Leveraging on Free Trade Agreements iadvisory Seminar Series: Doing Business in Indonesia April 29, 2015 presented by: WONG CHIAN VOEN Mayer Brown Consulting Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the Mayer Brown Practices ). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe-Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated legal practices in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. Mayer Brown Consulting (Singapore) Pte. Ltd and its subsidiary, which are affiliated with Mayer Brown, provide customs and trade advisory and consultancy services, not legal services. Mayer Brown and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
FTA Benefits Trade in Goods Gradual removal of market barriers Tariff reduction and elimination Removal of non-tariff measures Improved access to markets Expanded marketplace Greater pool of supply Creation of integrated operational space Rationalization Specialization Cost-saving opportunities 2
Indonesia s Merchandise Trade Flows 2013 China Singapore US$ 18.2 billion (42.31% of ASEAN trade) Korea Japan India Australia US$ 5.7 billion (42%) US$ 13.1 billion (54%) US$ 31.3 billion (36.77%) US$ 28.6 billion (45.32%) ASEAN US$ 15 billion (44.44%) US$ 43.1 billion (47.53%) New Zealand US$ 1.3 billion (52.06%) Indonesia ASEAN+6 US$ 138.1 billion (44.72%) EU28 US$ 22.4 billion (43.14%) United States US$ 19.2 billion (23.8%) Total Export: US$ 209.9 billion Export to ASEAN+6 as % Total: 66% Export to ASEAN as % of Total: 21% Source: RIETI-TID 2013 3
Road to ASEAN Economic Community (AEC 2015) ASEAN Community 2015 Bali Concord III (RCEP/EED) 2011 Cha-am Hua Hin Declaration on the Roadmap for the ASEAN Community (2009 2015) ASEAN Economic Community Blueprint (2009 2015) 2004 2008 2007 2009 Entry into Force of ASEAN Charter 1998 Bali Concord II 2003 Vientiane Action Program ASEAN Vision 2020 1995 1997 ASEAN Investment Agreement (AIA); Hanoi Plan of Action (HPA) 1977 1992 ASEAN Framework Agreement on Services (AFAS) ASEAN Free Trade Area (AFTA) 1967 ASEAN Preferential Trading Arrangement Birth of ASEAN 4
Single market and production base Competitive economic region Equitable Economic Development Integration into the global economy AEC Pillars The AEC will establish ASEAN as a single market and production base making ASEAN more dynamic and competitive with new mechanisms and measures to strengthen the implementation of its existing economic initiatives; accelerating regional integration in the priority sectors; facilitating movement of business persons, skilled labor and talents; and strengthening the institutional mechanisms of ASEAN. Source: ASEAN Economic Community Blueprint goods Competition Policy services investment Freer flow of capital skilled labor Food, Agriculture & Forestry Consumer Protection Intellectual Property Rights Infrastructure Development Taxation e-commerce SME Development Initiative for ASEAN Integration (IAI) Coherent Approach towards External Economic Relations Enhanced participation in global supply networks 5
Single market and production base Competitive economic region Equitable Economic Development Integration into the global economy AEC Pillars The AEC will establish ASEAN as a single market and production base making ASEAN more dynamic and competitive with new mechanisms and measures to strengthen the implementation of its existing economic initiatives; accelerating regional integration in the priority sectors; facilitating movement of business persons, skilled labor and talents; and strengthening the institutional mechanisms of ASEAN. Source: ASEAN Economic Community Blueprint goods Competition Policy services investment Freer flow of capital skilled labor Food, Agriculture & Forestry Consumer Protection Intellectual Property Rights Infrastructure Development Taxation e-commerce SME Development Initiative for ASEAN Integration (IAI) Coherent Approach towards External Economic Relations Enhanced participation in global supply networks 6
Free Flow of Goods Tariff Liberalization Average intra-asean tariffs declined (as of Feb 2015) ASEAN: 0.23% ASEAN-6: 0.03% CLMV: 0.55% Intra-ASEAN tariffs on most goods are at 0% ASEAN: 87% ASEAN-6: 99% CLMV: 72% 7
Free Flow of Goods Trade Facilitation Rules of Origin Wholly obtained or produced Not wholly obtained or produced Co-equal general rules 40% Regional value content Change in tariff classification (CTH) Product-specific rules Operational Certification Procedures Back-to-back CO Third-party invoicing Self-certification 1 st Pilot Project: Manufacturers & traders (Brunei, Cambodia, Malaysia, Myanmar, Singapore, Thailand) 2 nd Pilot Project: Manufacturers only (Indonesia, Lap PDR, the Philippines, Thailand, Vietnam) ASEAN/National Single Window e-co Form D ASEAN/National Trade Repository Harmonized Regulatory Regime, Mutual Recognition Arrangements (MRAs) on Conformity Assessment and Good Manufacturing Practices Electrical and electronic equipment Cosmetics Medical devices Medicinal products Non-tariff Measures (NTMs) NTM database Notify new measures to Secretariat Identification of non-tariff barriers (NTBs) Matrix of actual NTB cases 8
