energy, forestry etc) of the region are exploited effectively and efficiently.

2. The 30th AMM/PMC is being held amidst continued economic development of the region. Over the past year, ASEAN economies continued to demonstrate their dynamism and competitiveness. Economic growth in ASEAN is forecast to reach between seven and eight per cent in 1997 bolstered by investment, exports and consumer spending. Inflation is expected to ease from 4.8 per cent in 1996 to 4.6 per cent this year.

3. In 1996, intra-ASEAN trade continued to grow in spite of the slowdown of exports experienced by some Member Countries. For the first three-quarters of 1996, intra-ASEAN exports of all products reached US$56.078 billion. This was 10.62 per cent higher than the US$50.696 billion of intra-ASEAN exports during the same period in 1996.

4. With the admission of Laos and Myanmar, ASEAN will have a combined population of 481.2 million people and a total GDP of US$632.5 billion, a GDP per capita of US$1,314 and combined exports of about US$339.2 billion.

5. ASEAN is a major investor in Laos and Myanmar. As of the first quarter of 1997, ASEAN accounted for 52% of the total foreign investment in Laos. As of August 1996, ASEAN accounted for 44 per cent of the total foreign direct investment in Myanmar.

6. Under the terms of their admission, both Laos and Myanmar will extend, on a reciprocal basis, Most Favoured Nation (MFN) treatment to all Member Countries and ensure transparency in all their trade regimes on goods and services by keeping all ASEAN Members informed of their laws and regulations and subsequent changes.

7. To support and complement national development plans of countries in the Mekong Basin and mobilise the participation of the private sector, ASEAN Ministers signed the Basic Framework on ASEAN Mekong Basin Development Cooperation in June 1997 in Kuala Lumpur. Among the on-going efforts in this area is a feasibility study for a trans-Asia Rail Link to connect Kunming in China with Singapore.

ASEAN Free Trade Area

8. This year marks the halfway point of the implementation of the CEPT Scheme for AFTA. As of 31 May 1997, Member Countries have included 42,253 tariff lines into the CEPT Scheme representing 91 per cent of all tariff lines in ASEAN. Average tariff rates for products in the Inclusion List have now fallen to 6.38 per cent from 12.7 per cent in 1993.

9. With the participation of Laos and Myanmar, the inclusion list under the CEPT Scheme will increase from 42,253 lines to about 45,119 tariff lines or about 81 per cent of the total tariff lines in ASEAN.

10. Laos and Myanmar are expected to participate in the CEPT Scheme beginning 1 January 1998 and to complete their commitments under the CEPT Scheme by 1 January 2008. They are required to undertake a comprehensive programme of tariff reduction to 0-5 per cent within 10 years. Laos and Myanmar have submitted their respective initial Inclusion List of products for the CEPT Scheme. The initial package of tariff reduction for Laos accounts for about 15 per cent of her total tariff lines. About 45 per cent of these tariff lines are in the machinery and electrical appliances sector and about 20 per cent in the optical, precision and musical instruments sector.

11. Myanmar has submitted the full package of Inclusion List, Temporary Exclusion List, Sensitive List and General Exception List. The initial Inclusion List accounts for about 43 per cent of the total tariff lines. About 20 per cent of these tariff lines are Base Metal and Metal articles and 14 per cent are in the machinery and Electrical Appliances sector. Products from the Optical, Precision and Musical Instruments sector, the Chemical sector and Agricultural Sector account for nine per cent.

12. A great deal of progress has been made in eliminating non-tariff barriers in the past year. ASEAN removed all customs surcharges on CEPT products at the end of 1996. In the area of technical barriers to trade (TBTs), a list of 20 priority product groups for standards harmonisation has been identified. In addition, some Member Countries are concluding mutual recognition agreements on a bilateral basis.

13. In the area of customs cooperation, ASEAN has agreed on the harmonisation of tariff nomenclature at the Harmonised System (HS) 8-digit level, adoption of the GATT Valuation Agreement and harmonisation of customs procedures. This commitment was further strengthened with the signing of he ASEAN Agreement on Customs on 1 March 1997 at the first ASEAN Finance Ministers’ Meeting. The Agreement provides a legal framework by which cooperative activities in this area will be governed.

ASEAN Industrial Cooperation Scheme

14. The new ASEAN Industrial Cooperation Scheme (AICO), which become operational in November 1996, is also aimed at attracting capital investments through the granting of preferential tariff rates and other non-tariff incentives. A number of applications are being processed at the moment. They include products in the automotive sector, electrical appliances and food processing.

