AFTA in full force<\/p>\n
The ASEAN Free Trade Area (AFTA) that came into effect on
\nWednesday has been designed to develop this region with a
\npopulation of more than 500 million into an integrated market and
\ninvestment area.<\/p>\n
As a common market, the 10-member ASEAN will become a more
\nattractive, alternative manufacturing base to China, which has
\nbeen getting most of the foreign investment flows to East Asia.<\/p>\n
This is the basic idea ASEAN governments share, fully aware
\nthat cutting intra-ASEAN tariffs to 5 percent will promote the
\nregion as an open, stable and low-cost manufacturing center.
\nSpecialization and economies of scale will set in with the
\nremoval of trade barriers to goods, services and investments.<\/p>\n
The AFTA concept has become even more relevant after the 1997
\nEast Asian crash and the instability that followed lowered the
\nregion's appeal to foreign investors.<\/p>\n
In reality, though, AFTA members still do not fully trust each
\nother to streamline the system. Quite a number of commodities
\nthat are heavily traded in the region, such as rice, sugar,
\npetrochemicals and automobiles, are still excluded from the
\ntariff cut regime.<\/p>\n
Yet bigger hurdles to intra-ASEAN trade may come from the slow
\nprogress members have made in removing non-tariff barriers. The
\nefforts to draw up shared procedures and standards for imports
\nand industrial products have lagged far behind tariff cuts, even
\nthough such non-tariff barriers have proven to be the biggest
\ndrag on trade in the region.<\/p>\n
The absence of an appropriate agency or mechanism to resolve
\ndisputes between members within AFTA implementation is posing
\nanother major challenge. Verification by the country of origin on
\nthe minimum 40 percent ASEAN content necessary to qualify
\nproducts for the tariff cut regime could become a major source of
\ndisputes, as many manufacturing companies in the ASEAN region
\nstill depend on input, parts or components from suppliers outside
\nthe region. Businesspeople are still in the dark about how
\ncustoms services in the member countries will ensure that
\ncommodities traded under AFTA fully meet the compulsory ASEAN
\ncontent.<\/p>\n
Many, therefore, do not expect much from AFTA in the way of
\ntrade expansion at least within the first one or two years of its
\noperations, as members will still tread carefully during the
\nlearning process, observing how the arrangements would affect
\ntheir domestic industries.<\/p>\n
These issues should not, however, discourage the six founding
\nmembers of ASEAN -- Brunei, Indonesia, Malaysia, Singapore,
\nThailand and the Philippines -- among whom AFTA initially came
\ninto full force to fulfill their commitment to abolishing tariff
\nand non-tariff barriers to trade.<\/p>\n
Too easily bowing to domestic industrial lobbyists who demand
\nheavy protection not only would leave ASEAN industries
\nuncompetitive internationally, but would also make the 35-year
\nold ASEAN grouping less relevant to the economic interests of the
\npeoples in the region.<\/p>\n
Such an inconsistency would also weaken ASEAN's bargaining
\nposition to negotiate free trade agreements (FTA) with other
\nregions and could push more ASEAN members to break rank and
\nconclude FTAs with other countries individually, as Singapore has
\ndone with Japan and the United States.<\/p>\n
The implementation of AFTA would surely affect ASEAN's
\ncommitments to long-term plans for FTAs with China, Japan and
\nIndia that were made during the eighth ASEAN summit in Phnom Penh
\nearly November.<\/p>\n
Indonesia, as the largest market among the six founding member
\ncountries with almost 210 million people, is especially
\nchallenged to show strong leadership by seriously honoring its
\ncommitments to AFTA.<\/p>\n
This challenge is greatly taxing indeed, because most domestic
\nindustrial companies have been hard hit by the economic crisis
\nand many of them are still grappling with mountains of bad debts.<\/p>\n
Worse still, the business environment in Indonesia has
\ndeteriorated sharply due to complications and uncertainties
\ncaused by the transition from an authoritarian, centralized
\ngovernment to a democratic system focusing on local autonomy. An
\ninefficient and corrupt customs service, labor regulations that
\nare deemed to favor workers too much, and crumbling basic
\ninfrastructure in many areas due to a lack of public funding,
\nhave been eroding business competitiveness.<\/p>\n
The Indonesian Chamber of Commerce and Industry (Kadin) has
\nalready expressed great concern over heightened competition from
\nother ASEAN countries under AFTA and most industrial associations
\nhave simply argued that they are not yet ready for AFTA.<\/p>\n
But while the government should work harder to improve public
\nservices, the regulatory environment and basic infrastructure to
\nreduce the cost of doing business here, it should also be careful
\nin responding to complaints from industrialists, and correctly
\nanalyze which grievances are legitimate and which are simply
\ndemands for protection made by inefficient businesses.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/afta-in-full-force-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}