Open
Regionalism and Deeper Integration: The Implementation of ASEAN Investment
Area (AIA) and ASEAN Free Trade Area (AFTA)
Dr.
Lawan Thanadsillapakul
Part
15
The
commitments on market access involve the liberalisation of the pre-entry
stage, and under GATS and AFAS, are subject to the limitations or conditions
made by member countries. At the post entry stage, the non-discrimination
principle of national treatment applies if a member country bind itself
to grant such a right. However, even if a state agrees to grant market
access the NT obligation may remain "unbound", which means that
no post-entry NT commitments are made. Even if a state does bind itself
on NT, this can be subject to conditions and exclusions.
Liberalisation
of Trade in Services
Under
the AFAS, ASEAN countries commit themselves to liberalise trade in services
in a substantial numbers of sectors within a reasonable time-frame through
the principles of stand still and roll back(112) . Under Art. IV, they will negotiate to liberalise the specific service
sectors beyond the commitments already made under GATS by each individual
member country (see Diagram 1 summary of ASEAN country schedules under
GATS). AFAS involves market access commitments that are preferential in
nature, as Art. IV (1) specifies that ASEAN countries will accord preferential
treatment to one another on a MFN basis. However, MFN exemptions are still
available under GATS-Plus, even though there was no MFN exemption clause
as such in Art. IV or in the AFAS Framework Agreement itself. It appeared
in the Protocol to Implement both the initial and Second Package of Commitments
under the AFAS and they are integral parts of AFAS Framework Agreement(113) . Therefore, MFN exemptions also exist in the GATS-Plus scheme. Nevertheless,
there is neither a provision for reviewing the MFN exemptions nor a period
for phasing out such exemptions. This seems to leave them to be eliminated
under Art. III which envisages that all existing discriminatory measures
and market access limitations are subject to stand still and roll back
principles, so that MFN exemptions should be phased out eventually. MFN
exemptions also can be regarded as included in each negotiation round
of the specific commitment package. ASEAN countries can be flexible in
negotiating their specific sector commitments and exemptions, as liberalisation
of trade in services is a 'bottom-up' process. However, any limitations
are subject to the general obligation and commitment under Art. III of
AFAS to be progressively phased out. Preferential treatment under GATS-Plus
and all commitments under GATS will be extended to all ASEAN member countries
including those that are non-WTO members (Laos and Vietnam).
The first round of negotiations of ASEAN services liberalisation began
in 1996 and ended in 1998 in the initial seven priority sectors, which
have been identified at the 5th ASEAN Summit: air transport, business
services, construction, finance, marine transport, telecommunications,
and tourism. Under the Hanoi Action Plan of December 1998 for accelerating
the implementation of AIA and AFAS, ASEAN countries agreed to extend the
sector coverage in GATS-Plus to cover all services sectors and all modes
of supply(114) , and the
second round of negotiations began in 1999 and will end in 2001.
ASEAN
Commitments under GATS
Since commitments under AFAS must be beyond those under GATS, a review
of the reservations and exclusion from GATS commitments of ASEAN countries
will indicate the kinds of preferential commitments that may be negotiated
in this GATS-Plus scheme. Looking first at the ASEAN country schedules
under GATS for horizontal commitments(115) (see Tables 1 and 2), the most common limitations imposed are in the areas
of market access involving both commercial presence and the presence of
natural persons. Particularly, commercial presence is often restricted
by requiring foreign service providers to enter through joint ventures
whose ownership must still be retained by domestic nationals who can serve
as members of the board of directors of the company(116) . This requirement is dominant in all ASEAN countries' investment regimes,
as commercial presence involves foreign direct investment. Additionally,
most ASEAN countries have restricted the entry and duration of stay of
foreign managers, executives and technical specialists. Indonesia, Malaysia,
the Philippines, and Thailand impose restrictions on ownership of land
by foreign service providers. Brunei, the Philippines, and Singapore impose
restrictions on the number of foreign nationals who can be members of
the Board of Directors of a company.
Regarding
specific sectoral commitments, ASEAN countries made commitments in air
transport, business services, construction, finance, marine transport,
telecommunication and tourism under which they made limitations on market
access specific to particular service sub-sectors, and limitations on
the NT principle. These limitations covered the four modes of supply:
cross-border supply, consumption abroad, commercial presence, and the
presence of natural persons (see detailed specific sectoral commitments
and exemptions of ASEAN countries made under GATS in Tables 4 and 5).
In
particular, the banking service sector includes the sub-sectors of acceptance
of deposits, lending, trading of financial instruments (which includes
foreign exchange), and financial asset management. The major limitations
consist of branching restrictions, and ownership restrictions such as
requirements that foreign service providers enter in joint ventures with
local banks. In the insurance sector: life insurance, non-life insurance,
reinsurance and broking and other agency services, the main limitations
are on market access ranging from requiring prior approval for the establishment
of new companies to limiting foreign shareholding in such companies. Malaysia
imposes an economic needs test before allowing insurance companies into
the domestic market. Indonesia requires higher paid up capital for foreign
companies. Other common limitations are restrictions on the membership
in the Board of Directors as well as on the hiring of managerial or technical
personnel.
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(112)
Art. III of AFAS provided that "Pursuant to Art. 1 (c), Member States
shall liberalize trade in services in a substantial number of sectors
within a reasonable time-frame by: (a) eliminating substantially all existing
discriminatory measures and market access limitations amongst Member States;
and (b) prohibiting new or more discriminatory measures and market access
limitations".
(113)
Section 3 of the Protocol to implement the second package of commitment
under the ASEAN Framework Agreement on Services reads: The Annexes to
this Protocol shall consist of the Horizontal Commitments, Schedules of
Specific Commitments and the Lists of Most-Favoured-Nation Exemptions.
And Art. VIII of the AFAS agreement provided that: Schedules of Specific
Commitments and Understanding arising from subsequent negotiations under
this Framework Agreement and any other agreements or arrangements, Action
Plans and Programmes arising thereunder shall form an integral part of
this Framework Agreement. Therefore, section 3 of the Protocol is part
of AFAS agreement.
(114)
Statement on Bold Measures, para 10. See http:/www.asean.or.id/economic/invest/sum_bold.htm.
(115)
Horizontal commitments refer to commitments that are common or run across
all service sectors of contracting parties.
(116)
ASEAN Secretariat's Information Paper: Member Country Commitments under
the GATS. Document No. 8. Second Meeting of the Ad-Hoc Working Group on
ASEAN Co-operation in Services, 17th-19th January 1995, Makati, the Philippines. |