The Working Group on Industrial Cooperation (WGIC) met six times between January 1996 and March 1997. The WGIC drafted the text of the Basic Agreement on ASEAN Industrial Cooperation (AICO) Agreement,Interpretative Notes to the AICO Agreement and AICO Operational Procedures. The Basic Agreement on ASEAN Industrial Cooperation (AICO) Scheme was signed on 27th April 1996 during the AEM Retreat in Singapore. The AICO Scheme itself became operational on 1 November 1996.
The objectives of the new industrial cooperation scheme include increased ASEAN industrial production; closer ASEAN integration; increased investments from ASEAN and non-ASEAN sources; increased intra-ASEAN trade; improved economies of scale in production and scope; enhanced technology base; internationally competitive ASEAN industries; increased private sector participation; and increased industrial complementation.
The major privilege of the new scheme is that approved AICO products, output of an AICO Arrangement, will enjoy preferential tariff rates of 0-5% upon their approval. The zero to five per cent tariff represents the final CEPT rate to be reached by ASEAN by the year 2003. Thus, the immediate application of the preferential tariff rate, will give a head start to AICO products over non-AICO products. Other incentives include local content accreditation where applicable, and other non-tariff incentives to be provided by the participating member countries.
The scheme is open to any ASEAN-based company that fulfills the following criteria:
Although the equity condition is imposed as a criterion, it is not as stringent as the AIJV where at least two ASEAN countries' equity participation is required in an ASEAN Industrial Joint Venture (AIJV) entity contributing at least 40% to the total equity. 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. A waiver provision on the equity condition is provided to cater to other companies operating in the region but which cannot meet the equity condition to participate in the new scheme.
Recognizing the sensitivity and the uniqueness of the automotive sector and the large contribution it makes to the economies of Member Countries, a meeting of automotive experts was convened to find ways to promote the participation of the automotive sector in the AICO Scheme. With inputs from the automotive experts, the AICO Scheme recognizes industrial complementation as one of the means of resource sharing/pooling. This form of resource sharing/pooling may also be utilized by other industry sectors.
In the meantime the ASEAN Secretariat has published a concise information leaflet to explain the AICO Scheme. These leaflets have been transmitted to all Member Countries for distribution to the general public. The leaflets were also sent to all the National Chambers of Commerce and Industry as well as the ASEAN-CCI. To promote the AICO Scheme on a sustained basis, the Scheme will be incorporated into all national investment promotion programmes of Member Countries. An AICO Workshop was held in April 1997 in Jakarta to explain the workings of the AICO Scheme to about 120 participants.
Future of BBC and AIJV Schemes
The first of November 1996 marked the end of the BBC and AIJV Schemes. No new BBC and AIJV application will be processed after that date. However, existing approved BBCs and AIJVs may submit requests for amendments. For approved BBCs, the privileges will continue until such time that the approved car model runs out of its production cycle. This normally takes about five years. All AIJV privileges will be terminated by 1 January 2003.
Small and Medium Scale Enterprises
Following the approval of the ASEAN Action Plan for SME Development by the Fifth ASEAN Summit in December 1995, the SME Agencies Working Group met to implement the plan. Preparations to launch several projects for ASEAN SMEs were made during the year under review. Among these is a workshop to enable ASEAN SMEs to prove equal to the challenges of AFTA. The workshop, funded by the UNDP ASP-5 Programme, will be conducted by the University of Philippines' Institute of Small-Scale Industries in July 1997.
The second project, the ASEAN Small and Medium Industries Showcase/ASEAN East Asian Small and Medium Industries Business Forum is scheduled to be held in Kuala Lumpur in August 1997. The third, the ASEAN-EU Partenariat, which will match SMEs in the two regions, is jointly funded by ASEAN and the EU and will be held in Singapore in September 1997. Several other SME projects have been proposed for funding under the ASEAN-Republic of Korea Dialogue.