Services

1. BACKGROUND

• Services liberalisation in ASEAN has been implemented progressively under the ASEAN Framework Agreement on Services (AFAS) since 1995. The AFAS was signed by ASEAN Economic Ministers (AEM) with the objectives of:
  • enhancing cooperation in services amongst ASEAN Members in order to improve the efficiency and competitiveness, diversify production capacity, and supply and distribution of services within and outside ASEAN;
  • eliminate substantially restrictions to trade in services amongst Member Countries; and
  • liberalise trade in services by expanding the depth and scope of liberalisation beyond those undertaken by ASEAN Member Countries under the GATS with the aim of realising a free trade area in services.
• AFAS provides the broad guidelines for ASEAN Member Countries to progressively improve Market Access and ensure equal National Treatment for services suppliers among ASEAN countries in all four modes of services supply. These are:
  • Mode 1 (Cross-Border Supply): services flow from the territory of one Member into the territory of another Member (e.g. banking or architectural services transmitted via telecommunications or mail);
  • Mode 2 (Consumption Abroad): refers to situations where a service consumer (e.g. tourist or patient) moves into another Member's territory to obtain a service;
  • Mode 3 (Commercial Presence): implies that a service supplier of one Member establishes a territorial presence, including through ownership or lease of premises, in another Member's territory to provide a service (e.g. domestic subsidiaries of foreign insurance companies or hotel chains);
  • Mode 4 (Movement of Natural Persons): consists of persons of one Member entering the territory of another Member to supply a service (e.g. accountants, doctors or teachers).

2. STATUS OF SERVICES LIBERALISATION

• The ASEAN Economic Ministers (AEM) agreed that 2015 will be the end-date for the liberalisation of all services sectors with FLEXIBILITIES. The liberalisation is to be based on the 12 broad sectors covering 128 services sub-sectors identified in the WTO Services Sectoral Classification List (W/120) as a guide. Liberalisation of financial services and air transport services are undertaken by the respective sectoral Ministers.

(Click here to view the W/120 List)

• Given the potential to expand intra-ASEAN trade in services, ASEAN Member Countries have agreed to draw up a concrete plan to liberalise the services sector within ASEAN from 2007 to 2015 to complement the goods sector. ASEAN has agreed to specific equity liberalisation thresholds:
  1. eliminate restrictive regulations and barriers for Cross-Border Supply (Mode 1) and Consumption Abroad (Mode 2);
  2. increase the foreign (ASEAN) equity participation under Commercial Presence (Mode 3):
  • priority sectors (e-ASEAN, healthcare, air travel and tourism):
    • 49 per cent by 2006;
    • 51 per cent by 2008;
    • 70 per cent by 2010.

    * Logistics sector:

    • 49 per cent by 2008;
    • 51 per cent by 2010;
    • 70 per cent by 2013.
  • non-priority sectors:
    • 30 per cent by 2006;
    • 49 per cent by 2008;
    • 51 per cent by 2010;
    • 70 per cent by 2015.

    * construction services : not less than 51 per cent by 2006.

3. improve the offer for Movement of Natural Persons.

• Following the signing of AFAS in 1995, ASEAN has concluded 6 packages of commitments. These packages provide for details of commitments from each ASEAN Country to the others in the various services sectors and sub-sectors.
• Malaysia 's offers in the 6 Packages cover the following services sectors/sub-sectors:
  • Healthcare;
  • Tourism and Travel Related Services;
  • Computer and Related Services;
  • Telecommunication;
  • Business and professional services;
  • Distribution Services;
  • Construction and related services;
  • Maritime Transport;
  • Education; and
  • Transport.

(Click here to view the schedule of commitments of ASEAN Member States under AFAS)

3. APPROACH FOR SERVICES LIBERALISATION (2007-2015)

• The modality to achieve the end goal of eliminating substantially all restrictions to trade in services in 2010 for priority sectors and 2015 for other sectors:
  1. Liberalisation will be undertaken through consecutive rounds every two years until 2015, i.e., 2008, 2010, 2012, 2014 and 2015.
  2. Target the minimum number of new sub-sectors to be scheduled in each round is as follows: 10 sub-sectors in 2008, 15 in 2010, 20 in 2012, 20 in 2014 and 7 in 2015, based on GATS W/120 universe of classification;
  3. The commitments for every round will be scheduled according to the following parameters:
     • Modes 1 and 2: “None”, with exceptions due to bona fide regulatory reasons (such as public safety) which are subject to agreement by all Member Countries on a case-by-case basis;
     • Mode 3 - foreign equity participation: no less than 51% by 2008 and 70% by 2010 for the 4 priority services sectors; no less than 49% by 2008, 51% by 2010, and 70% by 2013 for logistics services; and no less than 49% by 2008, 51% by 2010, and 70% by 2015 for other services sectors;
  4. Overall flexibility of not more than 15% of the universe list shall be accorded. The flexibility covers the sub-sectors which may not be committed and/or may not comply with the agreed parameters of liberalisation. The 15% flexibility shall be reviewed upon the completion of the inventory of limitations to trade in services by 40 th AEM in 2008.
  5. Scheduling of liberalisation commitments in each round shall be accorded the following additional flexibilities:
     • Possibility of catching up in the next round if a Member Country is not able to meet the parameters of commitments set in the previous round;
     • Allowing for substituting sub-sectors that have been agreed to be liberalised in a round but for which a Member Country is not able to make commitments with sub-sectors outside the agreed sub-sectors;
     • Liberalisation through the ASEAN Minus X formula; and
     • Any additional flexibility to be agreed on a case-by-case basis.

4. ASEAN MUTUAL RECOGNITION ARRANGEMENTS (MRAS)

• In addition to liberalisation, ASEAN is also negotiating mutual recognition arrangements (MRAs). To date, ASEAN has concluded MRAs on:
  1. MRA for Engineering Services ;
  2. MRA for Nursing Services ;
  3. MRA for Architectural Services ;
  4. Framework MRA for Surveying Qualifications ;
  5. MRA for Medical Practitioners Services ;
  6. MRA for Dental Practitioners ; and
  7. Framework MRA for Accountancy Services .

• number of service suppliers, whether in the form of numerical quotas, monopolies, exclusive service suppliers or requirements of an economic needs test
• total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test;
• total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic need test;
• total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test;
• measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service; and
• participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment.