ASEAN's free trade plan suffers setback

ASEAN's free trade plan suffers setback

SINGAPORE (AFP): An ambitious plan to turn Southeast Asia into
a free trade and investment area received a setback Tuesday when
Malaysia said it cannot meet a 2000 deadline to slash tariffs on
motor vehicle parts.

Malaysia dropped the bombshell at a closed-door preparatory
meeting of senior officials of the Association of Southeast Asian
Nations (ASEAN) ahead of talks this week among the grouping's
trade ministers, sources told AFP.

Automotive parts are among a list of industrial products that
can be excluded from a tariff liberalization scheme under the
ASEAN Free Trade Area (AFTA).

ASEAN had planned to do away with such an exclusion list for
key economies from 2000.

But with Malaysia's request for more time to cut tariffs on
motor vehicle parts, the plans could now go awry because other
ASEAN member states also wanted to "backtrack" on other products,
meeting sources said.

Malaysia reportedly had no problems reducing tariffs on car
parts and components by 2000 but was not ready for easing import
duties on completely-knocked-down and completely-built-up units.
Malaysia slaps heavy duties on some automotive parts largely to
protect its national car Proton.

It is not known how Indonesia, which has its own Timor
national car project, featured in the motor parts tariff
reduction plans of ASEAN.

"We are trying to achieve consensus by accommodating each
economy's problems to make sure that our free trade goals remain
on track," a source said. "Going by ASEAN's track record, we can
do it," the source added.

The talks among senior officials Tuesday was to lay the
framework for the meeting of trade ministers as well as review
the progress on both the tariff and investment-barrier reduction
fronts.

The ASEAN ministers will iron out the technical details of the
agreement to achieve the AFTA as well as an ASEAN Investment
Area.

The original members of the grouping, Brunei, Indonesia,
Malaysia, the Philippines, Singapore and Thailand, have all
agreed to lower their tariffs on industrial products to between
zero and five percent by 2002.

The other members Cambodia, Laos, Myanmar and Vietnam have
flexible deadlines in their effort to remove the tariffs.

The 10 states are also aiming for an ASEAN Investment Area
which requires their commitment to opening their manufacturing
sectors to investors within the region beginning 2003.

A statement from the Singapore Trade and Industry Ministry
said the ministerial policy-making mechanisms for the free trade
and investment plans would meet on Wednesday.

The ministers were scheduled to sign a pact Thursday on
arrangements for "sensitive" products to be included in the
plans.

Details of the so-called "protocol on the special arrangement
for sensitive and highly sensitive products" were not immediately
available.