1. The financial and economic crisis has severely affected the ASEAN economies and business dynamism in the region. In order to regain business confidence, enhance economic recovery and promote growth, the ASEAN Leaders are committed to the realisation of the ASEAN Free Trade Area (AFTA). In addition, the Leaders agreed on special incentives and privileges to attract foreign direct investment into the region. To enhance further economic integration of the region, the Leaders also agreed to further liberalise trade in services.

Acceleration of AFTA

2. To accelerate the ASEAN Free Trade Area (AFTA), the Leaders agreed that the six original signatories to the Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA) - Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand - would advance the implementation of AFTA by one year from 2003 to 2002. They also agreed to achieve a minimum of 90% of their total tariff lines with tariffs of 0-5% by the year 2000, which would account for 90% of intra-ASEAN trade.

3. Individually, each country would commit to achieve a minimum of 85% of the Inclusion List with tariffs of 0-5% by the year 2000. Thereafter, this would be increased to a minimum of 90% of the Inclusion list in the 0-5% tariff range by the year 2001. By 2002, 100% of items in the Inclusion List would have tariffs of 0-5% with some flexibility.

4. Member Countries also agreed to deepen, as soon as possible, tariff reduction to 0% and accelerate the transfer of products, which are currently not included in the tariff reduction scheme, into the Inclusion List.

5. The new members of ASEAN shall maximise their tariff lines between 0-5% by 2003 for Vietnam and 2005 for Laos and Myanmar; and expand the number of tariff lines in the 0% category by 2006 for Vietnam and by 2008 for Laos and Myanmar.

Short-Term Measures to Enhance ASEAN Investment Climate

6. In the area of investments, each ASEAN country has agreed to extend additional special privileges to qualified ASEAN and non-ASEAN investors in the manufacturing sector, for applications received from 1 January 1999 to 31 December 2000 and approved thereafter. These incentives cover the following seven areas:

1. minimum three year corporate income tax exemption or a minimum 30% corporate investment tax allowance;

2. 100% foreign equity ownership;

3. duty-free imports of capital goods;

4. domestic market access;

5. minimum industrial land leasehold period of 30 years;

6. employment of foreign personnel; and

7. speedy customs clearance.

Details of these measures are available in the attached ANNEX.

7. Highlights of the new measures offered by individual ASEAN countries include the following:

• Brunei Darussalam will allow 100% foreign equity in high-technology manufacturing and export-oriented industries.

• Indonesia offers wholesale and retail trade up to 100% foreign equity ownership to qualified investors, in addition to 100% foreign equity in all areas of the manufacturing sector. Indonesia has also reduced the processing time for approval in principle, for investments less than US$100 million, to 10 working days. In the banking sector, listed banks are open for 100% foreign equity ownership.

• Lao PDR offers duty exemption on imported capital goods required by the promoted investment projects.

• Malaysia allows 100 percent foreign equity ownership in all areas of manufacturing except for seven specific activities/products. No export conditions are imposed for all new investments, expansions and diversifications.

• Myanmar will extend minimum of 3 years corporate tax exemption to all investment projects in all sectors. In addition, Myanmar will also extend duty free import of raw materials to all industrial investments for the first three years of operation.

• Philippines is in the process of opening up retail trade and distribution business to foreign equity. In addition, the Philippines has opened private construction in the domestic market to foreign companies.

• Singapore has substantially reduced business costs as part of a cost reduction package that amounts to S$ 10 billion in savings in addition to extending 30% corporate investment tax allowance on a liberal basis to industrial projects and to selected service industries in respect of productive equipment.

• Thailand will allow 100% foreign equity ownership for manufacturing investment projects regardless of locations.

• Vietnam extends duty exemption on imported capital goods for all projects and on raw materials for projects located in mountainous or remote regions and for specially encouraged investments for the first 5 years of operation. Issuance of investment licenses for several types of projects has been reduced to 15 days from the receipt of proper simplified documents.

8. Under the Framework Agreement on the ASEAN Investment Area signed on 7 October 1998 in Manila, national treatment will be made fully available within six months after the date of signing of the Agreement for ASEAN investors in the manufacturing sector, subject to certain exclusions. These exclusions will be progressively phased out by the year 2003 instead of waiting for 2010 as initially agreed. Myanmar will join the six ASEAN countries to progressively phase out the exclusions by 2003 instead of 2015. Vietnam and Laos would exert their best efforts to achieve early realisation of AIA and shall do so no later than 2010, instead of 2013 and 2015, respectively.

ASEAN Industrial Cooperation (AICO) Scheme

9. To provide greater scope for industrial cooperation in the region, Member Countries agreed to waive the 30% national equity requirement under the AICO Scheme during the period 1999-2000.

Launching the Second Round of Negotiations on Services

10. In the area of trade in services, the Leaders have agreed to initiate a new round of negotiations beginning 1999 and ending 2001. The negotiations will be expanded beyond the seven priority sectors, identified at the Fifth ASEAN Summit, to cover all services sectors and all modes of supply.