RAFIDAH'S RESPONSE 3 KUALA LUMPUR

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(Bernama The Malaysian National News Agency Via Thomson Dialog NewsEdge) from BERNAMA, The Malaysian National News Agency Q: What is the progress so far on negotiations to liberalise the services sector? Could you elaborate on how Asean would gain by liberalising tourism, healthcare, e-Asean and foreign equity? Some countries could be concerned about opening-up these areas too much? A: Services sector liberalisation is equally important for Asean to realise the regional single market vision



The potential of this sector in Asean are huge and remain untapped by Asean service providers

Progressively, liberalising the sector will also inject greater competition, and thereby leading to strengthening of the sector as the sector is opened up for countries outside the region under the multilateral or through the regional FTAs that are being concluded by Asean with major trading partners

Recognising the importance of the contribution of this sector to the economies of the region, Asean Leaders in December 2005 decided to endorse the speedier liberalisation of the services sector within the region by 2015, instead of 2020

The current Fourth Round of Services Negotiations under the Asean Framework Agreement on Services (AFAS) commenced in January 2005 and scheduled to be completed by the end of 2006

The Fifth package of offers covering 70 sector/sub-sectors is being finalised

Further, Asean is also discussing the approach to liberalise the scope of services in nine equivalent annual tranches, i.e. subject to an annual quota of sub-sectors, over the liberalisation timeframe (2007-2015), including any other possible approaches

For this Fourth Round of Negotiations, Malaysia is considering offers that are significant to the progress of liberalising the services sectors

Among sectors where offers are being considered include education, tourism, construction, surveying and maritime

Flexibility is also allowed for sensitive sectors. Senior officials are discussing the threshold for flexibility to avoid countries using the flexibility clause as an "escape clause" from liberalisation commitments

In addition, Asean is also looking at possible Emergency Safeguard Mechanism (ESM), in case countries are affected by imports of certain services sector

Q: What is the progress so far with the Asean Single Window (ASW)? Do you see the initiative implemented by the set deadline by 2008? A: The development of the Asean Single Window (ASW) requires huge capital outlay. As an initial step, Asean member countries are in the process of developing their National Single Window (NSW), which will be subsequently integrated into the ASW

The Asean Task Force on ASW has developed the implementing Protocol, Technical Guide, National Single Window (NSW) Implementation Guide and the ASW Action Plan

The Action Plan provides the steps that need to be taken to realise the NSW/ASW from now till 2007 for Asean-6 and 2011 for CLMV

Given the complexity of establishing the system on a region-wide basis, Asean is seeking technical assistance from Dialogue Partners, particularly to help the newer member of Asean in establishing their NSW

As of now, there is strong commitment from all member countries to realise the ASW according to the established timeline of 2008 for Asean-6 and 2012 for the CLMV

Q: At the last AEM in Laos, Malaysia had proposed the setting up of an SMEs database to enable SMEs within the Asean circle to interact. Could you update us on the progress so far? A: SMEs form the backbone of the economy in Asean member countries and assume significant roles towards realising the regional integration initiatives

Asean Policy Blueprint for SME Development 2004-2014 was adopted in 2004 which contain strategic work programmes, policy measures and indicative output for SME development in the Asean region

SME Working Group in Asean is currently undertaking several projects, aimed at strengthening Asean's SMEs linkages

Some 23 projects are currently being completed or at various level of implementation

These projects include capacity building initiatives such as HRD, development of a micro credit system, establishment of Asean Trading Firms Network and programmes for improving technology transfer and licensing

Work is undertaken within the SME Working Group on a continuous basis to strengthen the SME database within Asean

Q: The 37th AEM also marked the first consultation between CLMV countries. How do you describe their level of development as these countries have larger development gap compared with other asean members? A: Various initiatives have been developed to promote the development of the CLMV to facilitate the speedier integration of these countries with the rest of Asean

Under the Initiative for Asean Integration (IAI), a Work Plan has been established for the period of 2002 - 2008. 135 projects have been identified and at various stages of implementation

The projects cover areas such as infrastructure, human resource development, ICT and regional economic integration

Funding for these projects is secured from Asean-6, international donor organisations and dialogue partners

To date, Malaysia has contributed US$ 1.53 million for the IAI projects. Malaysia also committed to provide an additional grant of up to US$500,000 for the period 2006-2008

Other measures taken to assist these countries include granting unilateral tariff preferences to products of export interests of CLMV under the Asean Integration System of Preferences (AISP)

Cross border investments from Asean-6 are also encouraged into these countries to promote their economic development

Q: During the Asean Investment Area (AIA) council meeting in Laos, it was agreed that all investment policies of Asean countries be brought together as one integrated policy to create a single investment marketplace for foreign investors. Do you think such an initiative is feasible given the intense competition for the investment dollar by countries individually? A: The Asean Investment Area (AIA) is aimed at promoting Asean as an attractive investment destination to FDI and to increase intra-Asean investment through facilitation, promotion and liberalisation programmes

Asean has accelerated the process of liberalisation programme through shortening of the end dates of the Temporary Exclusion Lists for the manufacturing sector from 2010 to 2003 for Asean-6 and Myanmar and 2010 for Cambodia, Laos and Vietnam

However, recognising the different level of economic development between Asean member countries, there is a need for specific national policies to be maintained to promote individual national development objectives

