AFTA process speeded up

The mountain air in Malaysia's Genting Highlands may be as soothing as the air in Thailand's Chiang Mai. But what the ASEAN economic ministers failed to achieve in the Genting Highlands in April became a reality at their meeting last week in the Thai Rose of the North, locally dubbed as the land of beauty and hospitality.

However incidental or insignificant Chiang Mai's surroundings might have been on the mood of the ministerial meeting, one thing is certainly clear: The ministers have become increasingly aware that if they do not adjust to the sea change in the global economy, ASEAN will be left swimming in the backwaters of mainstream economic activities.

The consensus adopted by the ministers from Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand to speed up the realization of the ASEAN Free Trade Area (AFTA) from the original schedule of 15 years to only 10 years, reflects their vision of the challenges ahead.

Indeed, the new General Agreement on Tariffs and Trade (GATT) which will come into force in January under the administration of the World Trade Organization, and the acceleration of the Asia Pacific Economic Cooperation are forcing ASEAN to make speedy adjustments. Otherwise its regional cooperation might be rendered less meaningful in the new global economic order.

Seen against this backdrop, the agreement to accelerate the implementation of AFTA from January 2008 to January 2003, and to set a gradual timetable for the inclusion of agricultural products into the trading scheme, are strategic indeed.

The new commitment will more than make up for the early backtracking on the part of several members which caused a one-year delay in the launching of AFTA from the original schedule of January 1993.

Under AFTA, which was adopted by the ASEAN summit meeting in Singapore in January 1992, the ASEAN countries will gradually reduce their tariffs to below five percent under the Common Effective Preferential Tariff strategy. The scheme itself consists of two tariff- reduction programs, a fast track and a normal program. Under the fast track program all members are committed to reduce the tariffs on 15 categories of products to under five percent by the year 2003 at the latest. The normal program calls for the same tariff reduction by the year 2008.

It is also quite encouraging that unprocessed agricultural products, which are now excluded from AFTA, will be gradually included in the free trade scheme. Hopefully, services will follow, which would conform with the new GATT program.

ASEAN's stronger commitment to the free trade area will make the ASEAN economies more dynamic. Obviously, the immediate benefits will not come from free trade itself because member countries are at various stages of economic development which causes them to compete with each other rather than complement one another.

Instead, the immediate result will be the advantages AFTA will offer to new investment ventures in the member countries. AFTA will make ASEAN, with its potential market of more than 350 million people and a combined national product of US$430 billion, much more attractive to investors both from within and outside the region.