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

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.

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

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

  2. 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.

  3. 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.

  4. 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 2015. • Schedules for tariff reduction/elimination: • Early Harvest Programme (EHP) • Normal Track • Sensitive Track • Sensitive List • Highly Sensitive List

  5. 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.

  6. 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.

  7. 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

  8. 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

  9. 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

  10. 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.

  11. 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.

  12. 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.

  13. 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

  14. 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

  15. End Thank you!

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