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   Vol. 14  No. 16
Thursday February 19, 2015

ASEAN No Show Has A Date

ASEAN No Show Still Has A DateAlthough from the seating arrangements pictured here some may have needed binoculars to see each other, Foreign Ministers from 10 Association of Southeast Asian Nations (ASEAN) met in Hanoi in July 2010. Right now the delayed launch of the ASEAN Economic Community is a blow to the region’s airlines, manufacturers, and 3PLs. But most remain optimistic that AEC can eventually deliver on its potential.

     January 1 was supposed to be the day when ten South East Asian nations with a combined population of over 600 million people and GDP of $2.5 trillion took their collective places among the heavyweights of world trade by creating the ASEAN Economic Community, Asia’s version of the European Union.
     But January 1 came and went. ASEAN’s members collectively shrugged their shoulders and simply announced a new deadline of December 31, although not many in the private sector or government expect this to be stuck to either. But the delays do not diminish the potential that AEC has to boost the economies of South East Asia and their place in the global trading system.
     The aims of AEC are much like those of the European Union: to create a single market for goods and services by opening borders, removing tariffs, and harmonizing regulations. As well as creating a single open skies aviation market, once implemented the facilitation of international truck movements offers the potential for integrators to create vast regional distribution centers linked globally by freighter services and offering rapid deliveries over large distances by truck and air, much like they already offer in Europe and North America.
     These networks would not only serve mushrooming domestic demand in places such as Vietnam, Indonesia, and Malaysia for foreign imports, they would also provide the crucial supply chain infrastructure needed for manufacturers attracted to AEC by its huge domestic market and—in many member states—low labor and land costs: the basic raw materials needed for mass production manufacturing aimed at export markets.
     The ASEAN secretariat claims that some 80 percent of AEC’s goals have been achieved already. Those in the transport world tell a different story. Although many tariffs have been removed, trading across borders remains difficult and bureaucratic—customs and regulatory regimes are far from harmonized. Where there have been improvements, many put this down to successful bilateral agreements rather than ASEAN reforms.
     Certainly, the pace of change is hugely variable, reflecting the vastly different social, political, and economic models and wealth of ASEAN’s members—Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
     For many in the air cargo sector, the big opportunity of AEC is derived from its stated policy of open skies. In theory, the creation of a single aviation market will create huge new opportunities for airlines, service providers, and logistics planners. A pure open skies environment with no limits on slots and routings will likely remain elusive after 2015, but airports and airlines around the region are already investing in new terminals and planes in anticipation of accelerated demand for freight and passenger movements.
Sou Ping Chee     Sou Ping Chee, (right) regional head of air freight Asia Pacific at Panalpina, said the AEC Open Skies policy was definitely a move in the right direction, although the impact in the short term would be minimal.
     “First, full implementation of AEC Open Skies will only happen by end-2015,” said the Singapore-based executive. “Second, AEC Open Skies has its limitations as it does not bring full liberalization. For example, it will not allow a third carrier to fly between two foreign countries or to operate on a domestic route in a foreign country.
     “So a certain level of protectionism is still there and consequently we have not seen any major production or planning shift in the ASEAN community so far ahead of the year-end.”
Richard Strollo     But elsewhere optimism is running high. Richard Strollo, (left) managing director, South Asia, BDP International, said the gradual implementation of free trade policy via the creation of AEC would be of huge benefit economically to the region. “Certainly our customers are reviewing developments and we are also keeping them updated with information and consultations for their logistics needs,” he said.      “From an air freight perspective, Open Skies will be welcome, enabling more flexibly to offer our air freight customers improved transit times. All in all this is a step forward to help our customers grow in South East Asia.”
     Michael Drake, (rightt) managing director, TNT Asia, Middle East & Africa, said TNT was not expecting a “Big Bang” impact from an ASEAN single market at the end of this year, citing “challenges to full implementation.” But he claimed there were already real trading wins accruing from the reform process.
     TNT has been pro-active in lobbying ASEAN governments to accelerate the implementation of simpler customs documentation procedures via the ASEAN Single Window. The company is also pushing for adoption of electronic data interchange for customs declarations and risk assessment systems to speed up the quick clearance and delivery of goods across the region.
     However, in many parts of the ASEAN bloc these trade facilitation measures will take some time to implement. In the meantime Drake is looking at the positives. “We are excited by the potential possibilities that an ASEAN single market will bring,” he said. “We are seeing some of benefits and real improvements in achieving the goals of the AEC. For example, more than 70 percent of intra-ASEAN trade incurs no tariff, which is good news for our customers.”
SkyKing

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