ASEAN FREE TRADE AGREEMENT

(AFTA)

GROUP MEMBERS

• ZAHARI

• ZULKIFLI

• DHIAUDDIN

• SYAIFUDIN

• SALLEHUDDIN

• SAIFUL

• ROSMINIZAM

INTRODUCTION

• Established in January 1992

• AFTA is aimed at enhancing economic development, growth, and linkages among the ASEAN member countries through a liberal trade and investment regime.

• AFTA will lead to increased intra-regional trade and investment and rapid economic development in the region.

• With the widespread, rapid and sustained economic development, AFTA will narrow economic gaps among the ASEAN member countries through trade-creating effect, improved resource allocation and greater employment opportunities.

• AFTA will facilitate efficient utilizations of scarce resources and provide opportunities for the ASEAN member countries to further strengthen their competitive advantage.

Objectives • it is aimed at creating an integrated regional

market and enhancing ASEAN international competitiveness against other major competing economies in the global economy.

• AFTA is an economic initiative to position ASEAN as regional investment area in order to continuously attract foreign direct investment. This initiative is necessary in the light of keen competition with some of the fast emerging economies such as China and India to attract foreign investment because of their abundant labour supply and low wages.

HISTORY

• The proposal to set up a Free Trade Area in Asean was first mooted by the Thai Prime Minister Anand Panyarachun

• The proposal was agreed upon with amendments during the ASEAN Seniors Economic Official Meeting (AEM) in Kuala Lumpur.

• In January 1992, the ASEAN members then signed the Singapore Declaration at the heart of which was the creation of AFTA in 15 years.

• AFTA was designed during the rapid reemergence of regional trade arrangements in the late 1980s and early 1990s, despite the multilateral efforts to liberalize international trade through the General Agreement on Tariffs and Trade. Increased regionalism was a major issue then. The birth of NAFTA in 1994 and the deepening and broadening process of the EC in 1990s partly hastened the AFTA process.

• The creation of AFTA is to complement the forward and outward-looking ASEAN countries in promoting economic growth through export and investment-promotion strategies.

ASEAN MEMBERS

• Indonesia • Brunei• Malaysia• Philippines• Singapore• Thailand• Vietnam (1995)• Laos (1997)• Myanmar (1997)• Cambodia (1999)

Time Frame • In 1992, it was decided that AFTA would be

completed within a time frame of 15 years from 1993 to 2008. However, in 1994, the six original members of ASEAN (Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand) agreed to accelerate the completion process by 2003.

• Later in 1998, these six original members decided to further accelerate the process by another year, i.e. by 2002. For the new members, the time frame varies: Vietnam 1996-2006, Lao PDR and Myanmar 1998-2008, and Cambodia 2000-2010

Common Effective Preferential Tariff Scheme

• The objectives of AFTA are to be achieved through a tariff reduction scheme known as the Common Effective Preferential Tariff (CEPT) Scheme for:-

manufactured products, processed products unprocessed agricultural products. • The scheme adopts two approaches, namely

normal track and fast track, which will result in tariff rates for all relevant products being reduced to 0-5 per cent by 2002/2003.

Implementation

• For implementation purposes, manufactured and processed agricultural products have been divided into three lists:

Inclusion List, Temporary Exclusion List General Exception List. • Products under the Temporary Exclusion List would be

transferred to the Inclusion List by 1 January 2000. Products under the General Exception List are not included in the CEPT scheme. Unprocessed agricultural products have been categorized into three main lists as well: Inclusion List, Temporary Exclusion List and Sensitive List.

Malaysia’s Commitment

• To date, about 96.6 per cent of Malaysia’s products are already in the CEPT scheme, of which 91.7 per cent are already at tariff rates between 0 and 5 per cent. About 60.4 per cent of the products are already at zero tariff.

• The average CEPT tariff rate for Malaysia’s products in 2000 was 2.8 per cent and is expected to decline further to 2.45 per cent by 2002 and 2.07 per cent in 2003.

• The remaining products which have yet to be included into the CEPT scheme are CKD and CBU automotive products, unprocessed agriculture products in the Sensitive List, and products in the General Exception List.

THE PRIMARY GOALS OF AFTA

• Increase ASEAN's competitive edge as a production base in the world market through the elimination, within ASEAN, of tariffs and non-tariff barriers.

• Attract more foreign direct investment to ASEAN.

Membership Benefits

• Financial· Special negotiated low merchant fee rates· Reduced rates for AFTA members at AFTA Seminars, Professional Development Programs and AFTA Conferences· Advice on implementation of Service Fees· Discounted rates on Professional Indemnity Insurance

• Industry· AFTA is your voice when addressing policy issues and representation at state and federal government level, and with principals, IATA, the TCF, ACCC and other regulatory bodies

• Legal· One annual free legal advice/consultation for members· Assistance in dispute resolution· Assistance in Industrial Relations issues (A copy of the current  Travel Industry - Agencies - General Award and sample employment agreements are  available to all members)

• Marketing· Members decals provided to assist customers with identifying AFTA Members· The National Travel Industry Awards for Excellence program to promote and reward excellence within the Industry· Internet Listing on the AFTA Website with search facility for use by prospective clients· AFTA WebMAIL service· Members only web site information· Specific AFTA Location advertising and tagged supplier advertising· Annual AFTA Wallplanner· Ability to use the AFTA Logo on stationery and advertising· Ability to use the WTAAA logo designating membership of the travel agents' global organisation

Policy Issues· AFTA is your voice when addressing industry policy issue, and in representation at government level and

with principals, IATA, the TCF, ACCC and other regulatory bodies

• Education, Training & Continuing Professional Development- Providing quality graduates from the AFTA Travel and Tourism Colleges- Raising the industry standard through the Professional Development and Certification Programs

CONCLUSION

• This article has highlighted the developments and benefits of AFTA to the ASEAN region. Although the date of AFTA’s completion is 2002/2003, more than 90 per cent of the products from the six original AFTA members are already in the CEPT scheme with tariff rates between 0 and 5 per cent. Because of this, the transition process from pre- to post-AFTA period is expected to be smooth.

• AFTA promises significant economic benefits to the region. Increased intra-regional trade and investment through the liberalisation process will lead to higher income, economic welfare and rapid development in the regional economies. While AFTA promotes trade in merchandise or goods, its positive effect on the services sector within each of the ASEAN economies cannot be ignored.