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Open Regionalism and Deeper Integration: The Implementation of ASEAN Investment Area (AIA) and ASEAN Free Trade Area (AFTA)
AIA thus indicates a new direction for ASEAN to balance deeper regional integration and "Open Regionalism". While it enhances intra-ASEAN economic i]ntegration, it also opens the door to non-ASEAN investors. Moreover, individual ASEAN countries have also unilaterally liberalised their trade and investment regime, by keeping their margin of preference as low as they can so that market access is more available for non-ASEAN enterprises
The ASEAN Framework Agreement on Services
The ASEAN Framework Agreement on Services (AFAS) was signed on 15th December 1995
(105)resulting from the 5th ASEAN Summit Meeting, pursuing the objectives of the Singapore Declaration of 1992, which provided that ASEAN shall move towards a higher plane of economic co-operation and regional integration. AFAS thus aims
(106)to liberalise trade in services in the region to facilitate the realisation of AFTA by substantially eliminating restrictions on trade in services
(107)among ASEAN countries in order to improve the efficiency and competitiveness of the provision of services in the region.
Since the majority of the ASEAN countries
(108)are members of GATT/WTO and they individually have to comply with GATT/WTO rules, they concertedly agreed to commit to the rules and principles of GATS at a regional level
(109). Art. V of GATS
(110)permits any WTO member to enter into an agreement to further liberalise trade in services with other countries, provided that such agreement has "substantial sectoral coverage", and aims at the elimination of substantially all discrimination among the members in the sectors covered through the stand still and roll back principles. Art. V is an exemption to the MFN requirement under the GATS, in addition to services specified in individual MFN exemption lists (which are subject to a review and time limit under the Annex). Its rationale is to encourage regional economic integration and it is modelled on Art. XXIV of the GATT, recognising that implementation of regional liberalisation of trade in services may well form part of a wider process of economic integration and further integrate a regional market into the global market (World Trade Organisation, 1999: 166). Therefore, the AFAS is intended as a GATS-Plus scheme, to liberalise trade in services by expanding the depth and scope of liberalisation beyond the commitments undertaken by the member countries under the GATS, with the aim of realising a free trade area in services in this region
(111). Thus, ASEAN countries affirm to extend one another preference in trade in services.
The AFAS can be regarded as the selective liberalisation model, which offers right of entry and establishment only in specific sectors committed by member countries, since AFAS, like GATS, is a 'bottom up' approach. Therefore, a right of entry or establishment of service suppliers in receiving countries, either in the mode of commercial presence or presence of natural person, may exist only where member countries make specific commitments on market access. In service sectors for which a member country undertakes market access commitments, the member country must specify any condition or limitations which it wishes to maintain, either on (i) market access, or (ii) on (post-entry) national treatment. Thus, in the absence of an express reservation, member countries cannot restrict or require, for instance, specific forms of legal entity or joint venture through which a service must be provided, or impose limits on participation of foreign capital or limits on foreign shareholding. The receiving countries therefore have considerable discretion in determining the extent of the market access, and they may expressly reserve powers to limit the mode of supply (UNCTAD, 1999: 20). Under AFAS, ASEAN countries committed themselves to offer market access in more specific sectors and sub-sectors than they did in GATS and also fewer limitations on market access and national treatment.
(104)For example, Indonesia has reduced tariff rates beyond WTO commitments, see http:/www.wto.org/wto/reviews/indonesia.htm, WTO-TPRP report on Indonesia, meeting date 3rd-4th December 1998.
(105)The ASEAN Framework Agreement on Services was done at Bangkok, Thailand on 15th December 1995 and The Protocol to Implement the Initial Package of Commitments under the ASEAN Framework Agreement on Services was done at Kuala Lumpur, Malaysia on 15th December 1997.
(106)Art. 1 of the Framework Agreement on Services stated its objectives that "(a) to enhance cooperation in services amongst Member States in order to improve the efficiency and competitiveness, diversify production capacity and supply and distribution of services of their services suppliers within and outside ASEAN; (b) to eliminate substantially restrictions to trade in services amongst Member States; and (c) to liberalize trade in services by extending the depth and scope of liberalization beyond those undertaken by Member States under the GATS with the aim to realise a free trade area in.
(107)Art. 1 (a) and (b) of the ASEAN Framework Agreement on Services stated its aims as "to enhance cooperation in services among ASEAN member countries in order to improve the efficiency and competitiveness, diversify production capacity and supply and distribution of services of their suppliers within and outside ASEAN", and "to eliminate substantially restrictions to trade in services among member countries".
(108)Only Vietnam and Laos are not members of GATT/WTO.
(109)The ASEAN Framework Agreement on Services provided in the preamble that "Reiterating their commitments to the rules and principles of the General Agreement on Trade in Services (hereinafter referred to as 'GATS') and noting that Art. V of GATS permits the liberalizing of trade in services between or among the parties to an economic integration agreement".
(110)Art. V of GATS permits the liberalizing of trade in services between or among the parties to an economic integration agreement provided that such agreement "(a) has substantial sectoral coverage, and (b) provides for the absence or elimination of substantially all discrimination, in the sectors covered under subparagraph (a) through: (i) elimination of existing discriminatory measures, and/or (ii) prohibition of new or more discriminatory measures, either at the entry into force of that agreement or on the basis of a reasonable of time frame, except for measures permitted under Arts. XI, XII, XIV and XIV bis."
(111)Art. I (c) of the ASEAN Framework Agreement on Services.