The ASEAN Heads of States and Government have promulgated the ASEAN Vision 2020 charting a new direction for ASEAN through the turn of the century towards the year 2020. That vision is of an outward and forward looking ASEAN, living in peace, stability and prosperity, bonded together in partnership in dynamic development and in a community of caring societies.
To realize the ASEAN vision, the Hanoi Plan of Action (HPA) was adopted by the ASEAN Heads of States and Government in Hanoi in December 1998. The HPA is the first in a series of plans of action aimed at operationalizing the vision. The HPA lays down specific steps and measures to be taken during the years 1999-2004 in order to strengthen macroeconomic and financial cooperation, advance economic integration and promote social, science & technology and information technology infrastructure as well as human resources development.
Taken together, these two major accords represent ASEAN countries’ resolve to look beyond the immediate economic and financial challenges and regain the momentum of growth and prosperity.
Recognizing the immediate need to quickly regain business confidence and hasten recovery from the regional contagion that hit many East Asia countries, the ASEAN Leaders issued the Statement of Bold Measures in December 1998 containing concrete measures further liberalizing and integrating ASEAN economies. In a recent speech, ASEAN Secretary-General Rodolfo C. Severino, Jr., said that "It is clear that ASEAN leaders have made regional economic integration a primary component of the region’s response to the economic troubles that have hit it."
The Statement of Bold Measures involve an acceleration of the establishment of the ASEAN Free Trade Area or AFTA and ASEAN Investment Area or AIA including the provision of special incentives and privileges to qualified foreign investors for a limited period. To further encourage investment, the leaders agreed to waive the 30% national equity requirement for firms wishing to take advantage of the ASEAN Industrial Cooperation Scheme or AICO. Finally, they agreed on a new round of negotiation in services beginning in the year 1999 and ending in 2001, in all services sectors and all modes of supply.
On AFTA, the six original members agree to achieve a minimum of 90% of their total tariff lines with tariffs of 0-5% by the year 2000 and bring forward the implementation of AFTA from 2003 to 2002.
On investment, ASEAN investors can now invest in manufacturing sector in any member country subject to certain exclusions, which shall be phased out by 2003 instead of 2010 as previously agreed. Non-ASEAN investors can also invest in the manufacturing sector and enjoy special privileges if they come in between now and the end of year 2000. These privileges include income tax exemption, full foreign equity ownership, duty-free imports of capital goods, domestic market access, and at least 30-year long-term lease for industrial land. They can also hire foreign personnel and enjoy speedy customs clearance. These privileges stay for the life of the investment and are additional to incentives each ASEAN country already offers to foreign investors.
On industrial cooperation, those who qualify and opt for ASEAN Industrial Cooperation Scheme during the same two-year window will also be waived the 30% national equity requirement in addition to being given full AFTA treatment. A number of large Japanese and European multinational companies, many in the automotive industry, have already taken advantage of the scheme.
In addition to accelerating liberalization in trade through tariff reduction and liberalization in investment through the opening up of industries and the granting of national treatment, integration is being fostered through trade facilitation measures in customs, harmonizing product standards and facilitating goods in transit.
In the area of customs, ASEAN countries are scheduled to implement the WTO Valuation Agreement in the Year 2000. We are also working on a common tariff nomenclature at the 8-digit Harmonized System level to be implemented by the year 2002. The Green Lane has been expanded to cover all ASEAN products. There is a strong commitment on the part of customs administrations in ASEAN to work towards world-class efficiency through automation and modernization of customs procedures.
Economic integration has also been complemented by the considerable progress made on financial cooperation. The ASEAN surveillance process has been established and the first peer review conducted early this year. Under the surveillance process, ASEAN is developing an early warning system to keep track of macroeconomic trends and provide early detection of any adverse development. Another integrated component of the surveillance process of equally importance if not more is the peer review in which ASEAN countries exchange views with one another on economic developments and measures being undertaken to address the crisis as well as jointly formulate policy responses to pending problems. Together with the early warning system, it provides safeguard against future crisis by providing an opportunity to take early unilateral or collective action against minor but potentially disastrous disturbances. It also promotes closer coordination of macroeconomic policies and facilitates peer support or in some cases exerts peer pressure for necessary economic and financial reforms.
