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Cool response to Asean-China FTA |
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07/Jan/2010 Intellasia | The Straits Times |
7 Jan, 2010 - 10:22:56 AM |
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Reaction to the landmark trade pact signed between China and the 10 Asean members has been muted among local businessmen and trade experts, who are not giving the accord the same jubilant reception as politicians.
They acknowledge that the Asean-China Free Trade Agreement (ACFTA) — which came into effect on Jan 1 — is a big step towards regional trade liberalisation, but fear obstacles such as corruption and red tape could well stop them from using it to its full potential.
Rodolfo Severino, head of the Asean Studies Centre at the Institute of Southeast Asian Studies, said: "Keep in mind that with these agreements, they have to actually be used by traders and investors. If they're not used or not used properly, they won't have much effect."
Businessmen The Straits Times spoke to were still working out how they could benefit from ACFTA, and were sceptical about whether the commitments set out in the deal would be acted upon by all signatories.
Indonesian companies are already pushing to have tariff reductions delayed so as to cushion the impact on local industries. This has prompted concern that some governments may not follow through with tariff reductions and could renege on promises to open up specific sectors to investment.
"We need to watch for how this is actually carried out on the ground rather than the effect of just having the agreements in place," said Severino.
Dr Tan Khee Giap, chairman of the Singapore National Committee for Pacific Economic Cooperation, warned that a lack of transparency among the pact's members could undermine the agreement's success.
"The tariff barriers may have been lowered, but there may be other transaction costs such as poor corporate governance that may make the FTA less significant," he said.
Singapore companies also point out that ACFTA overlaps with the existing China-Singapore FTA (CSFTA).
Singapore International Chamber of Commerce's chief executive, Mr Phillip Overmyer, doubts there will be a big uptake of ACFTA, given that CSFTA has already eliminated tariffs on 85 per cent of Singapore's exports to China.
Dominic Yeo, Singa Plastics' export sales executive, said that with most of his firm's manufacturing conducted in Singapore, he does not see ACFTA offering any additional perks.
Dr Tan said: "Right now, the political implications of the agreement outweigh the economic significance."
Despite this lukewarm reception, many see long-term benefits flowing from ACFTA.
Companies that have a regional manufacturing presence in Asean could strengthen their market presence in China, said Renny Yeo, president of the Singapore Manufacturers' Federation.
The deputy chief executive of Armstrong Industrial, Steven Koh, said his company plans to centralise production of electronic parts in China and export to the rest of the region from there.
Barclays Capital economist Leong Wai Ho said it could well lead to the creation of a larger free trade zone in the future.
"How it catalyses other countries to join the arrangement is an important consideration. Regional integration is slowly playing itself out. An Asean+3 (with China, South Korea and Japan) FTA could be the next milestone, and even Asean+4 with Taiwan."
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