Expanding Trade in Business Services in ASEAN
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Transcript of Expanding Trade in Business Services in ASEAN
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Faculty of the Professions
Life Impact The University of Adelaide
Expanding Trade in Business Services in
ASEAN
Hussain Rammal School of Commerce
The University of Adelaide
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Life Impact The University of Adelaide
Research Backgrounds
• In spite of the rapid growth of business services sectors in ASEAN, there exist formidable barriers to prevent the free trade of services and thereby hinder their growth.
• This study investigates trade-inhibiting policies and domestic regulations in five business sectors: Accounting, Architectural, Legal, Computing & Related Services, and Management Consulting.
• This presentation consists of country-specific reports dedicated to results from each of the 10 ASEAN member countries investigated.
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Life Impact The University of Adelaide
Methodology• Index Approach
– Restrictiveness Index in Business Services (RIBS) is constructed to represent the degree of trade restrictiveness of one sector in an economy
• Research Method (4 Steps)
1. Identifying trade restrictions: include both GATS-defined and de facto trade barriers.
2. Scoring procedure: primarily based on responses gathered from survey questionnaires and interviews with selected groups.
3. Weighting: weights were assigned to each form of trade barrier depending on the severity of its impact on trade.
4. Index calculation: by aggregating the weighted scores of all trade barriers in one business services sector.
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Life Impact The University of Adelaide
Brunei Darussalam (1)
Accnt Archit Legal CRS Mgt Cons
1 2 4 3 5
.308 [5] .286 [8] .143 [10] .262 [2] .101 [2]
• Liberalisation commitments in four sectors
• Experienced major increase in its commitments from 4 sectors under AFAS 4 to 46 sectors under AFAS
• Moderate to Low Trade Barriers in all 5 sectors
– 30% limit on foreign investment in local professional firms
• Provides the most open legal market.
• Liberalisation commitments in four sectors
• Experienced major increase in its commitments from 4 sectors under AFAS 4 to 46 sectors under AFAS
• Moderate to Low Trade Barriers in all 5 sectors
– 30% limit on foreign investment in local professional firms
• Provides the most open legal market.
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Life Impact The University of Adelaide
Cambodia (2)
Accnt Archit Legal CRS Mgt Cons
1 4 2 3 5
.228 [7] .057 [10] .208 [9] .247 [3] .047 [9]
• Liberalisation commitments in all five sectors
• Examples of trade barriers:
– Foreign legal practitioners are prohibited from practicing
– Foreign equity ownership in management consulting firms must not exceed 49%
– Local employees must be hired in management consulting firms
• Provides the most open architectural market
• Liberalisation commitments in all five sectors
• Examples of trade barriers:
– Foreign legal practitioners are prohibited from practicing
– Foreign equity ownership in management consulting firms must not exceed 49%
– Local employees must be hired in management consulting firms
• Provides the most open architectural market
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Life Impact The University of Adelaide
Indonesia (3)
Accnt Archit Legal CRS Mgt Cons
3 2 1 4 5
.415 [4] .450 [2] .463 [4] .246 [4] .072 [7]
• Liberalisation commitments in four sectors (with the exception of Management Consulting)
• Committed to 12 business sections in GATS schedule, despite lack of written sectoral commitments under AFAS 4
• Liberalisation commitments in four sectors (with the exception of Management Consulting)
• Committed to 12 business sections in GATS schedule, despite lack of written sectoral commitments under AFAS 4
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Life Impact The University of Adelaide
Indonesia (Cont’d)
Trade Barriers by Sector
• Accounting:
– Foreigners are bound by law to own only a minority share.
