final report international finance
TRANSCRIPT
SCHOOL OF BUSINESS STUDIES
ADVANCE DIPLOMA IN FINANCE AND INVESTMENT (GROUP THREE)
ABMF4094 INTERNATIONAL FINANCE
ASEAN FREE TRADE AREA (AFTA) AGREEMENT AND ITS IMPACT ON MALAYSIA’S TRADE
NAME: YU CHAUR YEU (11WBA10172)
TANG RICK KEE (11WBA08456)
PANG WAI LOON (11WBA09826)
YONG DONG LIM (11WBA12109)
YOW YONG LOONG (11WBA10842)
LECTURER/TUTOR: PN MAZNAH
CRITERIA MAXIMUM MARKS
MARKS ALLOCATED
REMARKS
1.INTRODUCTION 20
2.BODY-FACTS 40
3.RECOMMENDATION 10
4.CONCLUSION 15
5.PRESENTATION 10
6.REFERENCING 5
1
Contents
INTRODUCTION...........................................................................................................................3
Background of AFTA..................................................................................................................3
Objective of AFTA......................................................................................................................3
BODY-FACTS................................................................................................................................6
CEPT Scheme..............................................................................................................................6
Trade Impact on Malaysia..........................................................................................................12
RECOMMENDATIONS...............................................................................................................18
CONCLUSION..............................................................................................................................19
REFERENCE................................................................................................................................20
2
INTRODUCTION
Background of AFTA
The ASEAN Free Trade Area is a multilateral agreement on the trade that involving many
sectors for example agricultural trade between the Association of South-East Asian Nations
(ASEAN) member countries. ASEAN Heads of Government agreed to establish an ASEAN Free
Trade Area (AFTA) by the year 2008 to release their economies to the era of globalization.
During the ASEAN Economic Ministers Meeting in September 1994, they advanced their AFTA
target of phasing out tariffs and revising other trade rules that involve 9 countries to year 2003.
AFTA was originally signed by 6 members which includes Singapore, Indonesia, Philippines,
Malaysia, Brunei and Thailand on the date of 28 January 1992 in Singapore. Right after that,
Vietnam, Laos, Myanmar and Cambodia joined into this agreement in between the year of 1995
to 1999. All the countries were given a time frame to meet the AFTA’s tariff reduction
obligation until these countries reaches a free trade level. A free trade area allows the companies
within this ASEAN region to get advantages from the economies of scale. Common Effective
Preferential Tariff (CEPT) Scheme is the main implementing mechanism used in AFTA.
Objective of AFTA
The creation of AFTA is to bring benefits to half a billion of people in ASEAN by improving
to a more efficient and competitive economies and also attract the foreign investments into the
region. The objective of AFTA is to increase the competitiveness of the ASEAN country as a
production base geared for the world market. Through elimination of intra-regional tariffs and
3
non-tariffs barriers in the free trade region, it affected the ASEAN’s manufacturing sectors to
become more efficient and competitive in the global market. This will also lead to a situation
where the consumer will import goods from the more efficient producers in ASEAN and thus
expand the intra-ASEAN trade.
The primary objective of the AFTA is to increase the ASEAN region’s competitive advantage as a
production base geared in the world market. The main direction of the AFTA is the liberalization of trade
through the elimination of tariffs and non-tariff barriers among the ASEAN members. The activity was
started to serve as a catalyst for greater efficiency in production and also long-term competitiveness.
Moreover, the expansion of intra-regional trade is giving to the ASEAN consumers wider a choice and
better quality consumer product.
For primary mechanism for the ASEAN Free Trade Area to achieve the goal was given above
which was the Common Effective Preferential Tariff (CEPT). A schedule was established for
phased initiated in year 1992 with the self-described goal is to increase the "region’s competitive
advantage as a production base geared for the world market".
AFTA does not include the common external tariffs of the imported goods. For each ASEAN
members, they may impose tariffs on the entering goods from outside ASEAN based on their
national schedule. However, for the goods originating within ASEAN, all members have to apply
a tariffs rate from 0 to 5 percent. This was known as Common Effective Preferential Tariff
(CEPT). ASEAN members have the option of excluding the CEPT in three cases, which were,
temporary exclusion, sensitive agricultural products, and general exceptions.
