ASEAN ECONOMIC COMMUNITY

(AEC)

Presented by Mr. Saysana Sayakone Deputy Director-General

Foreign Trade Policy Department, Ministry of Industry and Commerce, Lao PDR

Tel/Fax: +856 21 450066 E-mail: saysana2010@gmail.com

Website: www.laoftpd.com

Content

1. AEC Initiatives

2. Implementation progress of AEC Initiatives

3. Key Issues and Challenges

4. Future Action Plans

AEC Initiatives • ASEAN Leaders declared at the Bali Summit in

October 2003 to reaffirm the goal of regional economic integration

• Transform ASEAN into a region with free movement of goods, services, investment, skilled labour and freer flow of capital.

• Establish ASEAN as a single market and production, making ASEAN more dynamic and competitive, increase prosperity and stability.

• The AEC is one of the foundations of that future.

ASEAN focuses on integration across 10 diverse economies……

The Goals: A Community based on three pillars:

ASEAN Political and Security Community (APSC) ASEAN Socio-Cultural Community (ASCC) ASEAN Economic Community (AEC)

ASEAN 2015

2

Birth of ASEAN

ASEAN Preferential

Trading Arrangement

ASEAN Free

Trade Area

ASEAN Vision 2020

AEC Blueprint

Vientiane Plan of Action

ASEAN Framework Agreement on Services

1967 1992 1997 2003 1998 2009

Bali Concord II

(ASEAN Community)

Roadmap for an ASEAN

Community

1977 1995

ASEAN Investment Agreement

Hanoi Plan of Action

2004 2008 2007

ASEAN Charter

2011

Bali Concord III

(RCEP/AFEED)

AEC Milestones….

5

2015

AEC

ASEAN ECONOMIC COMMUNITY

STRATEGIC SCHEDULE OF THE AEC BLUEPRINT (2008-2015)

Pillar 1 Single Market

& Production Base

• Free flow of goods • Free flow of services • Free flow of

investment • Freer flow of capital • Free flow of skilled

labor • Priority Integration

Sectors • Food, agriculture

and forestry

Pillar 2 Competitive Economic

Region

• Competition policy • Consumer

protection • Intellectual

property rights • Infrastructure

development • Taxation • E-Commerce

Pillar 3 Equitable Economic

Development

• SME development • Initiative for ASEAN

Integration

Pillar 4 Integration into

the Global Economy

• Coherent approach towards external economic relations

• Enhanced participation in global supply networks

HUMAN RESOURCE DEVELOPMENT RESEARCH AND DEVELOPMENT

6

Implementation of Prioritised Key Deliverables by 2013 by Pillar

7

AEC Scorecard

0 10 20 30 40 50 60 70 80 90

100

Pillar 1 - Single Market and Production Base

Pillar 2 - Competitive Economic Region

Pillar 3 - Equitable Economic Development

Pillar 4 - Integration into Global Economy

84.3 69.6

100.0 100.0

ASEAN (Overall - 82.1%)

Implementation of Prioritized Key Deliverables by 2013

Implementation of Prioritized Key Deliverables by 2013

Single Market and Production Base

10

11

Since January 2010, Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand (ASEAN-6) eliminated intra-ASEAN import duties on 99.20 % of their tariff lines.

Cambodia, Lao PDR, Myanmar and Viet Nam have reduced their import duties to 0-5% more than 97.86 % of their tariff lines.

However the AMS are allowed to maintain some products in Sensitive List (Schedule D), Highly Sensitive List (Schedule E;) and General Exception List (Schedule H).

Information on tariff based on AHTN is available in the ASEAN Website at http://www.asean.org/news/item/annex-2-tariff-schedules

Trade in Goods Tariffs Liberalisation

12

Trade in Goods

Non-tariff barriers Although there is great success in the reduction Tariff Barriers ,

ASEAN still faces a uphill battle in trying to reduce the NTM’s and related NTB effects .

The ASEAN Member States are now in the process of establishing a robust mechanism to identify and eliminate NTM’s and NTB’s with the cooperation of Member States.

The Coordinating Council on ATIGA (CCA) has engaged with the private sector on a regional level and individual AMS are also encouraged to engage the private sector at national level to seek inputs.

The CCA has provided a forum for ASEAN Member States to discuss actual cases brought about by their engagement with the Private Sector at National level.

13

Trade in Goods Enhancement of ATIGA Rules of Origin

The ASEAN Rules of Origin (ROO) are also being continuously revised to respond to changes in global production processes, and to make these regulations more trade-friendly and as liberal as those contained in the ASEAN Free Trade Area arrangements. This is to also to ensure minimizing the noodle bowl effect.

The ROO revisions to date have introduced other origin criteria to give economic operators wider options for achieving ASEAN-origin status for regionally traded products.

