The establishment of ASEAN Free
Trade Area or AFTA in 1992 has a significant impact to Malaysian growth through
trading intra-ASEAN countries.1 Looking in the objective of AFTA is
to increase the ASEAN region’s competitive advantage as a production base
geared for the world market. A harmonies step in boost up our trade is by make
the trade more liberal through elimination of tariffs and non-tariff barriers
among the ASEAN members. This eventually will produce such a greater efficiency
in production and long-term competitiveness.
Under ASEAN Free Trade Area or AFTA
the implementation of Common Effective Preferential Tariff (CEPT) has led the
tariff rate levied on a wide range of products traded within the region are
reduced to 0-5%. Under CEPT there has 4 list in order to motivated the trade
which is Inclusion List, Temporary Exclusion List (TEL), Sensitive List and
General Exception List (GEL)
Table 1 : Progress of Regional
Tariff Elimination in ASEAN by 2010
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Share of tariff lines at 0%
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Share of tariff within 0-5%
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Brunei
|
99.03
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Cambodia
|
98.53
|
Indonesia
|
98.66
|
Lao PDR
|
95.18
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Malaysia
|
98.68
|
Myanmar
|
99.28
|
Philippines
|
98.63
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Vietnam
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99.68
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Singapore
|
100
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Thailand
|
99.84
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Source: Calculated by authors based on tariff schedule under
the ATIGA of each member
published
by ASEAN secretariat.
The
table shows the proportion of the total number of products in terms of tariff
lines and the detailed elimination of tariffs for ATIG in 2010. 2017, tariffs
for more than 98% of all products will be deleted for new members, so the level
of tariffs on intra-ASEAN trade is practically zero for both the original and
new members. After recording the significant progress made in AFTA members of
tariff removal, it is important to realize that some tariffs and / or quotas
remain for all AFTA members, with the exception of Singapore, which are
eliminated tariffs completely.
ASEAN
trade in ASEAN CEPT Agreement was revised significantly Goods Agreement (ATIGA)
was signed in December 2008 . Revised Schedule IL tariff rates for products by
the year 2010 shall be reduced to 0 % The original six members and new members
by 2015 . ATIGA also
Redefine the detailed schedule of tariff reduction.2
ASEAN
intra-regional tariff rates have been reduced or eliminated rapidly Was
modified several times under the CEPT scheme . By 2010, the share of In terms
of tariff lines, the total number of products with 0 % tariff rate , was around
99 % of the original six countries , 0-5 % , while the share of products with
tariff
Rates Cambodia , Myanmar and Vietnam and Lao PDR was
99% to around 95 % . Table 1 shows the progress of each member country tariff
elimination. Given From these data , one can confirm that the process of
regional tariff reduction or ASEAN member countries have been eradicated in the
past 20 gears strongly Years, and is almost complete
The excellent of the AFTA has been
adopted as part of the measure in response to the regional financial crisis
which starting from the breakdown of Thai-Baht currency, which hit East Asia
beginning in July 1997. Thus, the reaffirmation of commitment to continue with
regional integration and economic liberalization is the big signal to the ASEAN
countries. In year 2000, a minimum of 90% of the six countries total tariff
lines must have tariffs of 0-5%. Individually, each country would commit to
achieve a minimum of 85% of the Inclusion List with tariff 0f 0-5%. Following
to the next year 2001, each country would achieve a minimum of 90% of the
inclusion list in the 0-5% tariff range. And in 2002, the commitment is for
100% of items in the Inclusion List would have tariffs of 0-5%, but with some
flexibility.
The performance of ultimate target
of AFTA through the elimination of all import duties towards the ASEAN
countries is going well, where majority of ASEAN leaders have agreed to
eliminate all import duties by 2010 for the six original members of ASEAN and
by 2015 for the new members. Currently,
38 percent of the Inclusion List has been listed to have zero duties
which is 20,701 tariff lines. And the improvement is going on until today.
Performance of ASEAN Free Trade
Agreement or AFTA in term of growth has absolutely has great impact in trade
among ASEAN countries. Based on statistics, trade among ASEAN countries has
grown from US$44.2 billion in 1993 to US$73.4 billion in 1998, and this
scenario illustrates an average increase of 13.2% in trade performance. Before
the financial and economic crisis struck in mid 1997, intra –ASEAN exports had
been increasing by 29.6% which is significantly higher than the rate of
increase of total ASEAN exports at 18.8%. However the good performance of AFTA
has been disrupt by Asian Financial Crisis in 1997 that has adversely affects
intra-regional trade more than trade with the rest of the world. And the data
show that intra-ASEAN trade contracted by 15.9% in 1998 compared to the 5.8%
reduction in total ASEAN exports.
