The services sector makes a significant contribution to total output in the economics of the ASEAN Member Countries. As is shown in Table 6, the services sector contributes between 46% to 72% of Gross Domestic Product (GDP). By 1993, the services sector is bigger than the manufacturing sector in all ASEAN countries culminating a long-term process of growth.
Table 6
SHARE OF SERVICE AND INDUSTRIAL SECTOR IN GDP, 1993
(in Per Cent)
| Country | Services | Industry |
|---|---|---|
| Brunei Darussalam | 51 | 48 |
| Indonesia | 50 | 31 |
| Malaysia | 46 | 38 |
| Philippines | 53 | 25 |
| Singapore | 72 | 28 |
| Thailand | 58 | 30 |
Source: Asian Development Bank
Commitments made By Member Countries Under GATS
The Uruguay Round brought trade in services into the negotiating table for the first time. ASEAN Member Countries have made commitments to liberalise some of their services sectors under the (General Agreement on Trade in Services (GATS). Table 7 gives us a summary of the broad sectors where Member Countries have made some commitments under this agreement. The sectoral commitments refer to commitments on market access and National Treatment’ for a service sector, or more accurately, a listing of the limitations on such commitments.
Table 7
SECTORS WHERE ASEAN MEMBER COUNTRIES HAVE MADE COMMITMENTS UNDER THE GATS
| Country | Sectors Where Commitments Have Been Made Under the GATS |
|---|---|
| Brunei Darussalam | Business services, communication, finance, and transport. |
| Indonesia | Business services, transport, tourism, and finance. |
| Malaysia | Business services, communication construction, finance, health-related services, tourism, recreational services, and transport. |
| Philippines | Transport, communication, finance, and tourism. |
| Singapore | Business services, finance, tourism, communication, construction and transport. |
| Thailand | Business services, communication, construction, distribution, education. environmental services, finance, tourism, recreational services and transport. |
Source: Schedules of Commitments by Member Countries under the General Agreement on Trade in Services.
There are still ongoing negotiations under the auspices of the World Trade Organization (WTO) to finalise agreements in the important areas of financial services, maritime transport and telecommunications. It is expected that the agreements reached in these areas would result in still greater market access commitments in these sectors.
ASEAN Initiative in the Area Of Services
Given the importance of the services sector in ASEAN and the global trend towards increasing liberalisation of trade in services, it does not come as a surprise that ASEAN has turned its attention to the services sector. In their Meeting in Chiang Mai in September of 1994, the ASEAN Economic Ministers agreed on the need to improve regional cooperation in the area of services so as to enhance the competitiveness of ASEAN service suppliers as well as to liberalise trade in services. The liberalisation in trade in services is to be achieved by Member Countries making commitments beyond those they made in the General Agreement on Trade in Services (GATS) and will aim at creating a free trade area in services in the long run.
A free trade area in services in ASEAN will complement the achievement of AFTA which is a free trade area in goods. One of the objectives of AFTA is to increase the competitiveness of ASEAN industries. A more liberal trading regime in services in ASEAN will increase the degree of competition among service suppliers in the region and make them more cost efficient thereby benefiting those who consume their services. Since typically industrial firms require various types of services as intermediate inputs, once these costs savings are passed on to industry, this will lower the cost of production of ASEAN industries and make them even more globally competitive.
An Ad-hoc Working Group on Cooperation in Services was created under the ASEAN Senior Economic Officials, to draft a Framework Agreement on Services. The Agreement should embody both regional cooperation to enhance the competitiveness of ASEAN service suppliers and liberalisation in trade in services. The Ad-hoc Working Group on Cooperation in Services has identified several ways in which intra-regional cooperation can enhance the Competitiveness of ASEAN service suppliers. These cooperation efforts can take the form of:
- establishing or improving infrastructure facilities;
- Joint production, marketing and purchasing arrangements;
- research and development; and
- exchange of information.
Some of the areas identified by the Working Group where ASEAN can deepen their cooperative efforts include tourism, financial services, construction, business services and transport.
As far as liberalisation of trade in services is concerned, the goal of the Framework Agreement is to provide preferential treatment to ASEAN service suppliers. These preferential commitments will be negotiated sectorally, and the agreements reached by Member Countries in those sectors will be appended to the Framework Agreement and be considered an integral part of it.
The negotiation of specific commitments is designed to cover all sectors but some priority sectors have been identified for initial negotiation. These are financial services, telecommunication, maritime and air transport, construction, tourism and business services. The negotiations are scheduled to be launched on 1 January 1996 after the Framework Agreement is signed at the Fifth ASEAN Summit in Bangkok.
October 4th, 2012
