ASEAN REACHES OUT TO INDONESIAN BUSINESS LEADERS

UNCLAS JAKARTA 000424 SIPDIS SIPDIS DEPT FOR EAP, EAP/RSP, EAP/MTS, EAP/MLS, EAP/EP DEPT FOR EB/IFD/OMA DEPT ALSO FOR OES/IET AND OES/ETC/TED USAID FOR LCHILES BANGKOK FOR USAID/KISSINGER/PARISH CAMBODIA FOR USAID MANILA FOR USAID HANOI FOR USAID TREASURY FOR IA-SETH SEARLS COMMERCE FOR 4430/ KELLY SINGAPORE FOR BAKER E.O. 12958: N/A TAGS: ECON PHUM PREL PGOV KDEM ID BM SUBJECT: ASEAN REACHES OUT TO INDONESIAN BUSINESS LEADERS ¶1. Summary. Sundram Pushpanathan, Principal Director of the ASEAN Secretariat's Bureau for Economic Integration and Finance, presented SIPDIS ASEAN's plan for economic integration by 2015 at an Indonesian business forum. According to Pushpanathan, the ASEAN foreign ministers have expressed strong support for the ASEAN Economic Community (AEC) and plan to mobilize additional resources for the ASEAN Secretariat to support the integration process. Pushpanathan also noted that ASEAN plans to take a more coherent approach to negotiating trade and investment accords and to enforcing existing ASEAN agreements. Pushpanathan and the business leaders agreed that the private sector must ultimately drive the economic integration process. End Summary. ASEAN Secretariat Launches AEC Awareness Campaign -------------- -------------- ¶2. On February 28, Sundram Pushpanathan, Principal Director of the ASEAN Secretariat's Bureau for Economic Integration and Finance, presented ASEAN's plan for economic integration by 2015 to a group of local business representatives. The event, entitled "ASEAN Economic Community: Benefits and Role of Business," was sponsored by the Singapore Chamber Indonesia and Globe Asia, a local business publication. Pushpanathan noted that the event was the first in a series of ASEAN speaking engagements aimed at promoting awareness and support for the AEC in Indonesia. As Indonesia constitutes roughly half of ASEAN's population and over 35% of ASEAN's economy, the success of the AEC will be determined largely by the level of Indonesia's support. AEC Gains Momentum -------------- ¶3. According to Pushpanathan, all ten ASEAN foreign ministers have expressed strong support for the AEC and plan to mobilize additional resources for the ASEAN Secretariat in order to ensure that ASEAN meets its 2015 target. In the short-term, ASEAN is focusing on harmonizing standards in the cosmetics industry, and implementing the ASEAN Single Window, which will speed customs processing. Progress on creating a free flow of goods and services within 12 priority sectors (electronics, e-ASEAN, healthcare, wood-based products, automotives, rubber-based products, textiles and apparels, agro-based products, fisheries, air travel, tourism and logistics) is also on track, according to Pushapnathan. The "ASEAN Six" (Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand) plan to reduce tariffs in these categories to zero by 2010, with full liberalization of the electronics and auto sectors expected to occur first. Pushpanathan was less optimistic about ASEAN's plans to liberalize financial flows, noting that this issue is in the early stages of debate among the member countries. ¶4. Pushpanathan also noted that ASEAN plans to take a more coherent approach to negotiating its myriad trade and investment agreements. ASEAN has initiated consultations or concluded negotiations on economic agreements with China, Japan, Korea, India, Australia, New Zealand, and the European Union. A number of Gulf States, Pakistan, and Russia have also approached ASEAN to explore the possibility of economic agreements. (Note: The United States signed a Trade and Investment Framework Arrangement with ASEAN in 2006. End note.) ASEAN countries also maintain a number of bilateral trade and investment agreements. Differences in rules of origin used for these agreements have caused considerable confusion for businesses operating in the region. As a result, Pushpanathan noted that ASEAN plans to implement a uniform approach to negotiating agreements moving forward. ¶5. According to Pushpanath, ASEAN will also increase enforcement of existing economic agreements among member countries. ASEAN member countries have fully implemented only 30% of the 126 existing ASEAN economic agreements. The ASEAN Secretariat plans to monitor implementation progress and present this information at the leaders meetings in order to increase pressure on delinquent members. Pushpanathan also stated that for all ASEAN agreements, ASEAN would apply only "pre-agreed" flexibility for member countries, meaning that ASEAN will not permit any implementation delays that members failed to negotiate prior to the signing of the agreement. However, he did not discuss whether ASEAN would apply penalties for non-compliance. Increased Business Engagement in AEC -------------- ¶6. Local business leaders at the well-attended event revealed a significant interest in learning more about progress on the AEC. Pushpanathan and the business leaders agreed that the private sector must ultimately drive the economic integration progress given their stake in the process and the inability of political leaders to move quickly in the absence of strong support. Business leaders and ASEAN agreed on the need to establish additional mechanisms to share information and solicit views on economic integration progress and prospects. Pushpanathan also urged the business participants to utilize ASEAN's dispute settlement mechanism, through their respective governments, to settle intra-ASEAN business disputes and raise awareness of issues impeding economic integration. HUME