The revised ROO is reflected in the Products Specific Rules (PSR), which provide a choice of rules from a RVC-based rule of origin, a CTC-based rule of origin, a specific manufacturing or processing operation, or a combination of any of these.

The study on the most appropriate ROO for automotive products in ASEAN has just been completed The study recommended adopting Change in Tariff Classification (CTC) as an alternative rule for automotive components whereas currently Regional Value Content (RVC) 40% rule applies for automotive products. The recommendation of the study is being considered by the relevant sectoral body to implement the recommendations

14

Trade in Goods ASEAN Self-certification

ASEAN is developing an ASEAN wide Self Certification System (SCS)

The SCS will enable registered exporters to self–certify the ROO in the export documents as opposed to being certified by appointed government authorities currently;

Currently there are two self-certification pilot projects in ASEAN;

The 1st Self-Certification Pilot Project with four participating Member States, i.e. Brunei Darussalam, Malaysia, Thailand and Singapore;

The 2nd Self-Certification Pilot Project was developed by Indonesia, Lao PDR, and the Philippines.

The 2 SCPP are operated under 2 different MOUs and will be merged by 2015 for an ASEAN-wide Self-certification system.

15

Trade in Goods ASEAN Trade facilitation (NTR/ATR)

The ATIGA mandates that setting up of a ASEAN Trade Repository (ATR).

To support the ATR, AMS are developing the National Trade Repository.

The Coordinating Committee on the Implementation of ATIGA with the assistance of donor agencies are developing the ATR and NTR.

The implementation of the ATR and the NTR will provide a transparent, comprehensive and easily accessible trade portal.

The main elements to be included in the ATR/NTR would be information on policies, laws, regulations, administrative rulings, licensing, certification, qualification and registration requirements, technical regulations, standards, guidelines, procedures and practices related to trade in goods.

Trade in Goods….

16

ASEAN Single Window ASW Pilot Project Customs Transit System

Single regulatory regime/framework agreement (cosmetics, EEE, medical devices, tradtnl’ medicines) Harmonisation of standards MRAs (pharmaceutical, EE)

RVC 40% or Change in tariff classification

Self-Certification

Customs Standards Rules of Origin

Trade in Services

17

Movement of Natural Persons (MNP) Agreement

9th Package of Commitments SIGNED

The final 10th Package by 2015

Negotiation of the ASEAN Trade in Services Agreement (ATISA) by 2015

ASEAN FRAMEWORK AGREEMENT ON TRADE IN SERVICES (AFAS)..

Investment

18

ASEAN COMPREHENSIVE INVESTMENT AGREEMENT (ACIA)

ACIA signed in 2009

Protocol to amend ACIA signed in August 2014

Progressive liberalisation of restrictions by 2015

Competitive ASEAN Region

19

▪ Kick-off Workshop on Sector Studies for the AEGC

▪ Advice on Drafting Competition Laws and Implementing Regulations for the AEGC

▪ Guidelines on Developing Core Competencies

▪ Competition Regulatory Experts Secondment

▪ Building Competition Law Enforcement Capability

▪ AEGC Website ▪ Phase II Regional Competition

Advocacy ▪ In-Country Workshop in CLM to

Raise Awareness and/ Study on Economic Benefits and Possible Challenges of CPL

▪ Workshop on Promoting Business Compliance for CPL in ASEAN

▪ ASEAN Competition Conference ▪ Development of a Regional

Cooperation Framework on Enforcement, Information-Sharing, and Technical Assistance Relative to CPL

Strengthening Regulatory Environment in ASEAN

Institutional-Building and Enforcement of CPL

Strategy and Tools for Regional Competition Advocacy

Cross-Cutting Regional Initiatives

5 AMS have Competition Law (CPL) and Competition Authorities in place

COMPETITION POLICY

CONSUMER PROTECTION

21

9 AMS have consumer protection laws

Cross border consumer redress

Rapid Alert System

Promoting consumer welfare and interests …

INTELLECTUAL PROPERTY

Activities Main Elements

▪ ASEAN Patent Search and Examination Cooperation (ASPEC), a regional patent work-sharing program, has been operational since 2012

▪ ASPEC is utilized by at least 5% of patent applicants by 2015 ▪ Accession to the Patent Cooperation Treaty by AMS ▪ Establish network of patent libraries

Patents

▪ Effective use of copyright system by 2015 ▪ Study on contribution of copyrights in each AMS ▪ Establishment of collective management societies

Copyrights

▪ 6 months turnaround time by 2015 (filing to registration) ▪ Best practices in eliminating backlog ▪ Improved IT system/ manual of substantive examination ▪ Accession to Madrid Protocol/advocacy/usage ▪ Use of the regional classification of ethnic goods and services as supplement

to Nice classification

Trademarks

▪ Accession to the Hague/advocacy/usage by 7 AMS by 2015

Industrial Designs

16

EQUITABLE ECONOMIC REGION

23

Narrowing the Development Gap in ASEAN across the three ASEAN Communities

24

Cambodia, Lao PDR, Myanmar, Viet Nam or CLMV assisted in implementing their commitments ensuring that benefits of ASEAN integration are equitably shared.

A S&D/Positive-bias approach: Growing the ASEAN cake and increasing the share going to the CLMV countries.

Publication on “Narrowing the Development Gap in ASEAN: Drivers and Policy Options (2013) Mid-term Review of the IAI Work Plan II (2009-2015) Completed

ASEAN Economic

Community

ASEAN Socio-cultural

Community

ASEAN Political-Security

Community Initiative for ASEAN Integration

Initiative for ASEAN Integration

24

Development of small and medium enterprises

Progress: Strategic Action Plan for SME Development (2010-2015) SME Service Center Web Portal, with Regional, Sub-regional Linkages SME Guidebook Towards AEC 2015 ASEAN Benchmark for SME Credit Rating Methodology ASEAN Business Incubation Network (ABINet) The ASEAN Business Awards, focusing on Young and Innovative SMEs, in collaboration

with ASEAN Business Advisory Council (ASEAN-BAC)

SME DEVELOPMENT

25

INTEGRATION INTO GLOBAL ECONOMY

26

Emerging Regional Architecture

AFTA ACFTA AKFTA AJCEP AIFTA AANZFTA AHKFTA

ASEAN’s other

external economic partners

27

28 Regional Comprehensive Economic Partnership

Ensuring the success of the ASEAN Economic Community to be credible in driving the emerging regional architecture

Need to continue enhancing the ASEAN Plus 1 FTAs and improve utilization of these FTAs

Efficiently manage economic agenda despite resource constraints

Resisting domestic protectionist pressures

Need to bring SMEs into the mainstream of regional economic integration

29

ASEAN’s FTA Challenge

Nov 2011

ASEAN Framework Agreement on Regional Comprehensive Economic Cooperation

Aug 2012

Guiding Principles and Objectives for Negotiating Regional Comprehensive Economic Cooperation

Nov 2012 Joint Declaration on the Launching of Regional Comprehensive Economic Cooperation

2013 - 2014

1st round of Regional Comprehensive Economic Cooperation Negotiation – May 2013 2nd round: 23-27 Sep 2013 3rd round: 21-24 Jan 2014 4th round: 31 Mar-4 Apr 2014 5th round: 23-27 Jun 2014. Another round is to be held in Dec 2014.

Dec 2015

Conclude negotiation on Regional Comprehensive Economic Cooperation (5 rounds)

Impact of Integration

30

ASEAN Economic Performance

ASEAN GDP

31

4.7%

1.8%

7.8%

4.9% 5.8%

5.1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2008 2009 2010 2011 2012 2013

Source: ASEAN Integration Monitoring Office (AIMO)

Trends: Export, Import, and Total Trade

376.2 511.0 598.4 602.0 608.6

1,160.7

1,498.1 1,790.1

1,874.4 1,902.9

-19.0%

30.7%

18.9%

3.7% 1.4%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0

500

1000

1500

2000

2500

3000

2009 2010 2011 2012 2013

US

D B

illio

n

Intra-ASEAN Trade Trade with Rest of World Total Trade Growth 32 Source: ASEAN Integration Monitoring Office (AIMO)

Intra-ASEAN Trade

33

FREE FLOW OF SERVICES

34

Total Export, 319.7

Total Import, 306.5

-50

0

50

100

150

200

250

300

350

2005 2006 2007 2008 2009 2010 2011 2012

Value in billion US$

Total Export, 13.8% Total Import, 13.3%

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009 2010 2011 2012

% of GDP

FDI into ASEAN

35

49.7 47.9

100.4 97.5

114.3 122.4

-41.5%

-3.6%

109.4%

-2.8% 17.2%

7.1%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

0

20

40

60

80

100

120

140

2008 2009 2010 2011 2012 2013

US

D B

illio

n

FDI Inflows Growth

Source: ASEAN Integration Monitoring Office (AIMO)

Net Inflow of FDIs to ASEAN ( 2009-2013)

Notes: Data for 2013 are preliminary figures; Lao PDR's data on 'by source country' are not yet available.