The figure above illustrate the
exports of seven ASEAN countries which is Brunei Darussalam, Indonesia,
Malaysia, Philippines, Singapore, Thailand, and Viet Nam. The increasing
trends has been illustrates by in figure
above. The successful performance of AFTA towards the ASEAN countries also been
contributed by the implementation of the CEPT, which has been elaborated
before. Thus, the trade among ASEAN countries has grown from US$44.2 billion in
1993 to US$ 95.2 billion in 2000, representing an average annual inverse of
11.6 percent. By the year 2000, intra-regional exports made up about 23.3
percent of total ASEAN exports. And
before the financial crisis breakdown in mid-1997, again, intra-ASEAN exports
had been increasing by 29.6 percent. This is significantly higher than the rate
of increase of total ASEAN exports, which grew at 18.8 percent during the same
period.
Currently, major contributors to
Malaysia performance in trading were cause by strong uptake by ASEAN especially
to Indonesia, Singapore, Thailand, Vietnam, Brunei, Myanmar and Lao PDR. The
significant export growth derived from the data statistics from Malaysia
External Trade Statistics in December 2013 shows that Indonesia increase by
RM5.5bil, Singapore increase by RM4.89bil, Thailand increase by RM 2.29bil, and
Vietnam increase by RM1.18bil. Look on ASEAN markets, more inter-company
linkages, cross-border investments, outsourcing activities and growing trading
activities within the region had resulted in a higher total trade with ASEAN
countries, to RM374.71 billion, accounting for 27.4% of Malaysia’s trade in
2013.In addition, exports to ASEAN increased by 7.2% to RM201.81 billion.
ASEAN’s share of Malaysia’s total exports expanded from 26.8% to 28% and
imports from ASEAN increased by 2.1% to RM172.9 billion.
Increase in exports to ASEAN was
contributed mainly by higher exports of refined petroleum products; electronic
integrated circuits and parts; machinery, appliances and parts including pumps,
compressors, fans, centrifuges and parts; as well as, manufactures of metal of
alloyed aluminum plates, sheets or strips. Main imports from ASEAN were refined
petroleum products; E&E products; as well as, chemicals and chemical
products.
Source:
UN Comtrade database and Secretariat estimates.
View
to that of the growth rate in the agricultural sector, the Malaysian trade in
AFTA has registered an increasing trend as a whole from 1992 to 2009 year.
However, the rate of import trade in the agricultural sector is higher than the
rate recorded in the exports of the sector, but imports are recorded initially
at a rate of nearly 1 billion higher than the export rate far below than that
of imports. low export conditions for agriculture sector in Malaysia is due to
policies that have been transformed into industrial policy that focuses on the
manufacturing sector, and so on, where to combat high unemployment in the days
of 90s. The action taken by the previous government in a negative impact on the
agricultural sector and to this day Malaysia was unable to match the neighboring
countries like Indonesia which has surpassed trade in the agricultural sector.
Source:
UN Comtrade database and Secretariat estimates.
Analysis of
the export and import of fuels and mining industry, Malaysia recorded an
increase trend in this sector after the signing of AFTA, referring the data
from the WTO, essentially Malaysia had no export rate for this sector in 1992,
and even Malaysia imported fuels and mining to Malaysia at a rate of 1.5
billion dollars in 1992. Exports and imports for this sector in the year,
however, the imports recorded a higher rate than exports, which account for
more than 10 billion dollars in 2008. Subsequent to the year 2008, the exports
and imports recorded a relatively sharp decline which caused from the global financial
crisis that occurred in 2008. In conclusion, the impact of AFTA on Malaysian
made a positive impact on imports and exports of fuels and mining sector in
Malaysia starting in 1992 to the present.
Source:
UN Comtrade database and Secretariat estimates.
Overall,
the industry recorded an increase for the whole period from 1992 to 2009 . The
rate of increase from 1992 to 2000, also recorded a surge in excess of 4billion
dollars in 2000 than previously only had a rate of less than 1 billion dollars
in 1992 . The dramatically increase is driven by Malaysian national policy that
focuses on industrial policy , as well as tariff reduction among regional
countries CEPT (inclusion list ) . This has prompted Malaysia to raise the rate
of exports and imports. However , the Asian financial crisis in 1998 that hurt
the most countries in the region has affected trade in this sector which also
have an impact on the rate of Malaysia's exports in manufacturing sector . This
situation also occurs in the fall of 2008 , which due to the world financial
crisis caused by the collapse of major economies of the U.S. In fact, AFTA has
stimulated the growth of trade in this sector and directly enhance competition
in Malaysian companies and attract foreign investors for come to Malaysia.
Source:
UN Comtrade database and Secretariat estimates.
In
1992, Malaysia had no growth in the automotive trade either exports or imports.
