CONFIDENTIAL
REPORT OF
THE FIRST ASEAN SENIOR ECONOMIC OFFICIALS MEETING
OF THE THIRTY-FOURTH ASEAN ECONOMIC MINISTERS MEETING
(SEOM 1/34)
15-16 JANUARY 2003, HA NOI, VIET NAM
INTRODUCTION
1.The First ASEAN Senior Economic Officials Meeting of the Thirty-Fourth ASEAN Economic Ministers Meeting (SEOM 1/34) was held on 15-16 January 2003 in Ha Noi, Viet Nam. The Meeting was preceded by the SEOM Retreat on 14 January 2003 in HalongBay.
2.The Meeting was attended by representatives from Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam. Staff members of the ASEAN Secretariat were also in attendance. The list of delegates appears as ANNEX 1.
3.The Meeting was chaired by Mr. Lim Jock Hoi, Director General, International Relation and Trade Development Division, Ministry of Industry and Primary Resources, Brunei Darussalam.
AGENDA ITEM 1.ADOPTION OF THE AGENDA
4.The Meeting adopted the Agenda, which appears as ANNEX 2.
AGENDA ITEM 2.BUSINESS ARRANGEMENTS
5.The Meeting was held in plenary.
AGENDA ITEM 3.FOLLOW-UP TO THE ASEAN SUMMIT MEETINGS, 4-5 NOVEMBER 2002, PHNOM PENH, CAMBODIA
6.The Meeting noted and considered the following documents in its discussion of the outcome of the ASEAN Summit meetings held in Phnom Penh, Cambodia on 4-5 November 2002:
(a)Press Statement by the Chairman of the 8th ASEAN Summit, the 6th ASEAN+3 Summit and the ASEAN-China Summit;
(b)Press Statement by the Chairman of the ASEAN-Japan Summit, the ASEAN-Republic of Korea Summit, the First ASEAN-India Summit and the South African President Briefing; and
(c)Matrix of Issues/Proposals Arising from the ASEAN Summit 2002,
which appear as ANNEXES 3, 4 and 5, respectively.
3.1.8th ASEAN Summit
3.1.1ASEAN Economic Community
7.The Meeting recalled that the 8th ASEAN Summit considered the idea of an ASEAN Economic Community (AEC) as an end goal for the Roadmap for the Integration of ASEAN and the Vision 2020, which Ministers could study.
8.The Meeting noted that the Ministry of Foreign Affairs of Singapore had commissioned ISEAS to produce a concept paper on the AEC in conjunction with CSIS for the consideration of ASEAN ISIS and ASEAN-SOM. The Meeting also noted that ASEAN-ISIS would also conduct a parallel study on the AEC with inputs from the ASEAN Secretariat. The Meeting requested the ASEAN Secretariat to provide the necessary input for the study to both ASEAN-ISIS and ISEAS. With regard to the proposed study with UNDP funds on the AEC by the ASEAN Secretariat, the Meeting agreed that it would be conducted only when necessary at a later stage. The draft Terms of Reference of the Study prepared by the ASEAN Secretariat for an ASEAN Economic Community appears as ANNEX 6.
9.The Meeting welcomed initiative undertaken by SOM regarding the AEC and agreed that eventually in substance, especially on the economic aspects, the AEC would require SEOM inputs.
10.The Meeting agreed that the High Level Task Force on ASEAN Integration should consider the studies on the AEC in its deliberations.
3.1.2ASEAN Competitiveness Study
11.The Meeting noted that the Leaders had tasked AEM to consider the recommendations of McKinsey and Company to fast-track priority sectors and look into a stronger ASEAN mechanism to monitor its implementation. Representatives from McKinsey and Company elaborated on their recommendations in a briefing made during the Meeting. McKinsey’s presentation appears as ANNEX 7.
12.The Meeting noted the key recommendations in the ASEAN Competitiveness Study, which included among others: (i) fast-tracking electronics and consumer products, which includes among others, the elimination of intra-ASEAN tariffs and harmonization of ASEAN external tariffs; (ii) strengthening ASEAN institutions specific to the fast-track sectors; (iii) establishment of a Task Force to implement the ACS recommendations; (iv) formulation of an Economic Plan of Action which could be signed at the Bali Summit; and (v) setting up an independent Dispute Settlement Mechanism (DSM) with private standing to increase investors’ confidence.
