ASEAN Economic Community · ASEAN Economic Community Presentation for Korean Business Community 7...
Transcript of ASEAN Economic Community · ASEAN Economic Community Presentation for Korean Business Community 7...
Baker & McKenzie.Wong & Leow is incorporated with limited liability and is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around
the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in
such a law firm. Similarly, reference to an "office" means an office of any such law firm.
© 2016 Baker & McKenzie.Wong & Leow
ASEAN Economic Community
Presentation for Korean Business Community 7 July 2016
Eugene Lim, Principal
+65 6434 2633
Baker & McKenzie.Wong & Leow
Agenda
© 2016 Baker & McKenzie.Wong & Leow
1. What are businesses saying about the AEC?
2. What can Korean companies do to harness the benefits of the AEC?
AEC as the centre of global value chains
Accessing preferential market access for trade in services and
investment protection
Compliance
3. Q&A
Agenda
What are businesses saying
about the AEC?
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Re-drawing the ASEAN map
‒ Survey of 171 companies
‒ Wide range of sectors
‒ Senior executives with regional
responsibility
‒ Nearly half with manufacturing
plants in ASEAN
‒ 60% B2B 40% B2C
‒ 10 in-depth interviews with
business heads running
ASEAN
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2013
Between
ASEAN FDI inflows
ASEAN’s economy could exceed
Home to nearly
Will ranks as
overtook China in
Annual average growth of
Will be the world's
ASEAN consumerism
Demographics are positive
US$4 by 2020
TRILLION (roughly that of
Germany in 2013)
and nearly 4 by
times
larger
2030
of the world's
population
5th LARGEST
ECONOMY BY 2018
5.6% for the
N E X T YEARS 5
More than double the USA, triple that of the EU
and hugely advantageous to
growth – young labour force.
2014 AND 2018 the region's labour force will expand
BY (adding 28m new workers). 1.7%
3rd LARGEST
EXPORTER 2018 BY
is set to grow
EXPONENTIALLY
Productivity is creating
a giant middle class.
Middle class households
2018 will more
than double 80m BY TO
Significant opportunities for
retailers, luxury market, manufacturers,
auto industry, IT industry, healthcare,
financial services and more
The ASEAN opportunity
Key findings
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ASEAN - Structurally high growth
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Trend rate of annual real economic growth 2013 to 2018 (%)
Source: Economist Intelligence Unit
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ASEAN: Rising foreign direct investment
9
Value of foreign direct investment inflows (US$m)
Source: UNCTAD
ASEAN
China
India
Japan
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If ASEAN were one country…
10
ASEAN’s share of global total (%)
Source: Economist Intelligence Unit
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If ASEAN were one country…
11
First in the world Second in the world Third in the world Fourth in the world
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Why ASEAN? From efficiency-seeking to market-seeking
12 Source: Economist Corporate Network survey of 171 multinational firms, July 2014
How important were these criteria in deciding to put manufacturing in ASEAN? (0= not important; 4 = extremely important)
Benefit for local and foreign
companies
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Potential Impacts of the AEC
Supply chain optimization
Access to markets
An integrated production base
Greater mobility of skilled labour via mutual
recognition arrangements (MRAs)
Creation of a competitive economic region
Integration into global economy
Equitable economic development
Elimination of non-tariff barriers
Technical requirements and standards
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Goods: Tariff Liberalization
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Source : ASEAN Integration Monitoring Report 2013
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Meaning… ASEAN: Manufacturing consolidation
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Old model
Indonesia Malaysia
Indonesia
Thailand
Malaysia Thailand New
model
Source: Economist Corporate Network
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ASEAN: Manufacturing fragmentation
17
Old model
Indonesia Malaysia Thailand
Malaysia Thailand
New model
Indonesia
Source: Economist Corporate Network
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ASEAN: Shifting manufacturing landscape
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Indonesia and Myanmar see manufacturing investment grow swiftly
