AEC Economic Community

Dr. Malai KORNKEUWSOMNEUK

Department of Trade Negotiations

Ministry of Commerce

Thailand

ASEAN (Association of South East Asian Nations)

1997

1997

1967

19671995

CAMBODIA

1967

1967

1967

19841999

ASEAN

Economic

Community

ASEAN

Political-

Security

ASEAN CommunityASEAN Communityin in 20152015

Community(AEC)

ASEAN Socio-

Cultural Community

(ASCC)

Security

Community(ASC)

…. …. Towards ASEAN Economic CommunityTowards ASEAN Economic Community AEC

One Vision,

One Identity,

One Community

� In 2007, ASEAN Leaders signed Cebu Declaration on the Acceleration

of the Establishment of an ASEAN Community by 2015.

� In 2003, ASEAN Leaders signed Bali Concord II, declaring that “An ASEAN

Community” shall be established by 2020.

Towards.......ASEAN Economic Community (AEC)ASEAN Economic Community (AEC)

� In November 2007, ASEAN Leaders signed the“ASEAN Charter”and “Declaration

on the AEC Blueprint” to reaffirm the commitments towards the AEC by 2015.

� In 2007, ASEAN Economic Ministers signed and approved the AEC Blueprint as an

Integrated plan towards the AEC.

1. A Single Market and Production Base

Free flows of goods

Free flows of services

Free flows of investment

Free flows of skilled labors

AEC

ASEAN Economic Community: AEC

2. A Highly Competitive Economic Region

e-ASEAN (e-commerce)e-ASEAN (e-commerce)

Taxation

Intellectual Property Rights

Competition Policy

Consumer ProtectionFree flows of skilled labors

Freer flows of capital Infrastructure DevelopmentInfrastructure Development

Consumer Protection

3. A Region of Equitable Eco. Development

Development of SMEs

Narrowing Development Gap

4. A Region fully integrated into Global

ASEANArrangement of FTAs with non-ASEAN

Involvement in global supply chain

Year

2015

ASEAN Free Trade Area(AFTA) ASEAN Trade in Goods Agreement (ATIGA)

Implemented in 1993, eliminating all tariffs in 2010 (ASEAN-6) and 2015 (CLMV)

ASEAN Framework Agreement on Services(AFAS)

Development of Economic Cooperation in ASEANDevelopment of Economic Cooperation in ASEAN

GoodsGoods

ServicesServices

Liberalization

Establishment of ASEAN in Establishment of ASEAN in 19671967

ASEAN Framework Agreement on Services(AFAS)

Implemented in 1995, gradually liberalization until 2015

ASEAN Investment Area(AIA) ASEAN Comprehensive Investment Agreement (ACIA)Implement in 1998, covering liberalization, protection, and promotion of investment

ServicesServices

InvestmentInvestment

Agriculture, Forestry, Food Security, Industry, IPR, Infrastructure, ICT (e-ASEAN), Consumer Protection, Competition Policy, etc.

CooperationCooperation

Economic Cooperation

Combined 10 markets into one0% import tariffs/elimination of all

barriers to trade

Free flows of Services

What will happen in AEC in 2015 ……..

Free flows of Investment

Goods

Services

Investment Free flows of Investment

Free flows of skilled labor

Investment

Skilled Labor

Freer flows of capitalCapital

� Gradually reduced import tariffs since 1993.

1. Free flow of goods

Free flow of GoodsFree flow of GoodsAEC Blueprint

1 January 2010 ASEAN-6 Zero import tariffs on products from ASEAN

1 January 2015 CLMV Zero import tariffs on products from ASEAN1 January 2015 CLMV Zero import tariffs on products from ASEAN

Except Sensitive products (Sensitive List: SL) import tariffs may not be 0% but must be

less than 5%.

and Products in Highly Sensitive List (HSL)

End tariffs will depend on the negotiations with interested member states.

HSL: Rice and SugarRequesting Countries: Indonesia, Malaysia, Philippines

Brunei

Thailand Coffee, Potato, Copra, Cut flower

Coffee, Tea

Cambodia Poultry, Live fish, some fruits, vegetable, and plants

Import Tariff

5%

5%

5%

Free flows of GoodsFree flows of GoodsAEC Blueprint

ASEAN – 6 by 1 Jan 2010

CLMV by 1 Jan 2015

Sensitive products (Sensitive List ) import tariffs may be > 0% and < 5%.