To mitigate the adverse impact of sudden shift in capital flows, ASEAN shall pursue an orderly and well-sequenced approach to capital account liberalization in tandem with the degree of the development of the domestic financial sector and supervisory regime. There will be greater use of ASEAN
Currencies trade and services. The possibility of an ASEAN exchange rate system including a common ASEAN currency will be explored.
To eliminate technical barriers to trade, a Framework Agreement on Mutual Recognition Arrangements or MRAs was signed in December 1998. MRAs allow countries to recognize one another’s product standards or regulations and make it easier to trade. Efforts are currently under way to formulate specific MRAs in three important areas – telecommunication equipment, pharmaceutical products and cosmetics.
A Framework Agreement on the Facilitation of Goods in Transit was also signed in December 1998. This will allow goods to be moved by road or rail across ASEAN countries with minimum customs inspections, vehicle specifications and regulations for drivers.
Work is also proceeding on bringing down barriers to investment. Studies will be conducted to identify and suggest ways to eliminate investment impediments. Investment application processes are being streamlined and made more transparent.
ASEAN is also strengthening its cooperation to foster the development of small and medium enterprises. Annual match-making workshops are being organized to promote SME joint-ventures. Various forms of funding support are being explored including regional export financing and credit guarantee schemes, and an ASEAN Investment Fund.
Beyond trade in goods, ASEAN is bringing down barriers to trade among member countries in seven services sectors – air transport, business services, construction, financial services, maritime transport, telecommunication and tourism. A new round of negotiations on trade in services has already started and will eventually be expanded beyond the seven sectors above to cover all services and all modes of supply.
Supporting economic integration in trade and investment are the development of regional infrastructure and closer cooperation in developing human resources and science and technology, particularly information technology. Transport linkages are being streamlined through landmark agreements on goods in transit and multi-modal transport. An agreement on inter-state transport is being worked out. Plans for road or highway networks, railway links and trans-boundary gas pipelines have been laid. Framework and modality for the ASEAN Power Grid are being developed.
Telecommunications networks will be integrated through greater interconnectivity, coordination of frequencies and mutual recognition of equipment-type approval procedure, providing an infrastructure for the ongoing coordination to develop cross-border electronic commerce in ASEAN.
ASEAN economic integration will be gradual in nature and cater to individual country’s own capacity. This is particularly true for the liberalization process as it would allow ASEAN countries to develop their regulatory structures, trade, finance and investment regimes as well as legal framework to adequately support the more open and competitive systems. ASEAN companies can also build up their competitiveness in stages as they are gradually exposed to increased competition from regional to international level. The economically less developed members are given more time to liberalize their trade and investment regimes. At the same time they will also be given assistance to build their capacity to integrate into ASEAN.
In the years ahead, cooperation will intensify between ASEAN and its major trading partners, northeast Asian neighbors, as well as other countries participating in larger groupings such as, East Asia-Latin America Forum (EALAF), Asia-Europe Meeting (ASEM), and Asia Pacific Economic Cooperation (APEC).
Regional economic cooperation is a fundamental principle steadfastly enshrined in major ASEAN accords since its establishment over 30 years ago. There is no alternative to regional economic cooperation and integration. It is the only way for countries such as those in Southeast Asia to make their way in the world. Individual countries would find it difficult to thrive in a globalized economy and in an uncertain configuration of power in the region. In Hanoi, the ASEAN leaders reaffirmed their commitment "to the greater integration of our economies as a primary expression of our cooperation and solidarity."
(Prepared by the ASEAN Secretariat, Jakarta, September 1999)
