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U.S. Business Leaders Recommendation: Unlock the Potential of ASEAN Market
US-ASEAN Business Council Urges Regional Integration to Compete with China
(Hanoi, Vietnam) U.S. business leaders said they were committed to expanding their trade and investment ties with Southeast Asia, and recommended strong and immediate moves for the region, most importantly swift economic integration, to compete with China and other markets during three days of meetings and discussions with ASEAN Trade and Investment Ministers.
The discussions between business leaders and ministers, which are held annually, took place against the backdrop of fresh economic uncertainty created by the terrorist attacks in New York and Washington. The American executives, however, were emphatic in stating that the attacks on their country would not diminish their efforts to expand business ties in Asia. The U.S. delegation was organized by the US-ASEAN Business Council, which represents over 400 American companies doing business in Southeast Asia.
“We are here because we see tremendous opportunities in ASEAN. Our core recommendation to ASEAN was to quickly and fully implement the ASEAN Free Trade Area (AFTA). This is key to ASEAN’s competitiveness in winning world class technology and capital,” said Ernest Z. Bower, President of the Council.
In a two-hour dialogue today, member companies of the Council, including AOL Time Warner, American Express, Cargill, Verizon Communications, Unocal Corporation, Ford Motor Company, and PricewaterhouseCoopers discussed trade issues and areas of comparative advantage for ASEAN. “The variety of issues we discussed reflects the diversity of industries that have confidence in ASEAN and want to be a part of this market,” Bower added. “But it is a new world out there, and ASEAN’s economic leaders must move with alacrity to ensure they maintain their competitive position.” During the 1990’s, ASEAN lost its position as the leading destination for foreign direct investment (FDI) to China.
Hugh Stephens of AOL Time Warner discussed the importance of a policy environment in ASEAN that would support digital trade. “Digital trade,” he explained, “holds tremendous promise in ASEAN, which could see productivity gains, exponential growth of online products, outsourcing and back office operations, and opportunities for regional and rural development. However, to reap these benefits fully, ASEAN needs a policy environment that supports the growth of digital trade through lower tariffs on Information Technology (IT) products, open trade in the services that comprise the e-commerce value chain; and protection for the intellectual property associated with digital products.”
Telecommunications policy provides the foundation for the growth of digital trade and internet infrastructure, a topic that John Lack of U.S. Telecommunications leader Verizon discussed at the meeting. “Telecommunications is a growth engine,” he said. “Telecom investment enables the entire economy, not just the e-economy. But the industry can only flourish within a supportive policy framework.” He emphasized in particular the need for independent telecom regulators. “Without adequate returns investment will not be made in infrastructure or services. The introduction of Independent Regulators is one of the most important steps that can be taken to support this vital industry.”
The US-ASEAN Business Council’s message on regional integration extends beyond mutual reduction of tariffs and liberalization of investment regulations. Randy Howard of US energy leader Unocal Corporation, said that ASEAN has large natural gas reserves spread throughout the region, and that much progress has been made in the development of an ASEAN regional gas grid. ASEAN’s natural gas reserves are potentially a competitive advantage,” said Howard. “Gas provides lower cost electricity than either coal or oil, and is more environmentally-friendly than either.” While expressing optimism about the viability of the regional gas grid, he examined in detail some of the complex obstacles to the completion of the grid, including ownership and financing questions.
In a presentation on the ASEAN Free Trade Area (AFTA), Dr. Suthad Setboonsarng of PriceWaterhouseCoopers, pointed out that AFTA is actually severely under-utilized by eligible traders within the region, and as a result many firms are not enjoying the lower tariffs that they are entitled to. He explained that a combination of factors contribute to this situation, including AFTA’s vague rules of origin, which results in differing interpretations in different countries, combined with uncertainty in the process governing the determination of rules of origin, and apparent disconnects between issuing and (importing) customs authorities.
To remedy this problem, he suggested that AFTA’s Rules of Origin should be amplified and clarified to ensure transparency and uniformity in application. Moreover, institutions could be established to provide rulings/opinions, and for business to consult.
ASEAN is America’s third largest overseas market. U.S. exports to ASEAN reached US$23.1 billion in the first six months of this year, up 7% from the same period in 2000. Imports from the region, meanwhile, at US$38.3 billion, were down about 4% from the corresponding period last year. U.S. investments in the region at the end of 2000 stood at slightly under US$52 billion, roughly five times as large as current US investment in China.
Highlights of the US-ASEAN Business Council meeting with the ASEAN Economic Ministers are available on line at www.us-asean.org/ASEANOverview/aem2001/.
The US-ASEAN Business Council is America’s leading private, non-profit business organization dedicated to promoting increased trade and investment between the United States and the member nations of ASEAN. For information on the US-ASEAN Business Council or general information on the ASEAN region, please contact John Goyer at jgoyer@usasean.org or visit the Council’s Web site at www.us-asean.org.
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