Open
Regionalism and Deeper Integration: The Implementation of ASEAN Investment
Area (AIA) and ASEAN Free Trade Area (AFTA)
Dr.
Lawan Thanadsillapakul
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24
In
practice, even though intra-ASEAN liberalisation under AFTA, AIA, and
AFAS would strengthen and enhance intra-ASEAN trade and investment, ASEAN
countries are still furthering generalised liberalisation internationally.
Moreover, the implementation of ASEAN integration schemes is interactive
with and complementary to each other that goes beyond intra-regional integration.
This can be justified, for instance, from the results of the implementation
of ASEAN liberalisation in investment regimes that also contribute to
the elimination of ASEAN countries' most common limitations under GATS,
i.e. equity restriction. As discussed above, commercial presence of service
providers in ASEAN countries is subject to the existing domestic laws
that generally require foreign service suppliers to enter into joint ventures
with domestic nationals with limited equity. Therefore, under investment
regime liberalisation, ASEAN countries would allow a 100% foreign-owned
company to freely move intra-ASEAN that directly helps promote liberalisation
in service trade and FDI, not just from within, but also from outside
ASEAN. This would result in phasing out ASEAN limitations on market access
involving commercial presence under GATS. Since many services are intangible
and non-storable, they can only be delivered to foreign market if foreign
affiliates can be established to produce and sell those services in the
host countries, or if at least a right of commercial presence is granted
to facilitate transactions. Therefore, ASEAN countries' liberalisation
of investment regime, i.e. domestic laws on equity restriction and the
opening up of industries closed to foreigners, also helps service trade
liberalisation. For example, the opening up of service sectors in banking,
insurance, and telecommunications in ASEAN, along with the elimination
of equity restriction, would greatly help enhance liberalisation in service
trade at international level because non-ASEAN service providers would
be able to gain market access in ASEAN countries and also enjoy ASEAN
preferences. So under AFAS and AIA, preferential treatment among ASEAN
countries and generalised liberalisation would be balanced. This would
also fruitfully enhance AFTA as a free trade area since the reduction
in tariff and non-tariff is comprehensively implemented under the three
schemes in an interactive way complementarily. In fact, ASEAN liberalisation
is a training ground at the regional level before moving ASEAN towards
an open multilateral trading system at the global level.
ASEAN's relationship with the Asia-Pacific Economic Co-operation (APEC)
forum has also linked ASEAN economy with the Asia-Pacific region. The
interdependence between the two reinforces broader and generalised liberalisation
as ASEAN countries are members of APEC, and they also have commitment
to implement liberalisation in trade and investment under APEC. Even though
APEC focuses on unilateral action(146) , concerted unilateral liberalisation has occurred, for instance, in service
sectors among APEC economies(147) . ASEAN member countries have actively implemented the Bogor Declaration(148) aiming at liberalising trade and investment in the region by the year
2020 for developing member countries, and 2010 for developed members.
This has resulted in the resolution of ASEAN Vision 2020(149) responding to the commitment under APEC. Thus, even though the APEC commitments
are non-legally binding, APEC members including ASEAN countries have "concerted
unilaterally" liberalised trade and investment fruitfully. Consequently,
ASEAN liberalisation in trade and investment also reinforces generalised
liberalisation internationally consistently with GATT/WTO, responding
to the commitment to liberalisation under APEC based on Open Regionalism.
Therefore, ASEAN liberalisation is complementary and balanced with broader
regional and global liberalisation.
Conclusion
The
most important issue of ASEAN regionalisation is to generate a common
political will of ASEAN countries to agree to the implementation of deeper
integration in the region. Over three decades, ASEAN countries have preferred
to have their commitment based on "consensus" and have provided
loose framework-agreements with flexible practice rather than a concrete
legally binding regime. This is the main obstacle to the upgrading of
ASEAN regional integration, as evidenced by the modest success in economic
co-operation of ASEAN in the past.
From
a legal point of view, ASEAN needs to take implementation of all new schemes
seriously, and institutional, legal, and administrative requirements are
needed to ensure implementation. Davidson has pointed out that "As
has been said, in international economic law, the economist tells us what
should be done while the lawyer is left to figure out how to do it"
(Davidson, 1992: 139). To construct regional economic integration is largely
a problem of managing interdependence. Governments may be limited in their
choices by sets of rules, procedures and principles. Even though at present,
each ASEAN country is free to regulate economic transactions that take
place within its boundaries, its international economic relations are
governed by an international legal framework, which comprises multilateral,
plurilateral and bilateral agreements. Such laws establish parameters
within which international trade in goods and services and foreign investment
is conducted. An international framework is necessary in order to promote
increased order and predictability in international transactions. Therefore,
private sector entities that participate in the ASEAN scheme need a clear
rule system that ensures stability and predictability to potential investment
and trade. This can take place only if ASEAN members enter into binding
agreements and implement the agreed framework through domestic legislation.
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(146)
The APEC Committee on Trade and Investment (CTI) has developed the formulation
of APEC Non-binding Investment Principles, which was adopted in the Second
Leaders' Meeting in Bogor, Indonesia. This document outlines the principles
for regional investment based upon liberalization and fairness that even
non-APEC investors should be treated equally with APEC investors and with
indigenous investors under the principle of non-discrimination and national
treatment. See Kodama, 1996: 375-76, also see Davidson, 1997a: 1.
(147)
PECC's Survey of impediments to Trade and Investment in the APEC Region
found that most APEC economies impose few barriers on foreign providers
of computer services, value added telecommunications services and tourism
services. Quoted in Findlay, Christopher and Warren, Tony. "The General
Agreement on Trade in Services and Developing Economies in Asia-Pacific".
A report prepared for the UNESCO, May 1998. Also an analysis of the individual
Action Plans of APEC member economies highlights the barriers on service
trade that are to be removed unilaterally within APEC process even in
the areas traditionally 'untouchable'. There has been significant action
such as the pace of reform in electric power generation distribution and
marketing. For instance the privatization reform in Thailand including
EGAT (Electric Generation Authority of Thailand) that allows foreign investors
to take part in the privatization.
(148)
The Second APEC Leaders' Meeting in Bogor, Indonesia in 1994 signed the
Bogor Declaration to commit APEC members to liberalization of trade and
investment that goes beyond GATT as an Open Regionalism of the Asia-Pacific.
As APEC is not created as a bloc or formalized a closed regional integration,
APEC members concerted unilaterally liberalize trade and investment, and
non-APEC would be treated equally under the principles of nondiscrimination
and national treatment. APEC's Bogor Declaration has set the target of
trade and investment liberalization and binds member countries to achieving
this goal in the region by the year 2010 for developed members and 2020
for developing member countries.
(149)
Hanoi Declaration of 1998, the result of the Sixth ASEAN Summit, 16th
December 1998. ASEAN countries called for "a concerted of Southeast
Asian Nations, outward-looking, living in peace, stability and prosperity,
bonded together in partnership in dynamic development and in a community
of caring societies". |