4
The general rule shows that the local ASEAN content must be at least 40% of the FOB value
of the good. The CEPT only apply to the goods that originating within ASEAN. For the local
ASEAN content can be cumulative, which is, the value of inputs from various ASEAN members
can be combined to meet the 40% requirement. For some certain goods, there are some special
rules apply, which are, change in the Chapter Rules for Wheat Flour, change of Tariff Sub-
Heading for Wood- Based Products, and the last is change in Tariff Classification for certain
Aluminum and Articles thereof.
The administration of AFTA was handled by the national customs and trades authorities in
each ASEAN members. The ASEAN secretariat has authority to monitor and also ensure
compliance with AFTA measures, but there has no legal authority to enforce compliance. The
ASEAN Charter is intended to bolster the ASEAN Secretariat’s ability to ensure consistent
application of AFTA measures.
Due to the increase in the competitiveness of manufacturing industries in ASEAN as well as
the huge size of the market, investors can enjoy the economies of scale in the production area.
Therefore, ASEAN hopes to attract more foreign investors to invest their fund in the region. And
this will then stimulate the growth of supported industries in the region for many direct foreign
investments.
5
BODY-FACTS
CEPT Scheme
CEPT scheme is a tariff scheme arrangement among the ASEAN members that will reduce the
intra-regional tariffs and remove non-tariff barriers over a ten year period since the commencing
date which is January 1, 1993. The main target of the scheme is to reduce the tariffs on all the
manufactured goods to 0-5% by the year of 2003. It will benefit the Malaysian exporter to
ASEAN. For example, a lower CEPT rates make the country’s products cheaper in these markets
and thus stimulate a greater demand in the market. The rise in exports to the ASEAN would also
depend on the price elasticity of demand.
Since CEPT is the main instrument of making ASEAN a free trade area, therefore the
ASEAN Member States shall have common effective tariffs among themselves in AFTA but the
tariffs on the non-ASEAN countries shall continue to be determined individually.
Generally, all the manufactured products which includes the capital goods and processed
agricultural products are covered under CEPT scheme. But there are general exceptions for the
6
CEPT scheme. For example, a country may exclude a product which they consider such product
as a necessary for the protection of its national security, protection of public morals, protection
of human, animal or plant life and health as well as the protection of public morals, historic or
archaeological value. Besides that, if a member states who not ready to include certain sensitive
products in the CEPT scheme may can also exclude the products on a temporary basis. But it will
stop them from enjoying the CEPT tariff from other ASEAN member states.
Based on the AFTA agreement, there are two types of tariff reduction under the CEPT scheme
which is the Normal Track Program and the Fast Track Program. For Normal Track Program, the
products with tariff rates above 20% has to reduce to 20% by 1st of January 2008 and
subsequently reduce from 20% to 0-5% by 1st of January 2003. Under the same program, the
products with tariff rates below 20% will reduce their products to 0-5% by 1st of January 2000.
For Fast Track Program, products with tariff rates more than 20% have to reduce to 0-5% by 1st
of January 2000 while products with tariff rates less than 20% will have to reduce to 0-5% by 1st
of January 1998.
Apart from the tariff reduction in the AFTA agreement, CEPT scheme also provides the
elimination of QRs which includes the Quotas, Licenses etc and the NTB (Non Tariffs Barriers)
as well as exceptions on foreign exchange restrictions on CEPT products. All the QRs on the
CEPT products shall be eliminated by the member states upon the enjoyment of concessions
applicable to these products.
For the Non Tariff Barriers, all the member states shall eliminate these CEPT products on a
gradual basis within a period of five years after the enjoyment of concessions. Besides that, the
7
member states shall make exceptions to the foreign restrictions relating to payments and the
repatriation of such payment on the CEPT products.
Started from January 2010, businesses in the Asean-6- Malaysia, Indonesia, Thailand,
Singapore, Brunei and the Philippines will benefit from a completely free trade area -Asean Free
Trade Area (AFTA), where duties on most products within AFTA will be eliminated.
Under the Common Effective Preferential Tariff (CEPT) Scheme, by January 1, Malaysia is
committed to abolish duties on 2123 products which includes the import duties on tropical fruits,
tobacco and tobacco products to 5% from the current duties ranging from 10% to 100%, while
the import duties on rice and rice products will be reduced to 20% and 15% respectively from the
current 40%.