Investment

15. Following the decision of the Fifth ASEAN Summit in 1995, to establish a regional arrangement on investment, ASEAN is currently drafting the Framework Agreement on the ASEAN Investment Area (AIA) which is expected to be ready by the 30th ASEAN Economic Ministers Meeting in 1998. Significant progress has been achieved in implementing the 1996-1998 Work Programme to execute the Plan of Action on Cooperation and Promotion of Foreign Direct Investment and Intra-ASEAN Investment. Projects under the existing Work Programme include, among others, human resources development, a series of joint promotion events in Asia and Europe, high-level strategic planning meetings, improving the 1987 ASEAN Agreement for the Promotion and Protection of Investment and the undertaking of a comprehensive survey on the regulations and subsequent changes thereof.

Finance

16. Cooperation in the field of finance also made notable progress with the implementation of the Ministerial Understanding on Finance Cooperation and the ASEAN Agreement on Customs signed early this year. The MU provides a framework for enhancing cooperation in banking, financing and capital market development, customs matters, insurance matters, taxation and public finance matters, monetary policy cooperation and human resources development in the area of finance. The ASEAN Agreement on Customs is expected to facilitate greater intra-regional trade and investment flows. These instruments will help ASEAN expedite its integration process and support the early realization of the various existing regional arrangements and schemes.

Services

17. ASEAN Member Countries have agreed to enhance economic cooperation in this new area and to liberalise trade in services. The ASEAN Framework Agreement on Services was signed during the Fifth ASEAN Summit in Bangkok. At the Summit, it was agreed that the process of negotiations shall commence on 1 January 1996 and end on 31 December 1998. The negotiation will aim to secure greater commitments on increased market and national treatment from Member Countries in the seven priority sectors – air transport, business services, construction, financial services, maritime transport, telecommunications and tourism. A Coordinating Committee on Services has already been established with seven working groups under it. Member Countries have exchanged information on their General Agreement on Trade in Services commitments and service regimes. An initial package of offers is scheduled to be finallsed before October 1997 for implementation no later than 31 March 1997.

18. As ASEAN Member Countries strive towards the next level of economic development, apart from the need to ensure continuous investment capital inflow of new or up to date manufacturing technology. It is important that ASEAN continuously upgrades its technological competitiveness in order to sustain its high economic growth. It is in this respect that there is a strong and urgent need for ASEAN to strengthen its intellectual property legislation, administration and enforcement.

Intellectual Property

19. Greater cooperation amongst ASEAN Member Countries in the area of intellectual property will increase the confidence of owners of technology that their ideas and technology are sufficiently protected in the region. Thus, Member Countries signed the ASEAN Framework Agreement on Intellectual Property Cooperation during the Fifth ASEAN Summit. A Programme of Action for 1996-98 to carry out the activities of the Framework Agreement has been adopted. Among the activities are measures to enhance and strengthen intellectual property enforcement, protection, administration, legislation and awareness of Intellectual Property among the general public.

Regional Linkages

20. ASEAN is committed to the principle of open regionalism, and a rules-based multilateral trading system. ASEAN also wants to further encourage more trade and investment flows between itself and other regional groupings. In line with this, ASEAN has established inter-regional links with the Australia-New Zealand Common Economic Relations Trade Agreement (ANZCERTA or CER) and is seeking to expand these linkages to include other regional groupings such as the Mercado Comun del Sur (MERCOSUR), the European Free Trade Association (EFTA) and the Southern African Development Community (SADC). Our trade with many of these other regional groupings is still quite small. For example, in 1995 total trade with the MERCOSUR countries was only about $ 4.8 billion representing less than 1 percent of ASEAN’s total trade. However, with the development of these regional linkages we expect to further diversify our trade and investment partners.

21. The First Consultation between the ASEAN Economic Ministers (AEM) and the Ministers from the CER countries in September 1995 agreed on a number of concrete measures to facilitate trade and investment flows between the two regions. These activities included creation of a customs compendium, information exchange on standards and conformance including collaborative work on ISO 14000 and linkages of trade and investment databases.

22. At the Second AEM-CER Consultation held on 13 September 1996 in Jakarta, the AEM and CER Ministers signed a Memorandum of Understanding to further enhance regional cooperation in the area of standards and conformance. They also agreed on additional activities for trade and investment facilitation including:

(i) joint studies to examine the medium to long-term development of the AFTA-CER linkage;

(ii) regular exchange of information on the latest developments of ASEAN economic cooperation activities and in the CER;

(iii) cooperation in services such as transport and tourism.

23. The AEM met with the Ministers from the MERCOSUR, SADC and EFTA countries during the WTO Ministerial Conference in Singapore. During the consultations with EFTA, MERCOSUR and SADC in Singapore, the Ministers agreed on the need to promote greater trade and investment flows, to exchange views on international trade issues and to bring the private sectors of ASEAN and these other regional groupings together. Follow-up meetings among the Ministers will be held in October 1997 in Kuala Lumpur with CER and SADC. The Meeting with MERCOSOR to discuss the progress of linkages will be held in November 1997.