But after signing a trade agreement called the ASEAN Free Trade Agreement or
AFTA rate of increase of export and import trade sector grew by a relatively
high rate of exports recorded in kadar0.2 billion dollars and imports 0.1
billion dollars in 2000, the situation this rate of exports over imports in the
automotive sector, the situation is driven by the reduction or elimination of
tariffs under the CEPT rate for which it was shown that the automotive sector
Southeast Asian region is closely related to the reduction of tariff rates
under the CEPT scheme is an appropriate action.
Referring to the picture above, the sector is
facing a sharp increase in the period 2000-2008, which recorded almost 1
billion dollars. Other factors that stimulate the growth of automotive policy
is more liberal on the open market and the domestic and international demand increases
when the tariff imposed continued to decline in the following year. This
indicates that the automotive sector is a sector that is elastic to changes in
tariffs under the CEPT scheme, and it also shows that through trade AFTA,
Malaysia can benefit in terms of sustainable trade, increase national income,
increasing the rate of the national competition and are not directly accelerate
the development in Malaysia.
Source: UN
Comtrade database and Secretariat estimates.
In addition
to, the performance of AFTA is illustrated in the merchandise export and import
in office and telecom equipment from 1992 to 2009. Office and telecom equipment is one of the
sector that being expanding in the period of AFTA performance. A central
office, in telecommunications, is a building to which subscriber home and
business lines are connected on a local loop. This office has telephone
switches to switch calls locally or to a long-distance carrier office. Of major
importance for equipment installed in a central office is uptime, network
integrity, equipment compatibility and natural disaster survivability. Strict
environmental and physical packaging requirements are defined by telephone
service providers for telecom equipment manufacturers to ensure that switches and
other central office equipment always continue to function.
Based on
the graph above, the export of the office and telecom equipment is greater than
the import of the office and telecom equipment in the year of 1992, 2000, 2008
and 2009. Export of the office and telecom equipment rose sharply from 1992 to
2000 and even obtained the highest export in 2000 with 4.7 billion and suddenly
had a great fall in the year 2008 which is 3.4 billion and keep dropping
slightly again to 3.3 billion in 2009. On the other hand, the import of the
office and telecom equipment increased gradually from 1992 to 2008 and fall
slightly in 2009. The import of the office and telecom equipment reached a peak
in 2008 with 4.3 billion while import least in 1992 with 0.1 billion only.
Source: UN
Comtrade database and Secretariat estimates.
Based on the above figure , the
trade situation in Malaysia has shown an increasing trend for that period from
1992-2009. This situation demonstrated that the balance of trade deficit during
the year 1992-2009 the face of import of commodity market in Malaysia. Global
financial crisis prevailing in the year 2008 a little as to give the impression
to Malaysia trade region and Asia as well, this can be seen in decreased levels
of exports and imports in 2008 were recorded after a rather sudden decline to 5.8
billion dollars to 11.7 billion dollars export and for import.
Overall trade growth is stimulated by the
tariff levels under the CEPT scheme which is decreasing throughout the period,
follow the data in 2012 Malaysia recorded 98.68 % goods and services at region
of ASEAN countries are not subject to tariffs or low tariffs charged , compared
with Singapore which abolished the 100 % tariff levels on all merchandise
products for countries that signed the trade agreement AFTA.
In addition share of Intra- ASEAN
exports and imports started to diverge in the mid-1990s. In 1990, the import
share has started to rise , continued to increase throughout mid-2000s . In
particular, intra- ASEAN imports increased by nearly 16 % In 1990 over 24 % in
2004, and that level around stayed . On the contrary, Intra- ASEAN export share
of almost 18 % in 1998, declined from 22% in 1994, and Then in the late 2000s
to reach 20-22 % gradually increased, but not more Import shares corresponding
. In light of the AFTA process beginning in 1993 , the Interesting difference
ASEAN from 1995 to observe a sharp increase in import share , A similar pattern
holds for intra- ASEAN exports could not be found .
END NOTES
1The
AFTA was signed in 1992 in Singapore and was enacted in 1993.
2
The
tariff reduction and elimination schedule was categorized into eight groups
from Schedule
A
to H. The tariffs on the products in Schedule A were to be eliminated by 2010
for the six members and by 2015 for Cambodia, Lao PDR, Myanmar and Vietnam
(hereafter CLMV); Schedule B indicates tariff reduction on information and
communication technology (ICT) equipment for CLMV; Schedule C is for priority
integrated sectors (PIS) products for CLMV, whose tariffs were to be eliminated
by 2012; Schedules D and E include unprocessed agricultural products; Schedule
F defines the out-quota tariff rate for Thailand and Vietnam; Schedule G is for
petroleum products (PP) for Cambodia and Vietnam; and Schedule H is for General
Exceptions (GE).
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