Q: What are the major issues that would be discussed at the 38th AEM? Are there initiatives agreed to during the Asean summit last year that would be discussed by the ministers? A: The 38th AEM will discuss a wide range of issues. These covers: *assessment of the progress of Asean towards economic integration since implementation of the Asean Free Trade Agreement (AFTA) in 1993. This includes status of elimination of tariffs for intra-Asean trade; *implementation issues related to the Common Effective Preferential Tariff (CEPT) scheme relating to transfer of products that are still not integrated into the CEPT scheme by some member countries such as sugar, rice and petrochemicals; *revisions to the CEPT Rules of Origin (ROO) and Operational Certification Procedures to incorporate new improvements including product specific rules for enjoyment of preferential tariffs; *implications and measures that need to be put in place to fast track the realisation of Asean Economic Community (AEC) from 2020 to 2015; *status of the implementation of measures for the 11 Priority Integration Sectors, to accelerate the realisation of Asean Economic Community (AEC); *finalisation of the Roadmap for the Logistics Services Sector which has been endorsed as the 12th priority sector for integration; *work programme and modalities for elimination of non-tariff barriers; and *liberalisation and facilitation of trade in services sector, including the finalisation of package of offers for the Fifth Package of Services liberalisation

Another important issue that will be discussed is the acceleration of timeline for realisation of the AEC

This includes, developing a comprehensive blueprint to integrate all the existing Asean's economic initiatives such as AFTA, AFAS, AIA, and integration of the priority sectors

It must be stressed that the fundamental issue in realising the Asean integration is not solely dependent by accelerating the timeline, but most importantly, adhering to the implementation of the initiatives agreed to date

Q: How would Asean countries reconcile their commitments to Afta with the FTAs signed by individual countries. There are criticisms that Asean members would offer more under FTAs and in the process negate Afta? A: This issue has been raised frequently. Malaysia views the bilateral and regional FTAs as reinforcing one another rather than eroding the commitments under Afta

The bilateral FTAs are more comprehensive and take into account the specific bilateral interests

It is likely that there are instances where the level of commitments undertaken is much higher compared to those under the regional initiatives

Notwithstanding this, Asean member countries are committed to ensure that the bilateral FTAs will not pose a hindrance towards Asean's objective of realising the Asean Economic Community (AEC)

Q: What are the major issues that would be discussed with Asean's dialogue partners, especially the economic integration between Asean+3 and efforts towards building an East Asian Community? A: The consultations with dialogue partners will mainly focus on the current status of negotiations on the Free Trade Agreements (FTAs) that Asean is currently negotiating with these countries

These include narrowing the differences in positions relating to issues such as services and investment liberalisation and modalities for tariff reduction for trade in goods

Asean+3 Consultations have been devoted to identification and implementation of projects, mainly capacity building initiatives

Given the many global challenges, the Asean + 3 process is now giving greater emphasis for policy dialogues on key issues confronting member countries such as the spiralling oil price, energy efficiency and conservation measures, diversification of energy supply and use of alternative and renewable energy, effective and clean use of resources, oil stockpiling system development and energy-related statistics development

The meeting will be considering the recommendations of the Expert Group on the establishment of an East Asia Free Trade Area (EAFTA)

Initial findings shows that countries will benefit from EAFTA, as all parties can expect an increase in both GDP and welfare

Further thoughts need to be given on how EAFTA could be devised, taking into account all existing and ongoing East Asian FTAs including the Asean+1 FTAs

Q: What about enhancing trade and investment ties with other dialogue partners such as the United States and Australia? A: Asean and US have established the Enterprise for Asean Initiative (EAI), which was announced by the President of the US at the sidelines of the Apec Summit on 26 October 2002 in Los Cabos

The Vision Statement for Enhanced Partnership between Asean and the US was adopted in November 2005 in Busan, Korea

To strengthen the existing relations, the Action Plan to Enhance Asean-US Partnership covering all fields, including economic cooperation was adopted by the Asean Foreign Ministers and Secretary of State recently at their Meeting in Kuala Lumpur

Currently, Asean-US Trade and Investment Framework Agreement (TIFA) are being finalised for endorsement by the Economic Ministers and USTR during the consultations on 25 August 2006 in Kuala Lumpur

The objective of the TIFA is to promote and facilitate trade and investment as well as to identify areas of economic cooperation

As a start, the US has developed an initial list of proposed projects for Asean's consideration. This includes: *assistance to develop the Asean Single Window (ASW); *harmonisation of procedures/standards on certification for pharmaceutical products; and; *sanitary and phyto-sanitary (SPS) on agriculture products

As you are aware, Asean is currently negotiating a comprehensive FTA with Australia and New Zealand, which also includes measures towards enhancing economic cooperation, apart from the liberalisation initiatives

Q: As hosts, what is Malaysia's aspirations for this meeting? Are there any new initiatives that Kuala Lumpur might want to put forward? A: Malaysia, as the new chair will continue to work with other Asean countries to steer the process of accelerating and deepening the economic integration of Asean as well as strengthening Asean's linkages with the dialogue partners

Emphasis will be given to ensure that commitments made are realised according to the timeline established

Malaysia would like priority to be given in the area of trade facilitation which is critical in creating a regional single market

Asean will need to devise measures to reduce the costs of doing business in the region to remain competitive vis-`-vis China and India

In addition, Malaysia will also emphasise on the need to strengthen private sector participation in the Asean economic integration initiatives

The role of private sector is critical as they are the ones who will eventually benefit from all these integration initiatives

Copyright 2006 Bernama

Copyright 2006 Bernama - Malaysian National News Agency Source: Financial Times Information Limited - Asia Intelligence Wire.
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