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Asean free-trade plan

gets shot in the arm

SINGAPORE: Asean has moved closer toward the creation of a free-trade area with new pacts to slash tariffs on politically sensitive farm products and offer fresh incentives to regional manufacturing ventures.

Officials said the twin moves by trade ministers of the Association of Southeast Asian Nations (Asean) over the weekend underlined the seriousness of the seven-nation grouping to forge a free-trade area by 2003.

"So long as we ensure that whatever we do is market-driven, then we are making progress in efforts to achieve the Asean Free Trade Area (AFTA)," said Malaysia's international trade and industry minister Rafidah Aziz.

ASEAN, comprising Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, started dismantling tariffs in 1992, beginning with manufactured products, under the AFTA plan.

The trade ministers agreed in talks which ended here Saturday to slash tariffs by 2010 on "sensitive" items, notably 15 lines of unprocessed farm products, although future rates still have to be negotiated.

The deadline ended uncertainty on how long the politically-sensitive products, including rice, sugar and soyabean, will remain untouched by tariff reductions.

Indonesia, the largest member, had shown the most resistance to freeing up trade on these products.

"Obviously, the agreement on non-processed agricultural products is significant because of the differing opinions among member countries in the past," Thailand's deputy prime minister Amnuay Virawan said when asked about the biggest achievement of the talks.

By 2003, most products to be traded within Asean, now the world's fastest-growing economic region, will have tariffs of zero to five percent.

In a joint statement, the trade ministers urged Asean members to aim even higher -- zero tariffs on most products by 2003.

AFTA is being implemented through a Common Effective Preferential Tariff (CEPT) scheme, which lays out the timetable for lowering regional tariffs.

Intra-Asean exports totalled 70 billion US dollars in 1995, of which 84.7 percent were CEPT-covered products.

The trade ministers also signed the Asean Industrial Cooperation (AICO) scheme allowing companies in the region to enjoy tariff rebates if they set up joint ventures to produce manufactured goods.

The products would enjoy zero to five percent tariffs under AICO, which replaces earlier agreements that drew limited support from companies.

Asean Secretary General Ajit Singh said that the scheme, "equivalent to an accelerated AFTA benefit," would be launched in about two months following ratification by member countries.

Officials said that at least two companies in different Asean countries are needed to form an "AICO arrangement," adding that applications by companies would require the approval of national authorities of the participating countries.

The companies must be incorporated and operating in an Asean country and have at least 30 percent national equity.

"The idea is to accelerate the process of free trade among selected industries to an earlier date rather than wait for 2003," Thai deputy premier Virawan said.

The incentive scheme is flexible too, he added.

"If for example Malaysian conglomerate Sime Darby has a 100-percent-owned company in Indonesia, this company will qualify because its Asean content is high."

Officials said that the AICO scheme would also encourage investments from non-Asean sources, like Western and Japanese multinational companies already involved in joint ventures with local partners.

The Asean ministers also reported progress in setting up a dispute-settlement mechanism, eliminating non-tariff trade barriers and further streamlining customs procedures in the region.-AFP