An Introduction

1. Recognizing that the ever changing world economic environment continue to pose new challenges as well as provide new opportunities, ASEAN needs to adjust its program for economic cooperation. The conclusion of the Uruguay Round negotiations; the implementation of the WTO commitments by ASEAN member countries; the implementation of the CEPT Scheme for AFTA and the eventual implementation of the APEC Action Agenda on trade and investment liberalization and facilitation ; has and will change the global economic landscape including ASEAN. ASEAN also realized that some of the parameters upon which its existing industrial cooperation programs were designed are no longer valid to-day.

2. With the view to enhancing ASEAN's industrial competitive edge and maintain the attractiveness of ASEAN as an investment region and a premier global production base, ASEAN began looking for a new form of industrial cooperation scheme to replace the ASEAN Industrial Joint Venture (AIJV) and the Brand-to-Brand Complementation (BBC) Schemes. Learning from the shortcomings of these two schemes, the new scheme will retain some of the features of the BBC and AIJV scheme but will offer more in terms of tariff and non-tariff incentives. The new ASEAN industrial cooperation scheme shall be based on the CEPT Scheme for AFTA; promote investment from technology-based industries and enhance value added activities.

3. Towards this end, the new ASEAN industrial cooperation scheme have the following objectives:

i. Increased ASEAN industrial production

ii. Closer ASEAN integration

iii. Increased investments from ASEAN and non-ASEAN sources

iv. Increased intra-ASEAN trade

v. Improved economies of scale in production and scope

vi. Enhanced technology base

vii. Internationally competitive ASEAN industries

ix. Increased private sector participation

x. Increased industrial complementation.

4. The new industrial cooperation scheme shall operate on the following principles:

i. Mutually beneficial and equitable

ii. CEPT-AFTA based

iii. Simplified and uniform application, approval and administrative procedure

iv. Private sector driven

v. Be attractive and manageable to SMEs

vi. Offer incentives other than tariff and local content accreditation

vii. Promote resource pooling and sharing

viii. Regionally acceptable and workable.

What is the AICO Scheme ?

5. The AICO Scheme is the latest industrial cooperation program of ASEAN to promote joint manufacturing industrial activities between ASEAN-based companies.

6. A minimum of two companies in two different ASEAN countries are required to form an "AICO Arrangement".


What is an AICO Arrangement ?

7. An AICO Arrangement is a cooperative arrangement consisting of a minimum of two participating companies from two different ASEAN countries. It is not a legal entity but merely an "umbrella association" under the scheme wherein the output of the participating companies will enjoy a preferential tariff rate in the range of 0-5%.

8. An AICO Arrangement should involve not only the physical movement of products between the participating companies and countries but also resource sharing/pooling and/or industrial complementation.

AICO Privileges

9. The major privilege of the new scheme is that approved AICO products, output of an AICO Arrangement, shall enjoy preferential tariff rates of 0-5% immediately upon its approval. The 0-5% tariff represents the final CEPT rate to be reached by ASEAN by year 2003. Thus with the immediate application of the 0-5% preferential tariff rate, this will provide a head start to AICO products compared to non-AICO products. Other incentives includes local content accreditation where applicable and other non-tariff incentives to be provided by the participating member countries.

10. Under the AICO Scheme, an approved AICO Products may be in the form of finished products, intermediate parts and components or raw materials. In any AICO Arrangement the AICO Products are categorized as AICO Final Products; AICO Intermediate Products and/or AICO Raw Materials. The AICO Final Products which represents the final output of a specific AICO Arrangement shall have unlimited access into the market of the participating countries. The AICO Intermediate Products and/or AICO Raw Materials in a specific AICO Arrangement while on the one hand can enjoy the same 0-5% preferential tariff rate, have limited market access. These products may only be imported and used as inputs in the manufacture of the approved AICO Final Products in a particular AICO Arrangement.


Why should your company participate

11. The AICO Scheme offers participating companies tariff privileges and other incentives. The major privilege of the new scheme is that AICO products, upon their approval shall immediately enjoy preferential tariff rates of 0-5%. Other incentives include local content accreditation where applicable, and other non-tariff incentives to be provided by the participating countries.

12. The preferential tariff rate will also be applicable to the importation of intermediate products and/or raw material inputs for the manufacture of an AICO Final Product and/or AICO Intermediate Products.


Eligibility Criteria

13. To form an AICO Arrangement, the prospective companies must fulfill the following criteria:

- be incorporated and operating in any ASEAN country

- have a minimum 30% national equity

- undertake resource sharing/pooling, or industrial complementation or other industrial cooperation activities that are accepted by the participating country.

14. Although the national equity condition is imposed as a criterion, the equity condition is not as stringent as the AIJV. The AIJV requires a minimum of two ASEAN countries equity participation contributing at least 40% to the total equity of that AIJV entity and that each of the participating country must hold a minimum of 5%. Under the AICO Scheme, national equity holding of one ASEAN member country in each of the participating company is sufficient. Since two companies are required to form an AICO Arrangement, each company must have its own national equity holding.

15. For companies that cannot meet the equity condition, a waiver is possible if the proposing company meets other criteria imposed by the participating country in lieu of the 30% national equity.


What type of companies can participate ?

16. The new scheme will initially be applicable to manufacturing companies only. Enabling provisions has been incorporated in the draft agreement of AICO Scheme to expand the scheme to other sectors at a later stage.


Product Coverage

17. The scheme shall cover all products except those products falling under Article 9 (General Exception) of the Agreement on CEPT Scheme.


Other Privileges

18. The incentives under the AICO Scheme includes:

(i) Local content accreditation where applicable

(ii) Investment incentives offered by the relevant national authorities.

Application Procedure

18. The prospective company shall apply to their respective national authorities to form an AICO Arrangement by providing the following:

i . proof of legal incorporation

ii. identification of products and partner company

iii. documentary proof of resource sharing/pooling; industrial complementation or industrial cooperation

19. All applications will be processed and the results known within 60 days of submission. The ASEAN Secretariat shall issue the Certificate of Eligibility (COE) to the participating companies within 14 days of receipt of approval by the participating countries. The AICO privileges will then be granted to approved AICO Products within 60 days thereafter.

20. A more detailed explanation on the scheme including its operational procedures will be published by the ASEAN Secretariat soon.


Further Information

For more information please call or write to:

Director
Bureau of Economic Cooperation
ASEAN Secretariat
Jakarta
Fax: 6221 - 7398234 / Tel: 6221 - 7262991

Or the following National Authorities:

Brunei Industrial Development Authority
Ministry of Industry and Primary Resources
Brunei Darussalam
Fax: 6732 - 381687 / Tel: 6732 - 382846

Director General,
International Trade
Ministry of Industry and Trade
Indonesia
Fax: 6221 - 5252482 / Tel: 6221 - 5252482

Secretary-General,
Ministry of International Trade and Industry
Industrial Policy Division
Malaysia
Fax: 603 - 6512302 / Tel: 603 - 6510033

Executive Director,
Technical Service Group
Board of Investments
Philippines
Fax: 632 - 8953978 / Tel: 632 - 8976682

Director,
International Business Development Division,
Economic Development Board
Singapore
Fax: 65 - 3396077 / Tel: 65 - 3362288

Director of Foreign Relations Division
Office of the Permanent Secretary,
Ministry of Industry,
Thailand
Fax: 662 - 2023088 / Tel: 2023085

International Cooperation Department
Ministry of Industry
Vietnam
Fax: 844 - 265303 / Tel: 844 - 8260411