ASEAN in 4th year of free trade plan

ASEAN in 4th year of free trade plan

By P. Parameswaran

SINGAPORE (AFP): Intra-Southeast Asian trade receives an added
push as booming regional economies enter their fourth year of
tearing down internal tariff barriers under a landmark free-trade
plan that embraced Vietnam.

Brunei, Indonesia, Malaysia, the Philippines, Singapore and
Thailand, the other members of the Association of Southeast Asian
Nations (ASEAN), are to simultaneously slash tariffs on nearly
41,000 products in 1996.

The tariffs will be brought down to between zero and five
percent as part of their race to achieve an ASEAN Free Trade Area
(AFTA) by 2003.

Vietnam, which joined ASEAN in July, said it will cut tariffs
on 857 products from January -- its first step towards AFTA
membership. The communist state will fulfill the free-trade goal
three years after the other six.

John Lye, economist with Merrill Lynch, said the market
liberalization exercise would enhance intra-ASEAN exports, which
jumped by more than 22 percent year-on-year to US$31.1 billion in
the first half of 1995.

It would ease the region's dependence on trade with the
outside world, particularly the West, he said.

"Years down the road, as they industrialize further under this
free trade environment, the ASEAN economies will also be less
dependent on machinery imports" from outside the region, Lye
said.

Many of the ASEAN nations are riddled with deficits in their
current accounts because of imports of expensive machinery needed
to power their rapid economic growth.

To ensure that the free trade plan brings quick benefits to
ASEAN's 400 million people, officials said goods which enjoyed
tariff cuts would be cleared quickly at customs checkpoints under
a regional project also launched Monday.

"Green lanes are being set up at ASEAN airports and ports to
speed up clearance of CEPT products," said an ASEAN official.

The Common Effective Preferential Tariffs scheme is the
vehicle which allows all the ASEAN economies to liberalize their
markets by cutting tariffs and extend preferential treatment to
each other.

ASEAN embarked on an ambitious plan in 1993 to turn the
world's fastest growing region into a free trade area by 2008.

The deadline was later trimmed to 2003 and further shortened
to 2000 for about 80 percent of goods produced in the region.

ASEAN officials said in the 2000-deadline plan, some 38,397
products would see their tariffs slashed to a 0-5 percent range.

Under the new time frame, some 10,605 products would see
tariffs coming under the axe in Malaysia, 8,867 in Thailand,
7,909 in Indonesia, 6,112 in Brunei, 5,708 in Singapore and 4,694
in the Philippines, they said.

Some analysts, suggesting protectionist tendencies, say
exporters from outside ASEAN would be at a big disadvantage if
tariffs among ASEAN members were to be scrapped completely and
tariffs from non-ASEAN nations remain unchanged.

But ASEAN leaders have stressed that AFTA was not meant to
protect ASEAN industry.

The Hong Kong-based Political and Economic Risk Consultancy
Ltd., in a recent report on free market economics in Asia, said
the clout of the United States, for example, would lessen as the
relative position of the U.S. market for exports from the region
declines.

"And it is declining at a rapid rate," it warned.

But other analysts say the bigger challenge to ASEAN is
internal -- tackling trade liberalization when Cambodia, Laos and
Myanmar join it by the turn of the century.

Hoang Anh Tuan, a senior fellow at the Singapore-based
Institute of Southeast Asian Studies, said going by Vietnam's
experience, Cambodia, Laos and Myanmar should be allowed to
fulfill the goals of AFTA at a later time, probably 2010.

"But are the ASEAN members willing to allow this?," Hoang
asked. "And if so, how can all ASEAN members seek consensus on
future economic issues, while some have maximized the goals of
AFTA and want to turn to the next stage of economic cooperation,
and others have not and are not willing to do so?."