|Kuala Lumpur - Economic and trade ministers of ASEAN member countries have decided to delay discussions on a threshold for maximum foreign ownership on a number of businesses until the next round of talks because most of them are still protecting their local industries, a high-ranking official from Indonesia has said.
The trade minister’s adviser for trade and diplomacy, Sondang Aggraini, said on Tuesday that ASEAN could not yet agree on a cap for foreign investment because most member countries had not met a previous agreement that requires them to allow 70 percent foreign ownership in a number of sectors.
“So far, only two countries have met the expected [70 percent] threshold, Singapore and Thailand,” she said after a meeting between ASEAN and private sectors — the final series of the 47th ASEAN Economic Ministers (AEM) meeting in Kuala Lumpur.
ASEAN member countries inked in 1995 the ASEAN Framework Agreement on Services (AFAS), which covers liberalization in 128 subsectors across 12 business sectors, including finance, transportation, health and social services.
Based on the accord, each ASEAN member is expected to allow foreign ownership of up to 70 percent when the ASEAN Economic Community (AEC) is fully implemented, an increase from 51 percent at present.
Under existing rules, foreign ownership in business entities operating in Indonesia is limited to between 49 percent and 60 percent, depending on the sector. Computer-related services and passenger transportation services, for example, can be operated by companies that are respectively 49 percent and 60 percent-owned by foreign entities.
Trade Minister Thomas Lembong said previously in a statement that existing rules on foreign ownership were still a hurdle for Indonesia in fulfilling its commitment toward the AEC, which is expected to be launched at the end of this year.
As of July, Indonesia has implemented 92.7 percent of 506 measures in the AEC blueprint.
With the formation of the AEC, the 10-member bloc aims to become a single market and production base. It has effectively removed taxes through the ASEAN Trade in Goods Agreement and is trying to reduce barriers in trade of services through the AFAS.
The trade in services is carried out through four models — cross border supply, consumption abroad, commercial presence and presence of natural persons.
The cross-border supply and consumption abroad modes have been successful so far. ASEAN members are now working on the opening of business sectors to foreign ownership to guarantee the success of commercial presence.
Under the presence of the natural person mode, professionals such as accountants, doctors and architects may move within ASEAN freely.
ASEAN, which comprises Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, Vietnam and the Philippines — aims to kick off a single market by year-end, with less developed nations Cambodia, Laos, Myanmar and Vietnam (CLMV) expected to fully join the integration by 2018.
The single market will form a giant block of 620 million people with combined gross domestic product of US$2.7 trillion.
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