Yesterday Singapore’s
and Malaysia’s prime ministers announced plans to build a high-speed rail link
between Kuala Lumpur and Singapore. This
is just the latest progress in improving cross-straits relations. Hopefully, this will help lead to ending the long
delay in full implementation of the
ASEAN Framework Agreement on Goods in Transit (AFAGIT), a key but
low-profile aspect of the ASEAN Economic Community (AEC).
The issue of goods in
transit matters because the AEC is not a customs union. This is because national import duty rates of
the individual member states vary widely.
Each member state can impose its own duty rates on non-ASEAN origin
goods, which would not be the case in a customs union, where rates on
externally-originating goods are the same, regardless of where the goods
enter. ASEAN-origin goods, on the other
hand, receive the preferential tariff rate under the ASEAN Trade in Goods
Agreement (ATIGA) when they are traded between ASEAN member states.
Thus, the problem arises
when an ASEAN-origin good has to cross multiple national borders within
ASEAN. The Form D origin documents and
other import documentation must be presented each time the good crosses a
border, which
I explained can lead to a good losing its ASEAN-origin status.
This issue should have been
resolved by the AFAGIT, which would allow for special procedures for goods in
transit between ASEAN member states to reach their ultimate destination. The AFAGIT was signed in 1998 and was
intended to be part of the implementation of the ASEAN Free Trade Agreement
(AFTA), the predecessor of the ATIGA.
The problem was that two major protocols of the AFAGIT were never agreed
upon: Protocol 2, the designation of frontier posts, and Protocol 7, the
establishment of a customs transit system.
Both protocols were delayed
for years because of the bilateral dispute between Singapore and Malaysia
regarding the railway that links the two countries. Singapore insisted on having its immigration
and customs facilities for exit at the Woodlands checkpoint in the northern
part of the island. Malaysia insisted on
having its immigration and customs facilities at the Tanjong Pagar train
station at the southern part of the island, thereby asserting sovereignty over
the rail bed between Tanjong Pagar and Woodlands. Hence the two countries could not agree on
the frontier posts, nor the limits of their territory, leading to the impasse
over the AFAGIT protocols.
The dispute was resolved in
2010, leading to the closure of Tanjong Pagar in 2011 and now yesterday’s
announcement of the high-speed rail. The
major political obstacle to full implementation of the AFAGIT has been removed
yet we are still waiting, 15 years later, for the protocols to be
implemented. ASEAN’s leadership has
promised that this will happen and an ASEAN committee of government experts is
working on this. But like much of ASEAN, full implementation of the AFAGIT will
require additional patience by those hoping for full and effective
implementation of the AEC. Hopefully
this latest positive development in Singapore-Malaysia relations will help add
to the impetus for full implementation of the AFAGIT.
