ASEAN review free-trade progress

ASEAN review free-trade progress

KUALA LUMPUR (AFP): Faced with new challenges posed by an
unprecedented financial crisis, Southeast Asian ministers meet
this week to review progress towards realizing a free-trade area
early next century.

Amid fears in some quarters that financial turmoil might
derail the 10-year timetable, economic ministers from the
Association of Southeast Asian Nations (ASEAN) will also meet
their counterparts from Australia, China, Japan, South Korea, New
Zealand and the Southern Africa Development Community (SADC).

The annual meeting of ASEAN ministers starting Thursday will
be the first to include Myanmar and Laos, both admitted to the
regional grouping in July.

Under an agreement reached in 1993, the six most developed
members -- Brunei, Indonesia, Malaysia, the Philippines,
Singapore and Thailand -- agreed to work toward an ASEAN Free
Trade Area (AFTA) by implementing common effective preferential
tariffs of five percent or less by 2003.

Vietnam, which joined ASEAN in 1995, has until 2006 while the
deadline for newcomers Myanmar and Laos is 2008.

Malaysia's International Trade and Industry Minister Rafidah
Aziz said last month that 93 percent of the tariff lines of the
original six members had already been included in the scheme, up
from almost 91 percent in July.

She said this week's meeting would be "significant" as members
would reaffirm their commitment to move towards tariffs of 20
percent by next year for items where prevailing rates were still
above 20 percent.

But some analysts reckon the group's free-trade plans might be
upset by the crisis which has battered regional currencies and
stock markets since early July when Thailand floated the baht.

With some currencies losing more than a third of their value,
trade flow projections are being redrawn across Asia.

"The possibility that AFTA will end in failure is getting
bigger," says Shunta Yamato, regional analyst at Daiwa Institute
of Research in Tokyo.

While Thailand will suffer a slump in the short term, he
believes it could eventually join the ranks of the more developed
ASEAN members Singapore and Malaysia, exposing weaknesses in
Indonesia, the Philippines and the others.

Yamato also doubts whether Japan can play the same role with
ASEAN as the United States did with Mexico three years ago when
the peso collapsed, helping to bring about a recovery by sucking
in cheap imports.

Japan's International Trade and Industry Minister Mitsuo
Horiuchi is nevertheless expected to announce measures to raise
imports of Southeast Asian products when he meets with the ASEAN
ministers here Friday.

The measures are expected to cover trade insurance and plans
to help Japanese importers make payments in advance along with
technical cooperation and human resource development to support
industries such as auto parts makers.

Malaysia, for its part, plans to raise the issue of currency
depreciation at the annual meeting in a bid to minimize the
impact on trade and investment.

Rafidah says the proposed "strategies" will include focussing
on the most competitive industries in the region and taking
measures to boost intra-ASEAN trade which stood at 155 billion
dollars last year.

Strategies adopted are expected to be put to an ASEAN summit
in December, to which Japanese, Chinese and South Korean leaders
have been invited.

The ministerial meeting starting Thursday will be preceded by
a meeting of the AFTA Council on Wednesday and followed by
consultations between the nine ministers and an ASEAN Central
Committee on Investment.

On Friday and Saturday, the ministers meet their counterparts
from Japan followed by Australia and New Zealand and finally the
Southern Africa Development Community before a separate meeting
with ministers from Japan, China and South Korea and a final
session will all ministers attending.

During the meetings, three agreements will be signed including
a protocol of accession by Myanmar and Laos along with a protocol
on notification procedures for modifying AFTA commitments and
obligations.

ASEAN ministers will also sign a protocol on the first package
of offers under a framework agreement on services.

Under a 1995 initiative, ASEAN has identified tourism,
telecommunications, air services, shipping, construction,
business services and financial services as ripe for
liberalization.