• Architectural:
– Local employees must constitute more than 50% of staff
• Legal:
– Two years of experience required for accreditation purposes
– Foreign practitioners are allowed to work in the capacity of employees of local firms, but not allowed to appear in Court
• CRS:
– IT practitioners are required to be members of the professional body
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Life Impact The University of Adelaide
Lao PDR (4) Accnt Archit Legal CRS Mgt Cons
3 2 1 4 5
.213 [8] .216 [9] .522 [2] .203 [6] .027 [10]
• Liberalisation commitments in three sectors (excluding Management
Consulting)
• Increased its commitment from nil under AFAS 4 to 9 sectors under
AFAS 5
• Trade Barriers in Legal Services:
– Foreign legal practitioners prohibited from practicing
• Trade Barriers in Architectural Services:
– foreign practitioners are not constrained from practicing but are required to
enter into joint venture with local firm
• Liberalisation commitments in three sectors (excluding Management
Consulting)
• Increased its commitment from nil under AFAS 4 to 9 sectors under
AFAS 5
• Trade Barriers in Legal Services:
– Foreign legal practitioners prohibited from practicing
• Trade Barriers in Architectural Services:
– foreign practitioners are not constrained from practicing but are required to
enter into joint venture with local firm
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Life Impact The University of Adelaide
Malaysia (5) Accnt Archit Legal CRS Mgt Cons
3 2 1 4 5
.170 [10] .301 [7] .417 [6] .121 [9] .048 [8]
• Liberalisation commitments in all five sectors
• trade reforms in accountancy sector have been more advanced than in the other professional services.
• Provides the most open accounting market
• Trade barriers are regarded by the Government as a way to reduce public risk
• Liberalisation commitments in all five sectors
• trade reforms in accountancy sector have been more advanced than in the other professional services.
• Provides the most open accounting market
• Trade barriers are regarded by the Government as a way to reduce public risk
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Life Impact The University of Adelaide
Malaysia (Cont’d)
Trade Barriers by Sector:
• Accounting:
– Qualifications of the foreign suppliers are assessed to determine whether they are equivalent to the eligibility requirements imposed on local professionals
• Legal:
– Foreign professionals are strictly prohibited from practicing in the domestic market
• MC:
– Foreign firms are required to form joint ventures with locals with maximum foreign equity of 70%.
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Life Impact The University of Adelaide
Myanmar (6)
Accnt Archit Legal CRS Mgt Cons
1 4 2 4 3
.720 [1] .410 [4] .600 [1] .423 [1] .175 [1]
• Liberalisation commitments in three sectors [exc. CRS]
• Imposes the most restrictive trade barriers in the markets of Accounting and Legal services
• Accounting:
– Absolute prohibition on foreign ownership in local firms
– Foreign professionals are prohibited from practicing
– Temporary entry of professionals is disallowed, so is multi-disciplinary or multi-professional partnerships.
• Liberalisation commitments in three sectors [exc. CRS]
• Imposes the most restrictive trade barriers in the markets of Accounting and Legal services
• Accounting:
– Absolute prohibition on foreign ownership in local firms
– Foreign professionals are prohibited from practicing
– Temporary entry of professionals is disallowed, so is multi-disciplinary or multi-professional partnerships.
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Life Impact The University of Adelaide
Myanmar (Cont’d)
• Legal:
– Foreign lawyers are prohibited from practicing, since the license to practice can be awarded only to Myanmar nationals
• Architectural:
– Foreign firms are required to form a joint venture or partnership with a local firm
• CRS:
– Only ASEAN economy that regulates professional fees for IT services and requires foreign firms to partner with locals
• MC:
– Only ASEAN country that requires management consultants to take professional examination which is administered quarterly
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Life Impact The University of Adelaide
Philippines (7)
Accnt Archit Legal CRS Mgt Cons
1 3 2 4 5
.532 [2] .443 [3] .502 [3] .189 [7] .076 [6]
• Liberalisation commitments in three sectors (excluding Management Consulting)
• Instituted reciprocity arrangements allow foreign accounting, legal, and architectural professionals to practice domestically, provided they have ‘equivalent’ licensing requirements allow Filipino professionals to practice in their domestic markets
• Otherwise there is absolute prohibition on foreign equity in local firms, as well as practicing of foreign professionals
• Temporary entry of foreign professionals is subject to economic needs test (ENT)
• Liberalisation commitments in three sectors (excluding Management Consulting)
• Instituted reciprocity arrangements allow foreign accounting, legal, and architectural professionals to practice domestically, provided they have ‘equivalent’ licensing requirements allow Filipino professionals to practice in their domestic markets
• Otherwise there is absolute prohibition on foreign equity in local firms, as well as practicing of foreign professionals
• Temporary entry of foreign professionals is subject to economic needs test (ENT)
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Life Impact The University of Adelaide
Singapore (8)
Accnt Archit Legal CRS Mgt Cons
3 1 2 4 5
.203 [9] .336 [6] .219 [8] .116 [10] .084 [4]
• Liberalisation commitments in four sectors
• Effectively committed to 8 sectors under AFAS 4 and 9 sectors under AFAS 5
• Provides the most open market of Computing and Related Services
• Liberalisation commitments in four sectors
• Effectively committed to 8 sectors under AFAS 4 and 9 sectors under AFAS 5
• Provides the most open market of Computing and Related Services
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Life Impact The University of Adelaide
Singapore (Cont’d)
Trade Barriers by Sector
• Accounting:
– Passing the final accountancy examination of the CPA Australia or American Institute of Certified Public Accountants (AICPA) is recognised equivalent to passing local final examination in accountancy in Singapore
• Legal:
– Nationality requirements has been loosened in 2000 by permitting joint law ventures (JLVs) and formal law alliances (FLAs) between local and foreign firms.
