ASEAN makes token progress in industrial ties
By Vincent Lingga
SINGAPORE (JP): Industrial products manufactured under a new ASEAN industrial cooperation scheme will immediately see import tariffs of zero to 5 percent and other non-tariff incentives granted by member countries.
The preferential tariff rates -- the final tariff range under the ASEAN Free Trade Area beginning in 2003 -- are offered by the Basic Agreement on ASEAN Industrial Cooperation (AICO) plan, which was signed by the grouping's economics ministers on Saturday evening.
The new agreement, signed at the end of the three-day informal meeting of the economics ministers on Singapore's resort island, Sentosa, will replace the previous joint ventures and industrial complementation, including the 1988 Brand-to-Brand Complementation scheme in the automotive industry.
The nine-page agreement, however, does not offer any significant privileges other than the preferential tariffs. In fact, the regulatory requirements imposed on investors under the AICO plan are no easier than the ones which made previous schemes unattractive to businessmen.
By the year 2003, almost all industrial products manufactured in ASEAN countries will be entitled to the 0-5 percent tariff rates. Hence, only seven years remain for investors to benefit from the new program.
"Each member country is allowed to offer additional non-tariff incentives of its own to industrial ventures developed under the AICO scheme," Indonesia's Coordinating Minister for Production and Distribution Hartarto said at the end of the meeting.
Hartarto said the new agreement is designed to be a more conducive institutional framework to stimulate joint ventures and resource-sharing among ASEAN companies.
"The technical details or interpretative notes on the agreement still have to be worked out by senior officials. But I hope they will be ready when the ASEAN economics ministers hold their annual meeting in Jakarta in September," Hartarto added.
The agreement also stipulates that member countries eliminate all quantitative restrictions and non-tariff barriers to industrial products manufactured under the AICO scheme.
An industrial company taking part in the AICO scheme is to be established. It will operate in a member country and will have a minimum of 30 percent national equity and meet the rules of origin of the Common Effective Preferential Tariff, the tariff reduction program to implement the ASEAN Free Trade Area.
Under the AICO scheme, industrial firms are required to submit a lot of regulatory paperwork including documentary evidence of resource sharing, industrial complementation, or cooperation activities, such as joint ventures, joint manufacturing, technology transfer, training, consolidated purchasing, management services, sales and marketing agreements.
Investors from outside ASEAN are allowed to join industrial ventures under the AICO scheme if their home countries agree to extend the same preferential tariffs to the products of those ventures.
An industrial project under the AICO scheme requires the approval only of the host country and not of all member countries as it did under the previous scheme.
The basic agreement on AICO was signed by Brunei's Minister of Industry and Primary Resources Abdul Rahman Taib, Indonesia's Minister of Industry and Trade Tunky Ariwibowo, Malaysia's Minister of International Trade and Industry Rafidah Aziz, the Philippine's Secretary of Trade and Industry Rizalino S. Navarro, Singapore's Minister of Trade and Industry Yeo Cheow Tong, Thailand's Deputy Prime Minister Amnuay Viravan and Vietnam's Minister of Trade Le Van Triet.
Hartarto said the ministers also reviewed the progress made in preparation for an ASEAN Investment Area agreement which is designed to stimulate direct intra-ASEAN and foreign investment.
The investment agreement, expected to be finalized in Jakarta in September, will harmonize licensing procedures and make rules more transparent.
Each member country will remain entitled to decide on the kind of incentives granted to foreign investors.