Survey of 75 manufacturing firms: No of factories today and in 5 years’ time
Source: Economist Corporate Network survey of 171 multinational firms, July 2014
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ASEAN: One strategy, despite the diversity
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% of companies with a strategy oriented around the ASEAN region
Source: Economist Corporate Network survey of 171 multinational firms
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Go to market: Local vs regional structures
20 Source: Economist Corporate Network
• Oversight & performance management
• Brand management • Decisions around portfolio of
products & services • Consumer marketing plans • Trade marketing plans • Manufacturing
ASEAN level
Country level
• Local deployment of regional marketing plans
• Sales activation • Driving distribution • Managing local relationships
ASEAN level
Country level
• Oversight & performance management • Brand management • Deploying global R&D base • Sharing global best practices, esp with
marketing
• Decisions around portfolio of products & services
• Consumer marketing plans • Trade marketing plans • Manufacturing • Sales activation • Driving distribution • Managing local relationships
Remaining difficulties
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Barriers to integration
22 Source: Economist Corporate Network
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Trade in services
‒ Limited integration few meaningful commitments
‒ But there are in some benefits
Indonesia (to ameliorate effects of negative list)
some benefits in healthcare sector in Thailand
‒ Foreign / non-ASEAN companies may need to
restructure to qualify for trade in services concessions
‒ Further concessions expected from further packages of
commitments?
ASEAN as the centre of
Global Value Chains
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Tariff Reduction / Elimination
WTO CEPT ATIGA
ASEAN
MFN rate
ASEAN
0-5%
ASEAN
0%
Non-ASEAN
Origin
ASEAN Origin ASEAN Origin
2008-2009 2010-2011 2012-2013 2014-2015 2016 onward
Eliminate import
duties on products
in the Priority
Integration Sectors
for ASEAN-6.
Eliminate import duties on
all products (except
sensitive and highly
sensitive products) for
ASEAN-6; Reduce tariffs
on sensitive products to 0-
5% for ASEAN-6.
Reduce tariffs on
sensitive products
to 0-5% in
Vietnam.
Complete phase-in of
remaining sensitive
products into CEPT
scheme and reduce tariffs
to 0-5%:
-Lao and Myanmar in 2015
-Cambodia in 2017
-95.99% of tariff eliminated
by the end of 2015.
• Strengthen ATIGA
• Eliminate remaining
tariffs
• Negotiate priority
Product Specific
Rules of Origin
• Streamline origin
determination
processes
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Non Tariff Barriers
Elimination of Non-Tariff Barriers
• List of NTBs collated and countries are formulating commitments to eliminate the NTBs
• Commitment of a standstill and roll-back on NTBs.
• Abiding the Protocol on Notification Procedure and setting up an effective Surveillance Mechanism.
• Fully eliminate NTBs by 2018.
Harmonization of Standards
• Mutual recognition of conformity assessment results.
• ASEAN Cosmetics Directive.
• ASEAN Electrical and Electronic Equipment Mutual Recognition Arrangements (“MRAs”).
• MRAs for accountancy, medical/dental, engineering, nursing and architectural services.
Others
• Self Certification Pilot Project to facilitate intra-ASEAN trade.
• ASEAN Harmonised Tariff Nomenclature.
• ASEAN Single Window (ASW)
• ASEAN Trade Facilitation Work Program
• ASEAN Trade Repository
• ASEAN Agreement on Customs
• ASEAN Framework Agreement on Facilitation of Goods in Transit
• ASEAN Framework Agreement on the Facilitation of Inter-State Transport
• ASEAN Framework Agreement on Multimodal Transport
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Exploring Asia’s major regional trade initiatives
面
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Implications for the Global Value Chain
‒ ASEAN is one of the most
connected regions in the
global.
AEC covers the region.
ASEAN+6 FTAs cover Australia
/ New Zealand, Japan, Korea,
India and China.
TPP provides connectivity to
North and South America and
some North Asian countries.
Numerous bilateral FTAs by
ASEAN countries and other
trading partners.
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ASEAN
Preferential market access
for services & investment
protection
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AFAS - Free Flow of Services
AFAS
1995
• Improving the efficiency and competitiveness of
ASEAN services industries.
