Open
Regionalism and Deeper Integration: The Implementation of ASEAN Investment
Area (AIA) and ASEAN Free Trade Area (AFTA)
Dr.
Lawan Thanadsillapakul
Part
18
Construction
services, especially on-site construction work, are also opened in all
ASEAN countries under GATS-Plus. This sub-service sector was not offered
under GATS because it mainly involves commercial presence or the presence
of natural persons of service providers in the territory of the country
where services are provided. ASEAN countries' offers in this sub-sector
enable service providers from other ASEAN countries to gain market access
in the host country through local presence that also facilitates construction
investment intra-ASEAN.
In particular, ASEAN countries liberalise their financial sector under
GATS-Plus, in compliance with national policies to restructure and reform
financial markets that have resulted in more generally liberal ASEAN financial
market. Under GATS-Plus, Indonesia allows ASEAN banks to open branches
in three new locations: Padang, Manado, and Ambon. Myanmar allows ASEAN
banks' representative offices to be established in the country. The Philippines
allows ASEAN commercial banking generally to gain market access, and especially
Thailand allows 100% foreign-owned securities companies operating in the
market in all modes of supply (1b, 2a, 3a, and 4b). Vietnam also allows
100% foreign equity in all insurance companies operating in the market.
Singapore is liberalising the insurance sector in both life and non-life
insurance sub-sectors. These improvements mainly involve commercial presence
that previously was unbound under GATS.
The GATS-Plus improvements over GATS are in fact reinforcing generalised
liberalisation of services in ASEAN. For example, ASEAN countries committed
themselves under GATS to liberalise market access to their financial markets
via commercial presence, but subject mainly to restriction on foreign
shareholding in a finance company, insurance company, security company
or commercial bank, generally at a maximum of 25-30%. Under GATS-Plus,
ASEAN countries allowed (even foreign-owned) ASEAN companies to have equity
holding up to 49%(122) ,
60%(123) or even 100%(124) of paid-up capital in a financial company, insurance company, commercial
bank, or Securities Company. Under GATS, ASEAN countries bound themselves
to only existing companies but left unbound the granting of new licenses,
which remain subject to approval; but under GATS-Plus ASEAN countries
have agreed to grant more new licenses in the financial services sector.
For instance, Thailand agreed to grant 50 licenses for opening new commercial
banks, the Philippines bound itself to grant 10 new licenses for establishment
by ASEAN banks. Therefore, if a non-ASEAN service provider initially entered
into the ASEAN market under GATS, once it is established in one ASEAN
country it can enjoy access to the whole region under GATS-Plus, including
the right to establish in other ASEAN countries. Recently Prudential,
a British insurance company, established itself in Thailand under GATS.
Prudential Insurance can now also move into other ASEAN countries under
GATS-Plus. Similarly, if any foreign insurance company becomes established
in Vietnam where 100% equity is allowed, it can further enter into other
ASEAN countries as a Vietnamese company.
Mutual
Recognition under AFAS
Since
border barriers (tariffs and other controls) imposed by nation states
have been gradually eliminated or reduced, flows of trade and investment
appear to be increasing, facilitating the openness of the world economic
system. Since then, regulatory differences and variable internal requirements
among nation states have come to be regarded as "non-tariff barriers"
hindering, cross-border trade flows, even though they are not intended
to be protectionist (Mathis, 1998: 7). Non-tariff barriers are much more
difficult to eliminate. In the international sphere, under GATT, there
were initial discussions of the measures to combat non-tariff barriers
since the international negotiations in the Tokyo Round. However, it was
only in the Uruguay Round that measures for eliminating or reducing non-tariff
barriers have been formally agreed, especially in the TBT and SPS agreements,
and also under GATS Art. VII, by encouraging the approach of mutual recognition
as well as common international standards applicable by WTO Member States.
The principle of mutual recognition (MR) has been generated, initially
in the EU, to facilitate the implementation of regional liberalisation
due to the complexity and diversities of national laws, as an alternative
to harmonisation. MR has been developed by the ECJ, especially in the
Cassis de Dijon case(125) , in which the Court decided that national regulatory requirements, even
if formally non-discriminatory ('indistinct'), could constitute barriers
to trade that is contrary to the Treaty of Rome. So, in principle, the
ECJ ruled that what is legally produced and sold in one country should
be legally marketed in another. Therefore, internal national regulations
and requirements may not be excessively imposed on imported products,
and such regulations can be regarded as having an equivalent effect to
quantitative restrictions that are invalid measures applicable to imported
goods under Art. 30 of the Rome Treaty. This gave rise to the 'new approach'
of the EU towards harmonisation, which encourages mutual recognition and
its mandated recognition of other Member States' regulations, so that
harmonisation of standards is only undertaken when and to the extent it
is considered necessary. Member countries may still maintain their internal
rules and regulations applicable to their domestic products, while permitting
importation of "qualified" or "validly produced" products
from other member countries. However, the Court also accepted that compliance
with the importing country's rules may be necessary for specified reasons,
especially health and safety and consumer protection(126) . This brings pressure on the EU member countries to agree on minimum
harmonised standards or regulatory requirements, leading to the further
harmonisation of rules or common standards. Consequently, the new approach
enhances the complementarity and interaction between national rules and
regional-level harmonised regulations. So in the EU mutual recognition
operates in conjunction with some level of harmonisation (Bratton, William;
McCahery, Joseph; Picciotto, Sol & Scott, Colin; 1996: 32). MR is
therefore becoming a crucial instrument enhancing free trade either at
regional or international level and it is now pursued by various contracting
parties at regional, bilateral, and plurilateral level, such as the MRA
between the EU and the US signed in 18th May 1998(127) . MR has also been adopted by ASEAN in AFAS, as discussed below.
Part
19
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(122)
Indonesia allows acquisition of local existing bank through the purchase
of up to 49% of the shares of locally incorporated banks listed in the
stock exchange.
(123)
The Philippines allows acquisition of up to 60% of the voting stock of
an existing domestic bank or investing in up to 60% of the voting stock
of a new banking subsidiary incorporated under the laws of the Philippines.
(124)
Thailand allows 100% foreign equity participation in securities companies
and in asset management companies. Vietnam allows 100% foreign-owned company
providing services in life, accident and health insurance services, non-life
insurance, reinsurance, services auxiliary to insurance and financial
leasing services.
(125)
The judgment delivered by the Court of Justice in Case 120/78 (1979) ECR
649, (1979) 3 CMLR 494. (the 'Cassis de Dijon' case) on 20th February
1979. European Community Court of Judgement Report 1979 No.1-3, Part 2,
S.V6.9.
(126)
In the case Cassis de Dijon the Court accepted that "Obstacles to
movement within the Community resulting from disparities between the national
laws relating to the marketing of the products in question must be accepted
in so far as those provisions may be recognized as being necessary in
order to satisfy mandatory requirements relating to particular to the
effectiveness of fiscal supervision, the protection of public health,
the fairness of commercial transactions and the defence of the consumer".
Judgement of the Court of 20th February 1979, Case 120/78. European Community
Court of Judgement Report 1979 No. 1-3, Part 2, S.V6.9.
(127)
OJL 031, 04/02/1999 p. 3-80 and amendment adopted by 399 D0078 (OJL 031
04.02.99 p.1) |