Sapporo, Japan, 5-6 June 2010

“On the Road to the ASEAN Economic Community 2015″

At the outset, allow me to kindly convey the ASEAN Secretariat’s gratitude and appreciation to the Government and People of Japan for the warm hospitality extended to us at this meeting of the APEC Ministers Responsible for Trade (MRT). It is indeed a great pleasure for the ASEAN Secretariat to once again participate in this very important APEC event and present to the Ministers the key developments in ASEAN.

At the meeting of the APEC MRT last June, the ASEAN Secretariat reported on the responses taken by ASEAN and its Member States to quicken their recovery from the global financial crisis. We informed the Ministers that compared to the Asian Financial Crisis of 1997-98, ASEAN economies were better prepared and positioned to face the global financial crisis as the lessons learned from the last crisis have made them stronger and more resilient to weather the negative impact of the crisis. As a result of coordinated and timely stimulus measures implemented by various Member States, ASEAN managed to grow by 1.5 percent in 2009. For 2010, ASEAN is poised to achieve an average economic growth rate of between 4.9 percent and 5.6 percent. This positive outlook for 2010 would not only be a fitting cap to a year marked by important integration milestones for ASEAN but would also give the impetus for ASEAN to complete its 2015 economic integration agenda.

Developments in ASEAN

The turn of the decade is turning out to be significant for ASEAN for several reasons. First is the realisation of the ASEAN Free Trade Area (AFTA). As of 1 January 2010, tariffs on more than 99 percent of the total number of tariff lines have been eliminated by ASEAN-6, i.e. Brunei Darussalam, Indonesia Malaysia, the Philippines, Singapore and Thailand; and reduced to the 0-5 percent tariff range by Cambodia, Lao PDR, Myanmar and Viet Nam. Average ASEAN tariffs have dropped from 6 percent in 1997 to about 1 percent in 2010. For ASEAN-6, the original signatories of the 1992 Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area (CEPT-AFTA) Agreement, average tariffs have gone down from 12 percent in 1993 to 0.05 percent in 2010. Clearly, for a region with diverse levels of economic development, the realisation of AFTA could be considered as the most tangible high-impact outcome of ASEAN economic integration to date.

Second is the realisation of the free trade arrangements ASEAN had negotiated with its Dialogue Partners. These include the realisation of the ASEAN-China Free Trade Area (ACFTA) and the ASEAN-Korea Free Trade Area (AKFTA), and the entry into force of the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) and the ASEAN-India Trade in Goods Agreement on 1 January 2010. Under the ACFTA and the AKFTA, at least 90 percent of all tariff lines are now subject to zero tariffs when traded between ASEAN-6 and, China or Korea.

Third is the Chiang-Mai Initiative Multilateralisation (CMIM) of the ASEAN Plus Three countries of China, Japan and South Korea. Since 24 March 2010, US$ 120 billion have been made available to assist any of the ASEAN Plus Three Countries should they be confronted with short-term balance of payment liquidity problems. The Finance Ministers from the ASEAN Plus Three countries have also recently launched the US$ 700 million Credit Guarantee Investment Facility (CGIF) to support bond market development. The ASEAN Plus Three countries are now working on the establishment of an independent surveillance office for the CMIM in Singapore.

Fourth is the entry into force of the ASEAN Trade in Goods Agreement (ATIGA) on 17 May 2010. ATIGA is the end-result of efforts to transform the 1992 CEPT Agreement into a comprehensive trade in goods agreement – covering trade liberalisation and trade facilitation – consistent with the Trade in Goods agreement/chapter in ASEAN’s free trade agreements with dialogue/trading partners. The ATIGA provides the legal framework for ASEAN Member States to implement trade liberalisation and facilitation initiatives to achieve the free flow of goods component under the ASEAN single market and production base.

The impact of economic integration in ASEAN is manifested in the expansion of ASEAN trade albeit the region’s vulnerability to external shocks. The steady increase in ASEAN trade has only been affected by the impact of the 1997 Asian financial crisis and the 2008 global economic meltdown. ASEAN’s total trade increased from US$1.6 trillion in 2007 to US$1.7 trillion in 2008 but took a slight dip to US$1.5 trillion in 2009.

