AFTA bearing fruit in raising trade and investment inflows

Kuala Lumpur (Antara News) - Tariff reductions by member countries under the Asean Free Trade Area not only raised intra-Asean trade substantially to US$269.8 billion last year from US$233.6 billion a year before, it also attracted greater foreign direct investment flows into the region.

The latest data, provided by Minister of International Trade and Industry Datuk Seri Rafidah Aziz, was solid proof that members were gaining from what was surely Asean's most tangible economic initiative todate.

She said the private sectors were taking advantage of AFTA given the conducive business environment laid out by the governments, a move which was also encouraging those outside Southeast Asia to seek their fortunes in a regional market in excess of 540 million people.

Generally, the sectors which gained most from the implementation of AFTA are electrical and electronics, plastics-making industry, chemical products, rubber products, textile and apparel and automotive.

Major industries in Malaysia reaping fruits from AFTA were electric and electronics, plastics, chemicals, iron and steel, machinery, rubber, vegetable fats and oils, automotive and footwear, Rafidah told Bernama in an interview recently ahead of the Asean Economic Ministers meeting later this month.

"The expansion of intra and extra Asean trade indicates that the private sectors are taking advantage of AFTA. Undoubtedly, the major beneficiaries are countries such as Malaysia, Singapore, Thailand and Indonesia," she said.

Rafidah said that the 2005 trade figures incorporate full year data for Cambodia, Indonesia, Laos, Malaysia, the Philippines, Thailand, Singapore and Vietnam, and half-year figures for Brunei and Myanmar.

The total trade of US$82.4 billion in 1993 -- when AFTA's tariff reduction programme began to be implemented progressively, expanded more than three-fold compared with 2005's trade of US$269.8 billion.

The reduction or elimination of duties led to the expansion of the intra-Asean trade and enabled Asean to attract greater foreign direct investment (FDI) inflows into the region, she said.

AFTA was aimed at eliminating intra-regional tariffs, attracting FDI and improving the efficiency and competitiveness through tariff reductions.

Under AFTA, tariffs on goods traded within the Asean region, which meet a 40 per cent Asean content requirement, would have to be reduced to between zero and five per cent.

The region's attractiveness as a market was evidenced by extra-Asean trade increasing to US$763.1 billion in 2004 from US$347.5 billion in 1993.

Cumulatively, FDI inflows into Asean for the period of 1995-2004 amounted US$241.8 billion or an average of US$24.2 billion per annum.

"The liberalisation initiatives have also encouraged greater intra-Asean investment flows," said Rafidah.

Between 1995-2004, intra-Asean investment flows amounted to US$30.3 billion.

As far as investment flows within Asean was concerned, the biggest beneficiary was Singapore (US$1.2 billion), followed by Malaysia (US$600.8 million), Indonesia (US$269.1 million), the Philippines (US$190.7 million) and Thailand (RM131.8 million).

For Brunei, last year's investment flows were worth US$6.3 billion, Cambodia (US$3.5 billion), Laos (US$1.1 billion), Myanmar (US$5.8 billion) and Vietnam (US$5.7 billion).

Rafidah said the capacity of some Asean member countries was being enhanced to facilitate collection of trade and investment data on a timely basis.

"This is to enable Asean to undertake comprehensive analysis of the impact of the regional liberalisation initiative."

Notwithstanding the gains by the more developed economies, Rafidah said the newer member countries, comprising Cambodia, Laos, Myanmar and Vietnam (CLMV) are also increasing their exports to other Asean countries.

"As the economies of these countries expand, they will be able to benefit more from AFTA. Furthermore, these countries are benefiting from the increase in cross-border investments from countries such as Malaysia, Singapore and Thailand," the minister said.

To encourage these countries to expand their exports, she said the Asean-Six (Malaysia, Singapore, Thailand, Indonesia, Brunei and the Philippines) are providing unilateral tariff preferences under the Asean Integration System of Preferences (AISP) since 2002.

To date, she said Malaysia has offered duty exemption on 784 products to CLMV. Of these, 180 products are for Cambodia, 83 products for Laos, 284 products for Myanmar and 237 products for Vietnam.

As for products offered by Malaysia under AISP, she said they comprise fruits and vegetables, wood and wood-based products, chemical products, rubber products, paper and paper products, electric and electronics, plastics products, furniture, footwear and textile and apparel.

Malaysia's imports under AISP since its implementation amounted to US$56.8 million, Bernama News reported. (*)
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