Existing Regional Economic Architecture ASEAN+1 FTAs China (2005) Korea (2007) Japan (2008) Australia-New Zealand (2010) India (2010) Bilateral FTAs Missing Links China-Japan Japan-Korea China-India Japan-New Zealand 9
Regional Comprehensive Economic Partnership (RCEP) Population, 2013: 3.4 billion people (48% of world) Share of World GDP (PPP), 2013: 34.2% Intra-regional trade: 45% of total 10
Opportunities for Imports into Indonesia Indonesia MFN Applied Duties Product Group Duty-free AVG in % Max Animal products 4.6 8.2 20 Dairy products 5.5 0 10 Fruit, vegetables, plants 5.5 5.8 20 Coffee, tea 6.7 0 10 Cereals & preparations 5.3 10.1 150 Oilseeds, fats & oils 4.5 11.2 10 Sugars and confectionery 6.4 0 10 Beverages & tobacco 44.2 0 150 Cotton 4.0 20.0 5 Other agricultural products 4.1 17.2 5 Fish & fish products 5.9 1.4 10 Minerals & metals 6.4 17.6 30 Petroleum 0.2 95.1 5 Chemicals 5.1 14.4 150 Wood, paper, etc. 4.5 27.0 15 Textiles 9.2 0.9 25 Clothing 14.4 0.5 15 Leather, footwear, etc. 8.6 13.3 25 Non-electrical machinery 4.8 16.8 15 Electrical machinery 5.7 22.9 13 Transport equipment 9.8 32.9 40 Manufactures, n.e.s. 6.7 7.9 15 Source: WTO Indonesia s Liberalization Level under ASEAN FTAs AFTA 99.65% AANZFTA 95.1% ACFTA 93.0% AIFTA 80.9% AJCEP 97.4% AKFTA 99.0% 11
Opportunities for Indonesian Exports Major markets Agricultural products MFN AVG of traded TL Pref. margin Simple Wtd Wtd 1. India 33.3 74.9 0.0 2. China 14.8 11.1 5.9 3. European Union 11.1 3.1 1.9 4. Malaysia 14.2 6.5 3.2 5. Singapore 4.4 0.0 0.0 Non-agricultural products 1. Japan 3.8 0.8 0.6 2. China 9.3 2.4 1.8 3. Singapore 0.0 0.0 0.0 4. United States 4.5 7.2 0.6 5. Korea, Republic of 7.5 2.7 0.0 Source: WTO LIBERALIZATION UNDER ASEAN+1 FTAs AFTA AANZFTA ACFTA AIFTA AJCEP AKFTA BRN 99.65% 99.2% 98.3% 85.3% 97.7% 99.2% CAM 98.86% 89.1% 89.9% 88.4% 85.7% 97.1% IDN 99.65% 93.7% 92.3% 48.7% 91.2% 91.2% LAO 98.86% 91.9% 97.6% 80.1% 86.9% 90.0% MLS 99.65% 97.4% 93.4% 79.8% 94.1% 95.5% MYA 98.86% 88.1% 94.5% 76.6% 85.2% 92.2% PHI 99.65% 95.1% 93.0% 80.9% 97.4% 99.0% SGP 100% 100.0% 100.0% 100.0% 100.0% 100.0% THA 99.65% 98.9% 93.5% 78.1% 96.8% 95.6% VTN 98.86% 94.8% n.a. 79.5% 94.4% 89.4% AUS 100% CHN 94.1% IND 78.8% JPN 91.9% KOR 90.5% NZ 100% 12
Thank You Mayer Brown Consulting (Singapore) Pte Ltd Wong Chian Voen chianvoen.wong@mayerbrown.com 13
www.mayerbrown.com Bangkok Beijing Brussels Charlotte Chicago Düsseldorf Frankfurt Guangzhou Hanoi Ho Chi Minh City Hong Kong Houston London Los Angeles New York Palo Alto Paris Shanghai Singapore Washington DC Mayer Brown is a global legal services organization advising many of the world s largest companies, including a significant portion of the Fortune 100, FTSE 100, DAX and Hang Seng Index companies and more than half of the world s largest banks. Our legal services include banking and finance; corporate and securities; litigation and dispute resolution; antitrust and competition; US Supreme Court and appellate matters; employment and benefits; environmental; financial services regulatory and enforcement; government and global trade; intellectual property; real estate; tax; restructuring, bankruptcy and insolvency; and wealth management. Please visit www.mayerbrown.com for comprehensive contact information for all Mayer Brown offices. Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the Mayer Brown Practices ). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe-Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated legal practices in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. Mayer Brown Consulting (Singapore) Pte. Ltd and its subsidiary, which are affiliated with Mayer Brown, provide customs and trade advisory and consultancy services, not legal services. Mayer Brown and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions. This publication provides information and comments on legal issues and developments of interest to our clients and friends. The foregoing is intended to provide a general guide to the subject matter and is not intended to provide legal advice or be a substitute for specific advice concerning individual situations. Readers should seek legal advice before taking any action with respect to the matters discussed herein. 2014 The Mayer Brown Practices. All rights reserved.