ASEAN’s Current Priorities

ASEAN’s economic integration agenda is driven mainly by its ultimate goal to realise the ASEAN Economic Community (AEC) by the 2015 target date set by the ASEAN Leaders. This agenda would transform ASEAN into a single market and production base, and a highly competitive economic region that is fully integrated into the global economy. To achieve these goals, ASEAN has to successfully implement the key Agreements that provide the basis for ASEAN realising the free flow of goods, services and investment: the ASEAN Trade in Goods Agreement (ATIGA); the ASEAN Framework Agreement on Services (AFAS) and its related Protocols; and the ASEAN Comprehensive Investment Agreement (ACIA). The successful implementation of these three Agreements would already provide the solid foundation for the realisation of the AEC by 2015.

Trade facilitation remains high in the economic integration agenda of ASEAN. This will include simplification and harmonisation of customs procedures, working towards the full establishment of the National Single Windows that would provide the platform for the ASEAN Single Window, harmonisation of standards and technical regulations and the full implementation of Mutual Recognition Arrangements (MRAs), among others.

A top priority for ASEAN for 2010 is the Master Plan on ASEAN Connectivity, which is being developed by the High Level Task Force on ASEAN Connectivity to expand and enhance intra- and extra-regional linkages in key areas, such as, physical infrastructure including transport, energy and information and communications technology (ICT); institutional connectivity comprising among others trade liberalisation and facilitation in the areas of goods, investment and services; and people-to-people connectivity. To support ASEAN’s connectivity efforts, an infrastructure fund is also being explored in tandem to finance infrastructure development critical to connect and integrate not only ASEAN Member States but also ASEAN with the rest of the region and, ASEAN with the rest of the world.

Integrating ASEAN into the regional and global economy continues to be a top priority. This would be achieved through the successful implementation of ASEAN free trade agreements with major dialogue/trading partners, such as, China, Japan, Korea, India and, Australia and New Zealand. With two FTAs (e.g. China and Korea) almost completed and with the rest (e.g. Japan, Australia and New Zealand, and India) in full swing, consolidation is the next logical action to take. As mandated by the ASEAN Leaders, Member States are currently looking into the recommendations for an East Asia Free Trade Area (EAFTA) and Comprehensive Economic Partnership in East Asia (CEPEA) as put forward by Track Two experts, particularly in the priority areas of rules of origin, tariff nomenclature, customs-related matters and ec

onomic cooperation.

ASEAN and APEC

ASEAN and APEC share similar goals and aspirations. Priorities are alike although these are being pursued differently. Regional economic integration that goes beyond trade liberalisation and facilitation, structural reforms, connectivity, food and energy security, disaster management and counter-terrorism are some of the common areas of cooperation. The AEC, once achieved in 2015, will be a big boost to the Bogor Goals especially when developing APEC economies have been given until 2020 to liberalise trade and investment.

Both ASEAN and APEC also share similarities in their approach to the integration process, focusing on internal integration, removing all impediments for the free flow of goods, services and investments, as well as providing emphasis to integrating globally. ASEAN and APEC are fully aware of external shocks, both financial and non-financial, that could derail the integration process and the need for sustainable recovery and development for steady economic growth. The ASEAN Leaders at the 16th ASEAN Summit on 9 April 2010, noting this, issued a Statement on Sustained Recovery and Development and a Joint Response to Climate Change.

On the evolving global economic landscape, it is notable that the Asia-Pacific region, with its dynamic economies, has been a key driver of economic growth across the world, supported by preferential trade agreements not only with one another but with countries outside the region as well. The macroeconomic foundations of the region are strong and the region is expected to continue the positive economic growth in succeeding years.

Regionalism in the Asia-Pacific region is taking root despite the challenges that include protracted multilateral trade talks, climate change, food and energy security issues and, the global dislocations caused by the current financial crisis. The regional architecture in East Asia is also evolving and is dynamic. ASEAN, with its more than four decades of regional cooperation and integration, continues to be the hub and centre for East Asia cooperation and integration buttressed by its own community building efforts and its strong links with the major economies of the world and the region, which include several members of APEC. ASEAN will continue to play this role with aim of bringing about mutual gains to all partners.

Given the similar goals, agenda and aspirations of ASEAN and APEC, the ASEAN Secretariat values the partnership with the APEC Secretariat in moving forward our respective cooperation and integration objectives. We will continue to collaborate with the APEC Secretariat in joint efforts towards a stronger and more dynamic Asia-Pacific region.

Thank you.