The Way Forward: Maximizing Growth for SMEs in the China- ASEAN Economies Anthony Amunategui Abad

ASEAN China FTA Considered a landmark agreement: –The first external FTA pursued by the ASEAN and the first of China, outside its WTO membership. –Set in place the largest free trade area to date. On November 2004, ASEAN and China agreed and signed the Framework Agreement on Trade in Goods, put in force in July 2005.

ASEAN China FTA In July 2007, ASEAN and China signed an agreement for the liberalization of the trade in services. Agreement on Investments is still under negotiations. Areas of cooperation in ACFTA include the SMEs, i.e., increasing the competitiveness of SMEs.

ASEAN China FTA – Trade in Goods ASEAN 6 (Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand) and China eliminated tariffs on 90% of their products as of 2010, while the less developed ASEAN countries (Cambodia, Lao PDR, Myanmar, Vietnam) are given until Schedules for tariff reduction/elimination: 1.Early Harvest Programme (EHP) 2.Normal Track 3.Sensitive Track a.Sensitive List b.Highly Sensitive List

ASEAN China FTA – Trade in Services Paves the way for a more liberalized services sector for both the ASEAN and China through provisions such as market access and national treatment. Special and differential treatment given to Cambodia, Lao PDR, Myanmar and Vietnam, allowing them to open fewer sectors and liberalize fewer transactions.

ASEAN China FTA – Trade in Services Expected expansion and growth of the 4 modes of trade in services: –Cross-border supply –Consumption abroad –Commercial presence –Movement of natural persons Expected to spur higher levels of investments in the regions.

ASEAN China FTA – Trade in Services China committed to open up new markets for the ASEAN countries in 26 branches of 5 service areas based on original WTO commitments: –Construction –Environmental Protection –Transportation –Sports –Commerce

ASEAN China FTA – Trade in Services China also made commitments in: –Computer and Related Services –Real Estate Services –Other Business Services –Construction and Related Engineering Services –Environmental Services –Recreational, Cultural and Sporting Services –Transport Services

ASEAN China FTA – Trade in Services ASEAN committed to open their markets to China in the following areas, among others: –Finance –Telecommunication –Education –Tourism –Construction –Medical Treatment

ASEAN China FTA – Impact on SMEs Competitive impact of Chinese exports (e.g., machinery and equipment) –Expected to affect SMEs in more advanced countries such as Singapore, Malaysia and Thailand. The impact is more significant on emerging countries like Indonesia and the Philippines, that are still dominated by labor-intensive industries.

How ASEAN SMEs can benefit from ACFTA SMEs in ASEAN should be strengthened to take full advantage of the growing Chinese markets. SMEs in ASEAN should focus on developing their own Research and Development capabilities to complement the growing demand in China.

How ASEAN SMEs can benefit from ACFTA Take advantage of financing –i.e., ADB’s ASEAN China Investment Fund II, which seeks to raise $250 million in total capital, and plans to invest in companies that will benefit from increasing trade between ASEAN bloc and China.

How ASEAN SMEs can benefit from ACFTA Create strategic alliances –SMEs are in a better position to capitalize on FTAs to enhance profit, advantage and growth –SMEs leverage on their combined knowledge, capabilities, and other assets Study market structures and demand in China –Customers in China are fragmented due to the country's vast population

How ASEAN SMEs can benefit from ACFTA Identify target customers in China –Tailor-fit products according to specific profile of target market in China Products entering Chinese market also need to have local language labeling

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