ASEAN FREE TRADE AREA : PROBLEMS AND CHALLENGES

Abstract

The Fourth ASEAN Summit held in January 1992 marked the turning point in ASEAN economic cooperation. An organisation that is established 25 years ago has concluded an agreement to form ASEAN Free Trade Area (AFTA) within 15 years and tariff levels reduced on a gradual basis to 0 - 5 % by year 2007. The emergence of EEA and NAFTA coupled with uncertainties in GATT Talks have pushed ASEAN ahead to forge new economic cooperation to strengthen its economic power and voice in global trade. However, the process of establishing a free trade area will not be smooth sailing. This academic exercise seeks to analyse qualitatively the stumbling blocks such as lack of support from the private sector, unemployment, government budgetary· problems and diverse custom policies and regulations. Overcoming these problems through harmonization of polices and fiscal incentives will be a challenge to AFTA and ASEAN members. When the teething problems are resolved and AFTA is in full operation, the next challenge to ASEAN Free Trade Area will be liberalising of trade in services. This requires the removal of trade barriers in the financial, telecommunication, insurance and transport services. For AFTA to be a complete economic integration, ASEAN ought to consider liberalising trade in services to complement the formation of AFTA.