• Architectural:
– Foreign firms must maintain a certain ratio between local and foreign employees: they must hire 2 local employees for every foreigner employed
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Life Impact The University of Adelaide
Thailand (9)
Accnt Archit Legal CRS Mgt Cons
1 2 3 4 5
.484 [3] .456 [1] .438 [5] .241 [5] .090 [3]
• Liberalisation commitments in four sectors
• Foreign firms required to enter into joint ventures with local firms.
• Requires foreign firms to hire locals:
– For every foreigner hired, 4 locals must be employed (Mgt Cons. sector)
– 50% of directors must be Thai citizens (Architectural sector))
• Imposes the most restrictive barriers in architectural market:
– Reserves all professional practices to their nationals.
• Liberalisation commitments in four sectors
• Foreign firms required to enter into joint ventures with local firms.
• Requires foreign firms to hire locals:
– For every foreigner hired, 4 locals must be employed (Mgt Cons. sector)
– 50% of directors must be Thai citizens (Architectural sector))
• Imposes the most restrictive barriers in architectural market:
– Reserves all professional practices to their nationals.
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Life Impact The University of Adelaide
Vietnam (10) Accnt Archit Legal CRS Mgt Cons
3 1 2 4 5
.262 [6] .397 [5] .331 [7] .146 [8] .079 [5]
• Liberalisation commitments in all five sectors
Trade Barriers by Sector:
• Accounting:
– Foreign suppliers must pass local examination to practice.
• Legal
– Foreigners are allowed to practice international law but cannot appear in courts.
– Case-to-case assessment of the foreign lawyer’s certificate is required to determine whether they are qualified to practice.
• Liberalisation commitments in all five sectors
Trade Barriers by Sector:
• Accounting:
– Foreign suppliers must pass local examination to practice.
• Legal
– Foreigners are allowed to practice international law but cannot appear in courts.
– Case-to-case assessment of the foreign lawyer’s certificate is required to determine whether they are qualified to practice.
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Life Impact The University of Adelaide
Vietnam (Cont’d)Trade Barriers by Sector (Cont’d):
• Architectural:
– A maximum and minimum amount of professional fees is set by the regulatory body or the standard-setting professional association
– Joint venture with local firm is mandated with maximum foreign ownership of 49%
• MC:
– Maximum foreign ownership in local firms is 30% (up to January 2008)
– At least 20% of employees in foreign firms must be local
– The period of visa for foreign executives, senior managers and specialists is 3 years
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Life Impact The University of Adelaide
Recommendations1. Improve AFAS commitments:
• E.g. relax prohibitions on foreigners from forming partnership with local professionals
• E.g. Minimise restrictions on forms of establishment, as well as nationality and residency requirements
2. Monitoring:
• Constantly measure changes in commitments & actual market reforms using indices such as RIBS
3. Movement of professionals:
• Separate policies on temporary service providers from the normal immigration procedures
• Negotiate for trade-friendly policies on permanent movement of professionals
4. Negotiation:
• Shift from ‘positive list’ to ‘negative list’ approach of negotiating trade liberalisation commitments
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Life Impact The University of Adelaide
Recommendations (Cont’d)
5. Transparency:
• Improve predictability in the administration of domestic regulations.
• Use international standards to achieve harmonisation.
6. Mutual Recognition Agreements
• Push for reciprocity arrangements in all regulated professional sectors.
7. Increase AFAS Awareness
• Encourage professional bodies to undertake more active roles in the negotiation of trade liberalisation commitments.