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Thu, 02 Sep 2004

JP/AFTA council to expand rules of origin

AFTA council to expand rules of origin

Zakki P. Hakim, The Jakarta Post, Jakarta

Trade ministers of the Association of Southeast Asian Nations (ASEAN) will gather here on Thursday for the 18th ASEAN Free Trade Area (AFTA) council meeting to seek ways to boost intra- regional trade and to attract foreign investment.

The main agenda is to amend and expand the AFTA "rules of origin" so that trade between member countries can be increased.

Director of regional cooperation at the Ministry of Industry and Trade Eliver Radjagoekgoek said the ministers were expected to approve a "substantial transformation concept".

AFTA, which began a gradual implementation in 1992 and will be fully implemented in 2008, aims to significantly cut down tariffs and eliminate non-tariff barriers within the region through its Common Effective Preferential Tariffs (CEPT) scheme.

The rules of origin include a stipulation that only products with a minimum 40 percent "local content" can enjoy low tariffs under the CEPT scheme.

Eliver said the substantial transformation concept would allow products using imported raw materials manufactured in ASEAN countries to enjoy the CEPT facility, as long as the raw materials were completely transformed during the manufacturing process into finished products.

It is expected that more goods produced in ASEAN will be eligible for the lower tariff facility under this concept, thus bolstering intra-regional trade and luring investors from outside the region to set up local companies.

In addition, the council is also expected to agree on Singapore's proposal that the threshold for the 40 percent local content requirement be lowered to between 10 and 20 percent.

Eliver said Indonesia proposed a threshold of 15 percent, while Thailand suggested 20 percent.

"However, it seems the council would agree on the 20 percent threshold," he told reporters.

The AFTA council meeting will be followed by the 36th ASEAN Economic Ministers meeting, the main agenda of which is to seek means to accelerate regional economic integration.