• Diversify production capacity and supply; and
distribution of services.
• Elimination of barriers to trade in services:
• Limitations on market access
• Limitations on national treatment
• 9 packages of commitments concluded
• Discussion on ASEAN Trade in Services
Agreement (ATISA) – in progress
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AFAS Services Sectors
1. Business Services / Professional Services
2. Communication Services
3. Construction and Related Engineering Services
4. Distribution Services
5. Educational Services
6. Environmental Services
7. Financial Services
8. Health Related and Social Services
9. Tourism and Travel Related Services
10. Recreational, Culture, and Sporting Services
11.Transport Services
12. Other Services not included elsewhere
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AFAS - Free Flow of Services
Elimination of Limitations on Market Access
Services
Suppliers
1. Number of service suppliers.
2. Value of transactions or assets.
3. Total number of operations or
quantity of output.
4. Total number of natural persons.
5. Type of legal entity or JV.
6. Maximum foreign capital
participation.
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AFAS 9th Package – Vietnam
No. Sample service sectors 8th Package 9th Package
1. • Residential and non-residential
property management services
• The services of leasing or rental
furniture and household appliances
Not included Included, no limitation
2. • interdisciplinary R&D
• R&D services on social sciences
• rental/leasing services without
operator relating to ships
Not included Included, 70% ASEAN
ownership permitted
3. • road freight transportation
• tourist theme park
• packaging services
49% or 59% ASEAN
ownership permitted
70% ASEAN ownership
permitted
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AFAS 9th Package – Indonesia
No. Sample service sectors 8th Package 9th Package
1. Packaging services 49% ASEAN ownership
permitted
Eastern parts of
Indonesia: 70%
2. Nursing services East Indonesia region
(except in Makassar
and Manado): 49%
East Indonesia region
(except in Makassar and
Manado): 70%
3. Residential health facilities
services
51% 70%
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ACIA - Free Flow of Investment
‒ ACIA aims for a free and open
investment regime which will
enhance ASEAN’s
competitiveness in attracting
FDI and intra-ASEAN
investment.
4 elements of ACIA
Inve
stm
en
t lib
era
lisa
tio
n
Inve
stm
en
t p
rote
ctio
n
Fa
cili
tatio
n a
nd
co
op
era
tio
n
Pro
mo
tio
n a
nd
a
wa
ren
ess
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Investor-State Dispute Settlement
International arbitration options
• ICSID arbitration,
• ICSID Additional Facility Rules,
• UNCITRAL Arbitration Rules,
• SIAC,
• Regional Centre for Arbitration in Kuala Lumpur,
• Any other regional centre for arbitration in ASEAN, or
• If both parties agree, any other arbitral institution.
Key factors to demonstrate
• The existence of a breach by the responding ASEAN Party,
• The loss or damage incurred to the disputing investor, and
• The causal link between the above two elements.
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© 2016 Baker & McKenzie.Wong & Leow
Structuring FDI
‒ South Korean companies can
invest through a substantial
ASEAN subsidiary to the rest
of ASEAN
Access preferential market
access via AFAS
Protect investments via
ACIA
‒ Other considerations
Business environment
Legal system
Tax incentives
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Korea Co.
SG Co.
AEC Co. AEC Co. AEC Co/s. AEC Co.
AEC Co. AEC Co. AEC Co/s.
Compliance
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One Tip for Korean Companies
‒ The next trend: More post audits regarding trade compliance
‒ Compliance to be the top priority
Monitoring, Auditing and Response
Training and Communication
Standards and Controls
Risk Assessment
Leadership
© 2016 Baker & McKenzie.Wong & Leow
Q&A
Baker & McKenzie.Wong & Leow is incorporated with limited liability and is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around
the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in
such a law firm. Similarly, reference to an "office" means an office of any such law firm.
© 2016 Baker & McKenzie.Wong & Leow
ASEAN Economic Community
Presentation for Korean Business Community 7 July 2016
Eugene Lim, Principal
+65 6434 2633
Baker & McKenzie.Wong & Leow