13.Member Countries requested McKinsey to clarify certain aspects in the latter’s presentation. They also asked McKinsey to elaborate on the elements of competitiveness, including the analysis of the current mechanism, the recommendation on the need to strengthen the ASEAN Secretariat and the structure that has to be put in place by Member Countries. The discussion with McKinsey included, among others:
(a)Bridging the Development Gap among ASEAN Members: Some Member Countries were of the view that the study lacked measures to address the development gap in ASEAN, which is an important element in ASEAN integration.
McKinsey was of the view that the development gap would be addressed by the proposed economic integration. This would be enhanced with the technical assistance to be provided to the new members. McKinsey cited the transformation of Ireland in the EU. They also mentioned that within ASEAN, under the processed food sub-sector for instance, countries like Lao PDR and Myanmar could move up the value chain from producer of raw food to processed food through the integration process.
(b)Timelines: McKinsey acknowledged the tight timelines proposed in the ASEAN Competitiveness Study (ACS). However, time is of the essence in view of the challenges facing ASEAN especially that of China.
With regard to the timelines, McKinsey offered three options: (i) delay implementation; (ii) narrow the product scope; and (iii) adopt selective measures only (cherry picking). McKinsey was of the view that ASEAN should not “cherry pick” as the impact would be reduced. McKinsey was of the view that if some Member Countries are not yet ready, ASEAN could adopt the 10-X principle provided the number of participating countries can form a critical mass.
(c)Investment: In order to raise the ASEAN’s profile, McKinsey proposed a communication plan that includes investment road shows where ASEAN investment officials could meet international investors. McKinsey pledged to assist ASEAN in this aspect especially with regard to getting the participation of international investors.
(d)Scope of the Study: Some Member Countries expressed the view that the recommendations of the Study should not focus only on trade in goods but should include other areas, such as services and tourism, as well.
The McKinsey report also touched on the need for competition policy. Aware that not many ASEAN countries have competition policy in place, McKinsey clarified that it is merely recommending competition policy for cross-border market access to ensure that tariff and non-tariff liberalization would not be nullified by the existence of anti-competitive policy measures.
(e)Description of the Final Report. McKinsey informed the Meeting that its Final Report shall be delivered in March 2003 and it shall include elements such as, assessment of ASEAN’s competitiveness, implementation plan and specific milestones to be achieved.
14.The Meeting thanked McKinsey for their presentation and commended them for their bold recommendations. They encouraged McKinsey that in coming up with their Final Report, the views and concerns raised during the Meeting would be taken into account with the view to making the recommendations more practical, realistic and readily acceptable to the Member Countries.
3.2ASEAN-China Summit
3.2.1Framework Agreement on Comprehensive Economic Co-operation between ASEAN and China
15.The Meeting noted the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China, signed by the Leaders from ASEAN and China at the ASEAN-China Summit in Phnom Penh, Cambodia on 4 November 2002, which appears as ANNEX 8.
16.Thailand, as the country coordinator for ASEAN in the ASEAN-China Trade Negotiating Committee (TNC), briefed the meeting on the future work of the TNC in the negotiations for the ASEAN-China Free Trade Area (ACFTA). Thailand informed the Meeting that the first meeting of the TNC following the signing of the Framework will be held in Guanxi, China on 25-28 February 2003 and that the first meeting will focus on the work programme and appropriate mechanism for negotiating the various areas under the ASEAN-China Free Trade Area, i.e. trade in goods, services, investments, rules of origin.
17.On the structure of the future negotiations, Thailand highlighted that, given the 1½ year timeframe for the completion of the negotiations, it may be important to set-up working groups that would conduct parallel negotiations with the TNC on specific areas, e.g. services, investments, rules of origin. Thailand emphasized that the TNC would still be the body to discuss policy issues especially those pertaining to tariffs, specific rules and provisions such as safeguards, anti-dumping among others.
