By Shamim Adam and En-Lai Yeoh
Nov. 20 (Bloomberg) — Leaders of the Association of Southeast Asian Nations today agreed to eliminate trade barriers for goods and services in an attempt to create a European Union-modeled economic community by 2015.
The 10 members of the group adopted an Asean Economic Community Blueprint that also promises investors better dispute- settlement mechanisms and more transparent and consistent rules.
Member nations say integration, styled after the EU without a common currency or passport-free travel, is essential for the group as it competes with China and India for exports and investments. The Asean countries have a combined gross domestic product of over $1.03 trillion and a population of about 570 million.
“Businesses say we have a five-year window in terms of catching up with China and India,” said Robert Yap, chairman of the Asean Business Advisory Council. The blueprint, he said, “is to make sure we are there on time to compete.”
The report sets out commitments, targets and timelines for a single market and production base with an unrestricted flow of goods, services investments and skilled jobs.
Export-Dependent
Southeast Asia’s developing economies are almost twice as reliant on exports as the rest of the world, with more than 60 percent of overseas sales ultimately destined for the U.S., Europe and Japan.
“Simple, harmonized and standardized trade and customs, processes, procedures and related information flows are expected to reduce transaction costs in Asean,” the blueprint states. That “will enhance export competitiveness and facilitate the integration of Asean into a single market for goods, services and investments and a single production base.”
Asean leaders today also signed a charter, the first legally binding document since the group’s founding 40 years ago. Members found to be in violation of its rules will be referred to the leaders of the 10 Asean countries for action. The group will still rule by consensus, having rejected proposals to add voting, expulsion or sanctions on its members.
The charter will “allow us to evolve Asean into a community,” Malaysian Foreign Minister Syed Hamid Albar said in an interview.
`No Restrictions’
The group plans to remove “substantially” all restrictions on trade in services for four industries, including air transport, health care and tourism by 2010, the report said. Trade barriers in logistics services are expected to be removed by 2013, while all other services industries will be opened two years later.
“There will be substantially no restriction to Asean services suppliers in providing services and in establishing companies across national borders within the region, subject to domestic regulations,” the report said.
Asean also plans to “remove or relax” restrictions on capital flows to promote the development of its capital markets.
“A free and open investment regime is key to enhancing Asean’s competitiveness in attracting foreign direct investment as well as intra-Asean investment,” the blueprint stated. “Sustained inflows of new investments and reinvestments will promote and ensure development of Asean economies.”
Dispute Mechanism
The group aims to attract investment by providing “enhanced protection” such as dispute settlement mechanisms, and developing more transparent and consistent rules and procedures, it said.
Still, some analysts say the gaps in development between the group’s richest and poorest members may slow the pace of integration, making the 2015 target an unrealistic one.
“The probability is somewhat low it will happen by 2015,” said V. Anantha-Nageswaran, head of investment research for Asia and the Middle East at Bank Julius Baer in Singapore. “Given the relative unevenness of growth between them, I’m not entirely sure they will be able to keep to the deadline.”
One such area where the blueprint’s enforcers may have difficulty in opening up industries would be in financial services, said Citigroup Inc.’s Piyush Gupta.
“Countries say `given our state of development, there is no way we can give up control of our monetary, fiscal and macroeconomic policies,”’ Gupta said. “That’s what underlines people’s worries and fears and why financial integration doesn’t proceed as quickly as you want it to.”
Transport Networks
Some progress has been made in infrastructure development, where the group said it will boost cooperation to develop better land, sea and air transport networks.
The Southeast Asian nations agreed earlier this month to fully liberalize aviation services by 2015, which will permit Singapore Airlines Ltd. and Malaysia’s AirAsia Bhd. to have more flights within the region.
“An efficient, secure and integrated transport network in Asean is vital for realizing the full potential of the Asean free- trade area,” the report said.
Asean also highlighted the completion of a 5,500-kilometer railway line linking Singapore and the Chinese city of Kunming as a priority. It will also work together to ensure a secure and reliable supply of energy in the region.
Asean’s members are Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam.
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