New members to get grace on tariff cuts from ASEAN

New members to get grace on tariff cuts from ASEAN

KUALA LUMPUR (AFP): Would-be entrants Myanmar, Cambodia and
Laos will get five extra years to adhere to the liberalization
commitments of a plan to create an ASEAN Free Trade Area (AFTA)
by 2003, ministers said Saturday.

The three under-developed nations will have 10 years from
January 1, 1998 to integrate into AFTA, ministers of the
Association of Southeast Asian Nations (ASEAN) decided at a
meeting here, allowing five years for them to phase in the
changes after the area comes into forces.

Myanmar, Cambodia and Laos are to join the trade-driven
organization at the annual ASEAN ministerial meeting here in
July, Malaysian Foreign Minister Abdullah Ahmad Badawi announced.
Current members are Brunei, Indonesia, Malaysia, the Philippines,
Singapore, Thailand and Vietnam.

Experts have seen the integration of the three countries into
AFTA, which would create a free trade area of 500 million people,
as one of the biggest challenges facing ASEAN.

Concern

Concern over their ability to meet the market liberalization
requirements of AFTA and other economic agreements had clouded
their bid for elevation from observer status to full membership
of ASEAN.

Philippine Foreign Minister Domingo Siazon said the ministers
who met here, however, believed it was better to induct the three
countries sooner than later to allow them to adjust faster to the
AFTA tariff-cut schedule.

"We are convinced of the argument that it is better to get
them in earlier so that we can help them faster," Siazon told
reporters.

He said the three countries needed assistance to initiate and
implement economic reforms to catch up with the others.

Indonesian Foreign Minister Ali Alatas said 10 years would be
enough for the three would-be entrants to integrate with the AFTA
process.

"We will cross the bridge when we are there, but I think right
now everybody is confident it can (be achieved)," Alatas said.

The grace period given to Myanmar, Cambodia and Laos is part
of a "two-track" approach adopted by ASEAN to the creation of
AFTA, its most ambitious economic endeavor.

Vietnam, which joined ASEAN in 1995, has been given leeway
until 2006 to match the tariff cuts of the more mature economies.

By 2003, tariffs on goods traded within ASEAN would be lowered
to a range of zero-to-five percent. The average ASEAN tariff rate
is expected to decrease from 7.1 percent in 1996 to 2.7 percent
when AFTA is created.

Disparities between older member-states and Vietnam as well as
aspiring members in their level of economic development has been
seen as the main hurdle in opening up markets and negotiating
tariff-cut schedules.

Liberalization would increase the attractiveness of ASEAN as a
production center for foreign investors and boost intra-regional
trade, which has grown to more than 70 billion dollars from 27
billion dollars in 1990.

Eighty-eight percent of the products traded within the region
would see tariffs brought down to zero-to-five percent by 2000
itself, three years before AFTA's formal creation.

Member-states have agreed to consider the possibility of even
eliminating tariffs altogether by 2003.

ASEAN Secretary-General Ajit Singh said here recently that
ASEAN should move on beyond AFTA to create an open investment
area to attract greater investment flows.