18.The Meeting exchanged views on the mechanism for negotiating the specific areas covered in the Framework Agreement. In particular, the Meeting noted the following views expressed by Member Countries:
(a)To request CCCA, CCS and the CCI to support the negotiations of the TNC on issues/areas relevant to these ASEAN bodies;
(b)Instead of the involvement of these ASEAN bodies, some member countries were of the view that the negotiations could be undertaken with the presence of country experts in these areas;
(c)Other Members were of the view that ASEAN should negotiate liberalization of trade in goods first. Negotiations on trade in services and investment could be concluded at a later stage;
19.The Meeting agreed that although negotiations should be comprehensive and balanced, trade in goods should be settled first. The Meeting also agreed that to facilitate this process, the TNG should be given flexibility in its approach. The Meeting requested the CCS, CCCA and CCI provide inputs to the TNG.
20.The Meeting considered the revised Terms of Reference of the ASEAN Trade Negotiating Group (TNG) and the ASEAN-China Trade Negotiating Committee (TNC), which jointly appears as ANNEX 9. The Meeting requested Member Countries to submit their comment on the TOR to the ASEAN Secretariat by 25 January 2003. If no comment is received, the TOR shall be considered as endorsed and the ASEAN Secretariat shall transmit the TOR to MOFTEC-China for ad-referendum approval.
21.On the Chairmanship of the TNG, the Meeting agreed that Mr. Kanissorn Navanugraha, Deputy Permanent Secretary, Ministry of Commerce, Thailand, shall continue to be ASEAN’s Chief Negotiator. The Meeting also emphasized the importance of the TNG coordinating ASEAN’s position in the ACFTA negotiations.
3.3ASEAN-Japan Summit
3.3.1ASEAN-Japan Comprehensive Economic Partnership
22.The Meeting noted Joint Declaration of the Leaders of ASEAN and Japan on the Comprehensive Economic Partnership, signed by the Leaders from ASEAN and Japan at the ASEAN-Japan Summit in Phnom Penh, Cambodia on 5 November 2002, which appears as ANNEX 10. The Meeting further noted that under the said Joint Declaration, ASEAN and Japan shall set up a committee that would consider and draft a framework for the realization of the Comprehensive Economic Partnership.
23.The Meeting considered the draft Terms of Reference of the ASEAN-Japan Committee on Comprehensive Economic Partnership, which appears as ANNEX 11.
24.The Meeting noted that Japan has proposed to have four chief negotiators from her side, which comprise representatives from Ministry of Economy, Trade and Industry (METI), Ministry of Foreign Affairs, Ministry of Finance and Ministry of Agriculture respectively. In this regard, the Meeting agreed to inform Japan that each side (ASEAN and Japan) would have only one Chief Official, who will co-chair the meeting of the AJCCEP and serve as the main spokesperson for each side in the negotiation process. The Meeting also agreed to request Japan to inform ASEAN their Chief Spokesman to facilitate the negotiation process.
25.The Meeting further noted that there could be two possible opportunities in 2003 to present the final draft framework on ASEAN-Japan Comprehensive Economic Partnership to the Leaders namely at the ASEAN-Japan Summit in Bali, Indonesia on 7-8 October 2003 and at the ASEAN-Japan Commemorative Summit on 11-12 December 2003 in Japan. In order to set a firm timetable, the Meeting agreed that the AJCCEP should finalise the draft framework to be submitted to the Summit for signing in October 2003 in Bali.
26.The Meeting requested Member Countries to submit their comments on the draft TOR to the ASEAN Secretariat by 25 January 2003. If no comments are received by that date, the TOR will be considered as acceptable and endorsed and the ASEAN Secretariat shall transmit it to Japan for ad-referendum approval.
27.The Meeting reaffirmed that Mr. Ramon Vicente T. Kabigting, Philippine SEOM, shall be the Chief Negotiator and main spokesperson for ASEAN.
3.4ASEAN-Korea Summit
3.4.1Closer Economic Partnership between ROK and ASEAN
28.At the ASEAN-Korea Summit in Phnom Penh, Cambodia on 5 November 2002, the Leaders, in endorsing the final Report of the East Asia Study Group, agreed to work towards implementing the recommendations to achieve closer economic partnership between ROK and ASEAN. At the same Summit meeting, ROK invited ASEAN to submit specific proposals on projects to enhance cooperation between the regions, particularly in improving transport networks in ASEAN and the sustainable development of the Mekong River areas.
