While ASEAN leaders formally launched the ASEAN Economic Community in Kuala Lumpur two weeks ago, they also discussed the ASEAN+6 grouping - free trade talks under the Regional Comprehensive Economic Partnership (RCEP) that could pave the way for the China-led trade bloc to be enforced next year.
A total of 16 RCEP members tentatively agreed at the 10th meeting of negotiation teams from 12 – 16 October in Busan, South Korea, to eliminate tariffs on 65% of all goods, amounting to 8 – 9,000 items, under the RCEP plans.
Of the 35% of total products not included in the initial agreement, RECP members are expected to gradually cut tariffs to zero within 10 years after 2017 for 20%, while further talks are needed for the other 15% of products, which are mostly sensitive items.
The RCEP was launched in November 2012 with the aim of establishing deeper economic cooperation between the 10 ASEAN members and Australia, China, India, Japan, New Zealand and South Korea, with a focus on trade in goods, services and investments.
If signed, the agreement will create an economic block with a combined population of 3.5 billion and a trade volume of US$ 10.7 trillion, accounting for nearly 30% of the world’s trade.
China has been seen as the key driver of the regional trade pact, which is viewed as an alternative to the US-led TPP, from which the world’s second biggest economy was excluded.
Within the RECP, seven countries – Australia, Japan, Malaysia, New Zealand, Singapore, Vietnam and Brunei – are part of the 12-nation TPP.
Thailand is taking these new RECP activities seriously and believes that they will benefit more from RECP than from ASEAN or TPP. The Thai government plans to introduce more measures to tempt investment in 10 targeted industries:
* Next-generation cars
* Smart electronics
* Affluent, medical and wellness tourism
* Agriculture and biotechnology
* Food
* Robotics for industry
* Logistics and aviation
* Biofuels and biochemical
* Digital sector
* Medical sector.
Similar to the Philippines, Thailand is developing roadmaps; the study reported that if Thailand seriously promoted the 10 industries, GDP growth could reach 5-6% a year based on private investment, which is expected to increase to by 10% in 2016.
The study also suggested Thailand support other incentives such as a corporate income tax limit of not more than 15%, a personal income tax limit for foreign experts of not more than 15% and facilitation of their work permits (Philippines watch out!).
Foreign investors should also be allowed to hold 100% of the first stage of R&D projects and the leasehold for land plots for 99 years before selling them back to the government once due.