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AT the opening of the 12th ASEAN summit, the ASEAN heads of states endorsed a proposal for the creation of an ASEAN Charter similar to the integrated regional bloc of the European Union. Amidst the call for greater cooperation and integration to support intra and extra ASEAN trade in goods and services, local industries fear that integration will result in more competition rather than complementation.

For the trading and transport industries, integration creates both opportunities and risks. Integration creates more opportunity for the free flow of goods, whether raw materials and finished goods and for a bigger common market place. On the other hand, the entry of more players and service providers provide stiffer competition in the market place, to the detriment of inefficient and stagnant industries and companies. For the logistics industry, integration will mean continuing structural and policy reforms in the air and maritime transport sector coupled with overall improvements in the land, air and maritime infrastructure.

ASEAN Initiatives for Trade in Services

ASEAN first launched their joint effort to liberalize trade in services with the signing of the ASEAN Framework Agreement on Services (AFAS) on 15 December 1995 by ASEAN Economic Ministers (AEM) during the 5th ASEAN Summit in Bangkok, Thailand, consistent with international rules for trade in services as provided by the General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO). At present, ASEAN has concluded services commitments in the following services sectors:

  • Air transport (sales and marketing of air transport services, computer reservation, aircraft repair and maintenance)
  • Maritime transport (international passenger and freight transport, storage and warehousing)
  • Business services (IT services, accounting, auditing, legal, architecture, engineering, market research)
  • Financial services (banking, insurance, securities and broking, financial advisory, consumer finance)
  • Telecommunication (public telephone services, mobile phone services, business networks services, data and message transmission)
  • Tourism (hotel and lodging services, food serving, tour operator, travel agency)
  • Construction (construction of commercial buildings, civil engineering, installation works, rental of construction equipments)

Cooperation in the Transport Industry

Obviously, the integration process in the transport and logistics industry will take many more years before full implementation due to the complexity of the work required and the policy and regulatory changes necessary to effect such integration. Developments, however, will come faster in some areas of the transport industry.

ASEAN has specifically targeted specific areas for greater cooperation which in the years to come will slowly change the landscape of the domestic transport and logistic industry. Among these areas are as follows:

  • Greater door-to-door transport and clearance facilitation
  • Improvement of land transport network infrastructure to link with international maritime and air gateways
  • Rationalization of shipping and maritime services to allow multimodal transport interface
  • Promotion of open-sky arrangements to allow unlimited fifth freedom traffic rights (passenger and cargo) across the region
  • Cooperation on security and safety networks
  • Coordination with international organizations (e.g. ICAO, IMO, UNCTAD, etc.)
  • Involvement of private sector [ (ASEAN Airlines Meeting (AAM), ASEAN Federation of Forwarders Associations (AFFA), ASEAN Ports Association (APA), Federation of ASEAN Shipowners’ Associations (FASA) and Federation of ASEAN Shippers’ Councils (FASC)]

Integrated Logistics in an Integrated Economy

Integrated logistics normally refer to the provision for an efficient and seamless flow of the goods starting from the suppliers to the customers of finished goods. Also known as third party logistics, this involves services such as: air and sea freight, multi-modal transport, customs brokerage, and warehousing and distribution. In the coming years, the challenge for logistics providers will be how to operate efficiently within a bigger geographical territory against stiff competition from regional and global players.

The author is an international trade and customs consultant, and a licensed customs broker. He is a regular lecturer on logistics, indirect tax, customs and supply chain. Please contact aouvero@dlugms.com for your comments.

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