29.The Meeting noted the mandate from the Leaders and agreed that SEOM take the initiative in formally engaging ROK senior economic officials through the establishment of the SEOM-ROK forum on condition that ROK clearly indicates its interest towards such an engagement. The Meeting requested the ASEAN Secretariat to seek the view of ROK on this matter.
3.5ASEAN Plus Three Summit
3.5.1East Asia Free Trade Area
30.The Meeting noted the Executive Summary of the Final Report of the East Asia Study Group presented at the 8th ASEAN Summit, which appears as ANNEX 12. The Meeting further noted that the Leaders tasked AEM to study and formulate options on the gradual formation of an East Asia Free Trade Area and report the results at the next ASEAN+3 Summit in Bali in October 2003.
31.With regard to the possible East Asia FTA, the Meeting agreed that it would be a long-term objective and SEOM would look into this recommendation at a later stage. For this purpose, the Meeting requested to consider the recommendation.
3.6ASEAN-India Summit
3.6.1ASEAN-India FTA
32.The Meeting noted that at the first ASEAN-India Summit in Phnom Penh, Cambodia on 5 November 2002, the Leaders from both regions agreed on the importance of enhancing close economic cooperation and working towards AFTA-India Linkages. The Leaders also welcomed the adoption on an ASEAN-India Regional Trade and Investment Area as a long-term objective.
AGENDA ITEM 4.FOLLOW-UP ACTIONS TO THE DECISIONS OF THE 34TH ASEAN ECONOMIC MINISTERS MEETING, 12 SEPTEMBER 2002, BANDAR SERI BEGAWAN, BRUNEI DARUSSALAM
4.134TH ASEAN Economic Ministers Meeting
33.The Meeting exchanged views on the various decisions made by the AEM at the 34th ASEAN Economic Ministers Meeting which was held in Bandar Seri Begawan, Brunei Darussalam on 12 September 2002. The Joint Press Statement of the said AEM meeting appears as ANNEX 13.
4.1.1Task Force of High-Ranking Officials on Deepening ASEAN Economic Integration
34.The Meeting deliberated on the decision of the AEM to establish a task force of high-ranking officials that will discuss and recommend initiatives to deepen and strengthen the region’s economic integration beyond AFTA. The Meeting agreed on the following:
(a)Task Force to comprise high ranking officials preferably at Permanent Secretary level or equivalent;
(b)Each member country shall nominate one Task Force Member;
(c)The Chairmanship of the Task Force shall be decided by the Task Force which may or may not be a member of the Task Force;
(d)Task Force to look into various documents such as ASEAN Vision 2020, the Secretary General Report to the 34th AEM; Roadmap on Integration of ASEAN; ASEAN Competitiveness Study and studies on the AEC;
(e)Task Force to submit its recommendations to the 35th AEM in Cambodia.
(f)SEOM Chair writes to the AEM Chairman to invite AEM members for nominations to the Task Force; and
(g)SEOM to brief its AEM on the draft TOR for the High-Level Task Force;
35.The Meeting also agreed that the first meeting of the Task Force be convened by end of February or early March 2003 at the ASEAN Secretariat.
36.The Meeting considered and endorsed the revised draft Terms of Reference of High-Ranking Officials on ASEAN Economic Integration, which appears as ANNEX 14.
4.1.2Permanent Body to Monitor and Ensure Compliance to the CEPT Agreement and other ASEAN Economic Integration Agreements
37.The Meeting noted that the 34th AEM Meeting agreed to create a permanent body/unit which would be responsible in monitoring and helping ensure compliance to the CEPT Agreement and other agreements pertaining to ASEAN economic integration.
38.The Meeting considered the discussion paper of the ASEAN Secretariat on the matter, which appears as ANNEX 15. The Meeting requested that it should be further refined to include the experiences and operations of other similar bodies such as the Fair Trade Commission of NAFTA the Textile Monitoring Body of the WTO and the peer review process under APEC. The Meeting also requested the ASEAN Secretariat to indicate whether the 68 cases highlighted has been resolved and time taken to resolve them. The Meeting requested the ASEAN Secretariat to submit the draft TOR for the consideration of SEOM 2/34.