Deepening Integration and Stronger Connectivity

Since ASEAN was formed in 1967, its economic growth, social progress and cultural development have been remarkable. The vision of an ASEAN Economic Community (AEC) set out in 2015 marks a further step forward for the region.

ASEAN's future success will be defined by 'connectivity', the two-way movement of goods, services, finance, people, data and communication. According to the McKinsey Global Institute Connectedness Index, Singapore is the most connected country in the world, while Malaysia, Thailand and Vietnam are among the top 40.15

Connectivity is the idea driving ASEAN economic integration. For example, the ASEAN Single Window will expedite cargo clearance and enable electronic exchange of border documents. Indonesia, Malaysia, Singapore, and Thailand are conducting pilot tests using the ASEAN Single Window to exchange electronic certificates of origin. Brunei and Vietnam are expected to join shortly.

Australia is a strong supporter of ASEAN's connectivity. A one-stop shop approach to border, customs and immigration, supported by our aid program, has slashed by 50 per cent passenger and goods crossing times between Vietnam and Laos at the Lao Bao-Dansavanh border. Another will open soon at the Mukdahan-Savanakhet crossing between Thailand and Laos.

Greater connectivity will lift ASEAN's reputation as a hot-spot for regional value chains integrated into global supply routes

Australian firms in mining, advanced manufacturing and transport and financial services, are already taking advantage of ASEAN as an international trading hub.

The AEC Blueprint 2025 is focused on addressing issues relating to trade facilitation, non-tariff measures, services integration and reform of investment policies. It aims to achieve a highly integrated and cohesive ASEAN economy through the seamless movement of goods, services, investment, capital, and skilled labour. The AEC's vision, if realised, will enhance ASEAN's trade and production networks and set up a more unified market for its firms and consumers. The AEC isn't a customs or currency union and it won't be administered by a supranational bureaucracy. Its aim is to guide Member States through a structural reform process.

Logistics and supply-chain specialists span ASEAN

Linfox

Founded in Australia over 60 years ago, Linfox International Group (Linfox) is the largest privately owned supply chain company operating in the Asia-Pacific region. Starting in Malaysia in 1992, the company expanded across Southeast Asia, supplying logistics expertise to large commercial operations and building fleets of trucks and distribution centres.

James Evans, Linfox's Regional Legal Counsel, believes opportunities for logistics companies are growing.

'Many ASEAN markets are reaching the stage where companies want large-scale, long-term logistics contracts,' he says. 'Vietnam is currently very welcoming towards overseas investors. The Vietnamese Government has set up special economic zones and parks to foster FDI.

'Linfox operates from one of the seven Vietnam-Singapore industrial parks that have been set up as joint ventures throughout the country.'

Linfox is witnessing increased trade under AANZFTA. The agreement progressively lowered tariffs on foodstuffs, including Australian meat, dairy, fruits and wine.

'Since the FTA was signed we've seen an increase in the amount of foodstuffs coming into Southeast Asia,' says Evans. 'It creates the potential for Australia to be a huge supplier of food to Southeast Asia.'

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Increasing interconnectedness within and between companies in different ASEAN markets will drive growth, create stronger markets and greater economic opportunities. However, much work remains to reduce infrastructure bottlenecks and barriers to cross-border trade. While intra-ASEAN trade is rising, it remains relatively low as a percentage of the region's total. Enhanced regional connectivity has the potential to unlock significant growth.

Australian businesses have a range of FTAs they can use to take advantage of ASEAN's connectivity agenda. AANZFTA provides market access commitments to ASEAN countries and sets consistent trade and investment rules across our region. Our bilateral FTAs with Singapore, Malaysia and Thailand add value to the benefits Australian businesses receive under AANZFTA.

Australia continues to engage in an active agenda to open markets and provide greater opportunities for Australian businesses accessing ASEAN countries. These include:

  • Regional Comprehensive Economic Partnership (RCEP) negotiations involving ASEAN and ASEAN's FTA partners (China, Japan, India, Republic of Korea, New Zealand and Australia),
  • Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) negotiations and
  • assessing options to bring the Trans-Pacific Partnership (TPP) into force.

These negotiations aim to simplify and strengthen the regional trade and investment environment, and create further opportunities for Australian business in key regional markets.

Central Mekong Connectivity Project

Australia and Vietnam are working together to improve transport infrastructure to reduce poverty and build new economic opportunities for the 18 million people living in the Mekong Delta. Australia's $160 million aid investment to support the design and construction of a new bridge at Cao Lanh will help link people and markets in the Mekong Delta to the rest of Southeast Asia and beyond.