Laos Live animals, Bovine, Beef, Poultry, some fruits, vegetable, rice, Tobacco

Malaysia Some live animals, Bovine, Poultry, Egg, some fruits, vegetable, Tobacco

Myanmar Nuts, Coffee, Sugar, Silk, Cotton

Philippines Some live animals, Bovine, Poultry, Tapioca, Corn

Vietnam Some live animals, Poultry, Egg, Processed meat, Sugar

Singapore and Indonesia

None

5%

5%

5%

5%

5%

5%

-

Thailand is compensated by minimum

importation of sugar of 550 thousand

Products in Highly Sensitive List

The end tariffs will depend on the negotiations with interested member states.

Products : Rice and Sugar

Requesting Country: Indonesia, Malaysia, Philippines

Free flow of GoodsFree flow of GoodsAEC Blueprint

Indonesia Rice : 25% by 2015 Sugar : from 40% to 5-10% by 2015

Philippines

Rice : Standstill at 40% until 2014 and reduce to 35% by 2015

Malaysia Rice : 20% in 2010

Sugar : Standstill at 38% until 2011 and reduce to 5% by 2015

importation of sugar of 550 thousand

ton annually.

Thailand is compensated by Philippines’s purchase of

Thai rice at least 367 thousand ton annually.

Service User CountryRestrictions on market access, i.e.Restrictions on market access, i.e.

Restriction on foreign equity shareholderService Provider

2. Free flow of Services

� To reduce substantially all restrictions on services among member states.

Which services are covered ?

reduce/eliminate

Free flow of servicesFree flow of servicesAEC Blueprint

�Restriction on foreign equity shareholder

�Restriction on value of service provided

�Restriction on the number of entities

�Restriction on types of legal entities

�Restriction on the number of service providers

�Restriction on types of service providers

� Do not permit the immigration of natural

persons to provide services

Service Provider Country

13“Services” VS “Investment”in Free Trade Agreement

: What are “Services” What are “Investment” ?

Services1. Business/Professional (Medical Practitioner, Engineer, Lawyer,

Accountant, etc.)

2. Communication

3. Construction

4. Distribution

5. Education

6 Environment

Sectors not included in services= Investment.

6. Environment

7. Finance

8. Health

9. Tourism and Travel

10. Recreation

11. Transport

12. Others

Investment1. Agriculture

2. Fishery

3. Forestry

4. Mining

5. Manufacturing (Industrial) +

services incidental to the above 5

sectors

Free flow of ServicesFree flow of ServicesAEC Blueprint AEC Blueprint

22. . Free flow of Services

Year

2006

Year

2008

Year

2010

Year

2013

Year

2015

-------- Gradually increase foreign equity participation for ASEAN investors up to Gradually increase foreign equity participation for ASEAN investors up to 7070%%..

2006

Priority Integration SectorsPriority Integration Sectors

Telecommunication-

Computer / Health / Tourism

/ Air Transport

LogisticLogistic

OthersOthers

4949494949494949%%%%%%%% 5151515151515151%%%%%%%% 7070707070707070%%%%%%%%

4949494949494949%%%%%%%% 5151515151515151%%%%%%%% 7070707070707070%%%%%%%%

4949494949494949%%%%%%%% 5151515151515151%%%%%%%% 7070707070707070%%%%%%%%

Free flow of InvestmentFree flow of InvestmentAEC Blueprint AEC Blueprint

11. . AgricultureAgriculture

22. . FisheryFishery

33. . ForestryForestry

44. . MiningMining

55. . ManufacturingManufacturing

((IndustrialIndustrial))

• Extend non-discriminatory treatment, including National Treatment and Most-Favored

33. . Free flow of InvestmentFree flow of Investment

• Liberalization, Protection, Promotion, and Facilitation of Investment

• Extend non-discriminatory treatment, including National Treatment and Most-Favored

Nations to investors in ASEAN.

