ASEAN countries Update News

ASEAN SIX FURTHER CUT TARRIFS

The six major Association of Southeast Asian Nations (ASEAN) countries of Thailand, Indonesia, Malaysia, Singapore, the Philippines and Brunei have agreed to eliminate import duties on goods ranging from cars to consumer electronics three years earlier than previously planned. The six countries account for approximately 85% of Asean's gross domestic product. By the same agreement, remaining tariffs on items outside this agreement will be cut to 5 percent or less. Cambodia, Laos, Myanmar and Vietnam will follow suit in these cuts by 2012.

Economic realities have prodded the region to step up efforts to build a larger market. Southeast Asia which has a population of just over 500 million and gross domestic product of nearly $740 billion has recently come under increasing pressure by red hot growth in India and China which are now Asia's fastest-growing economies. From 1989 to 1994, China and Southeast Asia averaged $13 billion in foreign direct investment (FDI). That former parity has faded in recent years and in 2003 FDI in China amounted to $54 billion while that in the countries of the Association of Southeast Asian nations only equalled 20 billion. This reversal has acted to suck critical investment from Southeast Asia at a time when economies are already weaking because the Multi Fibre Agreement is set to expire at years end. The expiration of this agreement which gave Southeast Asian countries quotas on exports of textiles and clothing to the U.S. and Europe will mean further loss of jobs to China in the textile and clothing sectors as textile plants throughout the region are forced to compete with lower cost, more efficient Chinese companies. This is creating an atmosphere in which Leaders are finally being pushed to speed up integration because of fear of further job losses and lack of competetiveness with China. As Philippine President, Gloria Macapagal Arroyo aptly noted at the meeting "We only see one way out, that is not by looking west but by looking inward."

At the meeting, ASEAN is also expected to sign an agreement with China to cut tariffs on $100 billion of goods as part of a free trade accord which will take effect in 2010. ASEAN is pushing India for a similar accord by 2011. This is creating further pressure on Japan, South Korea and Australia/New Zealand to start negotiations on similar deals with ASEAN in the coming year.