Longevity and shared values energise Blackmores in ASEAN

Blackmores

Sydney-based natural healthcare business Blackmores has operated in the ASEAN region for more than 40 years. The business started operations in Singapore before entering Malaysia and then Thailand. 'Our second largest market in Asia is Thailand,' says Peter Osborne, Blackmores' Managing Director, Asia. 'Overall in ASEAN, our business is experiencing double-digit growth.'

Blackmores is the number one foreign brand in its category in Malaysia, Singapore and Thailand, and its share of the latter market is more than 40 per cent.

Following extensive research into the Indonesian market, in November 2015 Blackmores established a joint venture – Kalbe Blackmores Nutrition – with Indonesia's largest pharmaceutical group, PT Kalbe Farma. The venture aims to develop a vibrant vitamin and health-supplement products business servicing the country's 260 million-plus population.

Osborne pinpoints three primary factors as driving Blackmores' success in ASEAN. 'We employ very good country managers, typically from a multinational fast-moving consumer goods (FMCG) background, and build very strong local teams because they understand their markets,' he says. 'Furthermore, we're a brand that focuses on quality and we believe you have to educate your consumers and your partners about that.'

Blackmores has also benefited from FTAs between Australia and ASEAN countries.

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Australia's Free Trade Agreements with ASEAN and its Members

Agreement

ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA)

In force

2010

Tariff elimination*

100% for Australia, New Zealand, Singapore

Over 93% for all ASEAN countries; except: Vietnam (90%); Cambodia, Laos and Myanmar (85–88%)

Further details

AANZFTA's First Protocol addresses implementation issues with certificates of origin and rules of origin, and has entered into force for all parties except Indonesia.

AANZFTA also provides greater certainty for Australian services suppliers and investors.

A review is underway in 2017–18 to ensure the Agreement remains relevant to business and supports greater regional economic integration.

Agreement

Malaysia-Australia Free Trade Agreement (MAFTA)

In force

2013

Tariff elimination*

98.8%

Further details

MAFTA builds upon AANZFTA to open up new opportunities for Australian businesses. MAFTA provides Australian service providers better access to the Malaysian market and reduces barriers to trade.

Agreement

Singapore-Australia Free Trade Agreement (SAFTA)

In force

2003

Tariff elimination*

100%

Further details

SAFTA provides improved market access for Australian exporters of services, particularly education, environmental, telecommunications and professional services. As a result of SAFTA, the bilateral business environment is also more open and predictable across a range of areas including in competition policy, government procurement, IP, e-commerce, customs and business travel.

Amendments from the 2016 review of SAFTA will come into effect when domestic treaty processes are complete.

Agreement

Thailand-Australia Free Trade Agreement (TAFTA)

In force

2005

Tariff elimination*

100%

Further details

TAFTA provides greater certainty for Australian investors, including in services, accessing the Thai market and guarantees a range of rights for them. The easing of visa and other requirements for temporary entry of Australian business people fosters business links.

* Percentage of tariff-free lines

Australia's Free Trade Agreements under negotiation or signed but not yet in force with ASEAN and its Members

Agreement

Regional Comprehensive Economic Partnership (RCEP)

Status

Under negotiation

Further details

The 16 RCEP participating countries cover half the world's population, 30 per cent of global GDP and over a quarter of world exports. They also account for almost 60 per cent of Australia's total two-way trade and over 65 per cent of our exports. RCEP will also include 10 out of Australia's top 15 trading partners. RCEP has the potential to further integrate Australia into the world's fastest-growing region, including by facilitating regional supply chains and providing greater certainty for Australian exporters and investors seeking to access RCEP markets.

Agreement

Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA)

Status

Under negotiation

Further details

IA-CEPA will create the framework for a new era of closer economic engagement between Australia and Indonesia. A comprehensive IA-CEPA will facilitate greater trade in goods and services and encourage two-way investment. It will also facilitate commercial partnerships between Australia and Indonesia and into third-country markets.

Agreement

Trans-Pacific Partnership (TPP)

Status

Signed in 2016 but not yet in force

Further details

The TPP is a regional FTA of unprecedented scope and ambition with great potential to drive job-creating growth across the Australian economy. Following the withdrawal of the United States, TPP Ministers of the remaining signatories launched a process to assess options to bring the agreement into force expeditiously. These efforts would contribute to maintaining open markets, strengthen the rules-based international trading system, increase world trade, and raise living standards.

Further information on trade negotiations is available at dfat.gov.au/trade/agreements/Pages/trade-agreements.aspx

For advice on whether a bilateral or regional FTA offers best access for trade and investment, consult DFAT's FTA Portal — ftaportal.dfat.gov.au