• Revise the AIA and draft the new ASEAN Comprehensive Investment

Agreement (ACIA)

ACIA : ASEAN Comprehensive Investment Agreement

Free flows of Skilled LaborFree flows of Skilled LaborAEC Blueprint AEC Blueprint

4. Free flows of Skilled Labor

� Facilitate the issuance of visas and employment passes for ASEAN Facilitate the issuance of visas and employment passes for ASEAN professional and skilled laborprofessional and skilled labor

� Work towards Mutual Recognition Arrangements (MRAs)Work towards Mutual Recognition Arrangements (MRAs)

� Mutual recognition on the qualifications of professional services

� Professionals and skilled labor of one member state are legitimate to work in

EngineerEngineer

AccountancyAccountancy

Medical Medical PractitionerPractitioner

DentalDentalPractitionerPractitioner

NursingNursing SurveyingSurveying

ArchitectureArchitecture

other member states, subject to domestic rules and regulations of the

recipient country.

� At present, ASEAN completed MRAs in 8 sectors.

TourismTourism

Freer flow of CapitalFreer flow of CapitalAEC Blueprint AEC Blueprint

5. Freer flow of Capital

� Ensuring an orderly capital account liberalization consistent with

member countries’ national agenda and readiness of the economy.

� Allowing adequate safeguard against potential macroeconomic

instability and systemic risk.

� Ensuring the benefits of liberalization to be shared by all ASEAN countries.

PrinciplePrinciple

countries.

Remove or relax restrictions, where appropriate and possible

� To facilitate the flows of payments and transfers for current account

transactions;

� To support foreign direction investment and initiatives to promote

capital market development.

ActionsActions

66. Other cooperation. Other cooperation

AEC BlueprintAEC Blueprint

Food, Agriculture and ForestryFood, Agriculture and Forestry

Enhance intra-and extra-ASEAN trade and

long-term competitiveness of ASEAN’s food,

agriculture and forestry products.

Intellectual property rights Intellectual property rights

(IPR)(IPR)

Develop a culture of learning and innovation

supported by a friendlier IP profile to businesses,

investors and creators in ASEAN.

18

Competition PolicyCompetition PolicyFoster a culture of fair competition and

establish a network of authorities responsible for

competition policies.

Infrastructure DevelopmentInfrastructure Development

Develop an efficient, secure and integrated

transport network, a secure and connected

information infrastructure, and a secure reliable supply of energy.

SME DevelopmentSME Development

Enhance the competitiveness, dynamism and

resilience of ASEAN SMEs and increase the

contribution of SMEs to overall economic growth and development of ASEAN.

AECAEC

China

India

Goods: Since July 2005

Services: Since 2007

Investment: Signed on 13 Aug 09

Goods: signed on 13 Aug 09, Effective on 1 Jan 10

Services/Investment: under negotiations

FTA between ASEAN and Dialogue PartnersFTA between ASEAN and Dialogue PartnersFTA between ASEAN and Dialogue PartnersFTA between ASEAN and Dialogue PartnersFTA between ASEAN and Dialogue PartnersFTA between ASEAN and Dialogue PartnersFTA between ASEAN and Dialogue PartnersFTA between ASEAN and Dialogue Partners-------- At presentAt presentAt presentAt presentAt presentAt presentAt presentAt present

JapanAKFTA

Korea

Goods/Services/Investment: Signed in 2008

For Thailand effective on 2 June 09

Goods/Services: ASEAN except Thailand since 2007

Foe Thailand Services: Signed on 26 Feb 09, Effective on 1 June

09 For Goods effective on 1 Oct 09

Investment: Signed on 2 June 09 Effective on 31 Oct 09

Goods/Services/Investment: Signed on 26 Feb

09, Effective on 1 Jan 10

New ZealandAustralia

19

EAFTA (East Asia FTA) (ASEAN +3)

CEPEA (Comprehensive Economic Partnership in East Asia) (ASEAN +6)

AEC

Enhancing ASEAN External Economic Relations-Future

New ZealandAustraliaChina Japan

KoreaKoreaIndia

ASEANASEAN1010 : Population 590 ml ( 9% of global population ) GDP

1,499 billion US$ ( 2% of global GDP )

EAFTA (ASEAN +EAFTA (ASEAN +33)) : Population 2,068 ml ( 31 of global population ) GDP 9,901 billion US$ (18%

of global GDP )

CEPEA(ASEAN +CEPEA(ASEAN +66)) : Population 3,284 ml (50% of global population ) GDP 12,250 billion