Source of data: ASEAN FDI Database 36

EU, 21.2%

ASEAN, 16.4%

Japan, 14.8%

USA, 8.6%

China, 5.8%

Others, 33.2%

by major source country

Brunei Darussalam

0.8% Cambodia

1.0% Indonesia

15.6% Lao PDR 0.4%

Malaysia 9.2%

Myanmar 1.9%

Philippines 2.4%

Singapore 51.6%

Thailand 8.6%

Viet Nam 8.4%

by receiving country

Intra-ASEAN FDI

Data for 2013 are preliminary figures; Lao PDR's data on 'by source country' are not yet available. 37

Key Challenges

38

Key Challenges in Achieving AEC 2015

• Bottlenecks in Pillar 1 (Single market and production-base) must be highlighted due to their direct impacts to the region’s trade, investment and growth prospects.

• Efforts to be redoubled to reduce and abolish non-tariff and regulatory barriers in goods, services and investment.

• Priorities at the tail-end of the AEC Blueprint implementation: - fast-track implementation of high-impact, prioritised AEC deliverables - communicate the AEC to SMEs, citizens and key stakeholders - finalise AEC’s post-2015 agenda, critical to deal expeditiously with unfinished AEC 2015 agenda. • Ensure that the AMS effectively implement measures to deepen

economic integration and provide conducive environment for business activities to boost economic growth and the region’s development.

• Post 2015 – What next?

39

For Lao PDR • Drafted and revised more than 90 Laws and regulations related to trade and

services to comply with WTO. These includes 26 laws and 18 decrees – main legal basis for creating enabling environment for trade and investment

• Macroeconomic performance has shown a positive trend: Economic growth rate increased on average 4.8% annually from 1986-1990, 6.24%

annually from 2001-2005 and 7.9% from 2006-2010 GDP per capita in 1985 was $114, increased to $325 in 2000, $1.069 in 2009/2010

and increased to $1.349 in 2011-2012. Trade volume ( Export+Import)

• Reached $246 million in 1990 (export $75 million) • Reached $865 in 2000 (export $324 million) • Reached $3.460 in 2010 (export $1.789 million) • Reach $4.322,2 million in 2012 (export $1.602 million which increased 21%

compare to the year 1990)

40

For Lao PDR (Cont.) • Foreign Investment

• In 2000, there are 64 foreign investment projects with investment value of $51,42 million

• In 2010, 261 foreign investment projects with investment value of $1.882 million • In 2012, investment value reached $2,899 million • Apart from investing in hydro-power and mineral, many foreign investors also focus

on industrial processing, trade and services and investment in Special Economic Zones for exports

• Level of integration reach 83% in 2010 which consider doubled compare to the year

2005 (reference: NSEDP VI(2006-2010)).

• Number of visitors to Laos increased from 102.946 people in 1993 to 737.208 people in 2000 and 1.095.315 people in 2005; 2.513.028 people in 2010 and increase to 3.330.072 people in 2012. average increased at 20,07% annually. Tourism is one of the leading revenue driver for the country (2nd rank after mineral)

41

For Lao PDR (Cont.) • Foreign Investment

• In 2000, there are 64 foreign investment projects with investment value of $51,42 million

• In 2010, 261 foreign investment projects with investment value of $1.882 million • In 2012, investment value reached $2,899 million • Apart from investing in hydro-power and mineral, many foreign investors also focus

on industrial processing, trade and services and investment in Special Economic Zones for exports

• Level of integration reach 83% in 2010 which consider doubled compare to the year

2005 (reference: NSEDP VI(2006-2010)).

• Number of visitors to Laos increased from 102.946 people in 1993 to 737.208 people in 2000 and 1.095.315 people in 2005; 2.513.028 people in 2010 and increase to 3.330.072 people in 2012. average increased at 20,07% annually. Tourism is one of the leading revenue driver for the country (2nd rank after mineral)

42

For Lao PDR (Cont) Lao PDR has reduced its tariff in each period according to AFTA, and there are total 9558 lists of tariff according to the AHTN 2007. In 2012, Laos has total 9110 lists of tariff products within ASEAN which is lower than 5%, equals 95,31% of total products and there are 7525 lists of the 0% of tariff products, equals 78,73%. In addition, Laos has completed the implementation of ASEAN’s Agreement on Services and Investment.

43

Future Plan

GOL’s Agreement no. …/04 dated April 30, 2013 regarding the preparation for AEC participation in 2015, in which5 work plans have been laid out as followed:

44

Work Plan 1

Raise public awareness at central and provincial level on AEC, global and regional integration and related regulations

45

Work Plan 2

Establish mechanism to improve vertical and horizontal coordination to ensure consistent implementation of all commitments

46

Work Plan 3

Develop projects aimed to promote commercial production based on our comparative advantages Promote SME competitiveness through facilitating their access to finance and ASEAN market

47

Work Plan 4

Enhance business competitiveness through improving laws and regulations relating to establishment and operations of businesses

48

Work Plan 5

Develop human resources in a wide range of areas through implementing targeted capacity building programs in technical areas as well as foreign language

49

50

One Vision One Identity One Community