Monday, November 30, 2015

Grading the ASEAN Economic Community Without a Scorecard

The ASEAN Secretariat released two reports before this month’s ASEAN Summit on the ASEAN Economic Community (AEC). The ASEAN Integration Report 2015 and its companion report ASEAN Economic Community 2015:Progress and Key Achievements provide useful updates on the AEC from the macro and micro points of view. 
On the macro level, the AEC appears to be doing well, according to these graphics from the reports:

However, readers of this blog know that I am also interested in developments at the micro level, particularly on the single production base and single market. There, more modest – but positive -- progress is being made:
  • AEC Scorecard – the Scorecard was last published in 2012; the Progress and Key Achievements report provides a partial update, stating that 92.7% of “focused” AEC deliverables (e.g., priority items) had been achieved by October 2015. Although this is positive, the actual completion rate of deliverables as per the full AEC Scorecard was 79.5%, according to this same report. 
  • ATIGA Tariff Elimination – 99.2 of tariff lines were reduced to 0% in the ASEAN-6, with the CLMV countries expected to have 90.8% of tariff lines at 0% by this year, for an overall average of 96%.  The remaining items subject to tariffs are sensitive items, e.g., agricultural goods.
  • Rules of Origin – all 10 ASEAN members are now participating in one of the two self-certification pilot projects, with Cambodia, Brunei, Malaysia, Singapore and Thailand in pilot program 1 (which includes trading companies) and Indonesia, Laos, Myanmar, Philippines, Thailand and Vietnam in pilot program 2 (which does not).  Myanmar was in the process of joining pilot program 1.  No time frame was given for completing the two pilot programs and applying a single approach to self-certification. In addition, all members except Cambodia and Myanmar have phased out the redundant requirement of reporting FOB value on Form D origin documents when the Change in Tariff Classification methodology is used.
  • ASEAN Single Window (ASW) and Trade Facilitation – the Protocol on the Legal Framework to Implement the ASW was signed, with the next stage of the ASW pilot program starting up, the electronic interchange of the Form D origin documents.  The ASEAN Trade Facilitation Joint Consultative Committee has been reactivated. Indonesia, Laos, Malaysia and Thailand have established National Trade Repositories of laws and measures affecting trade, which will help establish the ASEAN Trade Repository.
  • Non-Tariff Measures (NTMs) – these remain problematic, as data on the scope and implementation of NTMs remains spotty (for example, Thailand has self-reported 869 NTMs to the WTO, whereas Myanmar has self-reported just 1).  The reports indicate that more effort is needed to update the relevant information and allow for the private sector to engage with ASEAN on NTMs.  The ASEAN Framework Agreement on Mutual Recognition Agreements on industrial standards will be reviewed and revised.
  • Customs – Protocol 7 (customs transit) of the ASEAN Framework Agreement on the Facilitation of Goods in Transit (AFAFGIT) has been signed and is being ratified, with Protocol 2 (frontier posts) being finalized for signing.  A pilot program to implement AFAFGIT will be operational in Malaysia, Singapore and Thailand in May 2016.
  • Services – the report mentions the need to upgrade the ASEAN Framework Agreement on Services (AFAS) with an ASEAN Trade in Services Agreement (ATISA).   This topic is discussed in greater detail in the ASEAN Services Monitoring Report which was also issued around the November summit meeting and which I summarize in an earlier post.
  • Investment – the report notes that four countries revised their reservations (exceptions) to the ASEAN Comprehensive Investment Agreement (ACIA), with Brunei dropping manufacturing and forestry, Laos dropping manufacturing and Myanmar removing some restrictions on foreign investment; however, Indonesia introduced more restrictive measures for mining.
  • Capital -- ASEAN Finance Ministers signed the Protocol to implement the 6th Package of Financial Services Liberalization under the AFAS; this establishes the ASEAN Bank Integration Framework (ABIF). 
All in all, the reports describe an AEC that is a work-in-progress.  The AEC will indeed go into effect on December 31, 2015, but not a fully-functional AEC, as indicated by the 20.5% of the AEC Blueprint measures which have not yet been implemented.  Nevertheless, the degree and scale of work completed are still positive given the limitations imposed on the ASEAN institutions.  Hopefully, ASEAN leaders will follow the suggestions made by the Financial Times (and this blog) and assign additional authority to the ASEAN institutions and processes to achieve a fully functional AEC.