US$ (22% of global GDP )20

Global Economic ArchitectureGlobal Economic ArchitectureGlobal Economic ArchitectureGlobal Economic ArchitectureGlobal Economic ArchitectureGlobal Economic ArchitectureGlobal Economic ArchitectureGlobal Economic ArchitectureSource: Asian Development Bank

21

AEC

China

India

Goods : signed 29 Nov 04, effective on 1 Jan 05

Service : signed 14 Jan 07, effective on 1 Aug 07

Investment : signed 15 Aug 09, effective April 10

Goods : signed 13 Aug 09, effective on 1 Jan 10

Service/Investment : under negotiation

5 5 FTAs b/w ASEAN and Dialogue PartnersFTAs b/w ASEAN and Dialogue Partners –– At PresentAt Present

JapanAKFTA

Korea

Goods/Service/Investment : Thailand signed 11 April 08

For Thailand, effective on 2 Jun 09

Goods : Other ASEAN members signed on 28 Aug 06.

Service : Other ASEAN members signed on 21 Nov 07.

(Thailand : Service signed on 27 Feb 09, effective on 1 Jun 09

Goods: signed on 27 Feb 09, effective on 1 Aug 09)

Investment : all members signed on 2 Jun 09, effective on

31Oct 09

Goods/Service/Investment : signed 26 Feb 09

Effective on 1 Jan 10 (Thailand ratified the

Agreement on 12 Mar 10.)

New ZealandAustralia

ASEAN-Korea FTA

ASEAN-Canada

ASEAN-China FTA

ASEAN-Russia

ASEAN-EU FTAASEAN-US TIFA

Global Engagement is KeyGlobal Engagement is Key

Next Station >> RCEP

ASEAN-Australia- New

Zealand FTA

ASEAN-Korea FTA

ASEAN-Japan CEP

ASEAN-Pakistan

ASEAN-India FTA

ASEAN-US TIFA

RCEP

AEC

Who will Who will winwin / / loselose in AEC ?in AEC ?

Expand exports to larger

market in ASEANZero import tariffs, no

barriers to trade among

ASEAN MembersImport raw materials from

ASEAN with higher quality at lower cost

Products from ASEAN

countries will enter more into the market

AEC &Opportunities Challenges

Thai products with low

quality may lose the market share.

FOR MANUFACTURER / ENTREPRENEUR

Combined 10 countries into

a single market

Larger market contributes to economy of scale.

� Lower cost of production

Other ASEAN can also

utilize economy of

scale and compete

with domestic entrepreneurs.

ASEAN Economic Community(AEC) in 2015

Free flow of service and

Investment in ASEAN

Establish / expand

businesses in other ASEAN member states.

Greater competition in

ASEAN

market share.

The AEC will contribute to

Thai professionals and

skilled labor can work in other ASEAN members.

Other ASEAN’s skilled labor can enter into Thailand to work.

AEC &Opportunities Challenges

Free flow of skilled

labor

Expansion of Thai Low competitive industries

FOR PROFESSIONALS / SKILLED LABOR

ASEAN Economic Community(AEC) in 2015

The AEC will contribute to

economic growth and

development in ASEAN

Expansion of Thai industries/businesses

� Increase of employment

Low competitive industries

will be negatively

affected, resulting in

decrease of domestic employmentFree flow of investment

will enable the

expansion of businesses

in CLMV.

Increase of demand in

ASEAN market on Thai

products with high

AEC &Opportunities Challenges

Zero import tariffs on

FOR FARMER

ASEAN Economic Community(AEC) in 2015

products with high quality. Agricultural products

from ASEAN members

with high quality at

lower price may enter

more into Thai market.

Zero import tariffs on

agricultural products

� Increase of incomes

of Thai farmers.

� Thai farmers can

export more goods.No barriers to trade

on agricultural

products

Can buy more varieties

of imported products

from ASEAN at Low quality products

may enter more into

AEC &Opportunities Challenges

Zero import tariffs

FOR CONSUMER / PUBLIC

ASEAN Economic Community(AEC) in 2015

The AEC will contribute

to the improvement of

Thai Industry

competitiveness

from ASEAN at reasonable prices

may enter more into

domestic market unless

there is an appropriate

monitoring system in place.

Improvement of goods

and services with reasonable prices

For More InformationFor More Information

www.dtn.go.thwww.aecthailand.com

: +66 02 507 7555