Among the 2,123 products of which import duties will be eliminated include fish products
with 10 tariff lines, vegetable products (nine tariff lines); palm oil (17 tariff lines); prepared food
stuff (88 tariff lines); mineral products (17 tariff lines); chemical products (166 tariff lines);
plastic and rubber (366 tariff lines); leather (31 tariff lines); and wood products (61 tariff lines),
paper products (137 tariff lines); footwear (two tariff lines); ceramic products (94 tariff lines);
precious stones (3 tariff lines); base metal (iron and steel - 555 tariff lines); machinery (144 tariff
lines); vehicles (238 tariff lines); other manufactured items (74 tariff lines) and work of art (3
tariff lines).However, import duties on alcoholic beverages have been excluded from tariff
concessions under the CEPT Scheme.
The ASEAN Free Trade Area (AFTA) has now been virtually established. ASEAN Member
States have made significant progress in reducing and eliminating intra-regional tariffs through
8
the Common Effective Preferential Tariff (CEPT) Scheme for AFTA. During the 1st January
2010, there will be a significant in that ASEAN-6 will be a completely free trade area when
duties on most of the products are eliminated. This showed that Malaysia has committed to
eliminating the import duties on 2123 products, reducing the import duties to 5% for tropical
fruits, tobacco and tobacco products as well as reducing the import duties for rice and rice
products to 20% .
Among the 2,123 products that have been scheduled for the elimination of import duties covers :
fish products - 10 tariff lines
vegetable products - 9 tariff lines
palm oil - 17 tariff lines
prepare food stuffed - 88 tariff lines
mineral products - 17 tariff lines
chemical products - 166 tariff lines
plastic and rubber - 366 tariff lines
leather - 31 tariff lines
wood products - 61 tariff lines
paper products - 137 tariff lines
foot wear - 2 tariff lines
9
ceramic products - 94 tariff lines
precious stones - 3 tariff lines
based metal (iron and steel) - 555 tariff lines
machinery - 144 tariff lines
vehicles - 238 tariff lines
manufacture items - 74 tariff lines
work of art - 3 tariff lines
Import duties on tobacco and tobacco products and tropical fruits which ranges currently from
10-100 per cent will be brought down to 5 per cent on 1 January 2010. For rice and rice products
which are highly sensitive products, the duties which are currently at 40% will be reduced to 20
and 15 respectively. Alcoholic beverages have been excluded from tariff concessions under the
CEPT Scheme.
Below are number of Tariff Lines in the Tentative 2010 CEPT Package by Tariff Category
Country
Number of Tariff
LinesPercenta
ge
0-5%
> 5%
Other
Total
0-5%
>5%
Other
Total
Brunei D. (AHTN
8,22
3
- - 8,22
3
100.00
- - 100
10
2002)Indonesia (AHTN 2007)
8,62
516 -
8,64
1
99.81 - -
100
Malaysia (AHTN 2007)
12,227
12 -
12,239
99.90
0.10 -
100
Philippines (AHTN 2007)
8,91
934 -
8,95
3
99.62
0.38 -
100
Singapore (AHTN 2007)
8,30
0 - -
8,30
0
100.00 - -
100
Thailand (AHTN 2007)
8,30
0 - -
8,30
0
100.00 - -
100
ASEAN-6
54,594
62 0
54,656
99.89
0.11
0.00
100
Cambodia (AHTN 2002)
10,537 - -
10,537
100.00 - -
100
Lao PDR (AHTN 200
7,90
0
314
- 8,21
4
96.18
3.82
- 100
11
7)Myanmar (AHTN 2002)
8,24
0 - -
8,24
0
100.00 - -
100
Vietnam (AHTN 2007)
8,01
485 -
8,09
9
98.95
1.05 -
100
CLMV
34,691
399 -
35,090
98.86
1.14 -
100
ASEAN 10
89,285
461 0
89,746
99.49
0.51
0.00
100
The number of Tariff Lines at 0% for ASEAN in the 2010 CEPT Package
Country
Number of Tariff Lines Percentage
0% > 0%Total
IL 0% >0% TotalBrunei D. (AHTN 2007) 8,223 - 8,223 100.00 - 100Indonesia (AHTN 2007) 8,625 16 8,641 99.81 0.19 100Malaysia (AHTN 2007) 12,173 66 12,239 99.46 0.54 100Philippines (AHTN 2007) 8,857 96 8,953 98.93 1.07 100Singapore (AHTN 2007) 8,300 - 8,300 100.00 - 100Thailand (AHTN 2007) 8,287 13 8,300 99.84 0.16 100ASEAN-6 54,465 191 54,656 99.65 0.35 100
12
Cambodia (AHTN 2002) 795 9,742 10,537 7.54 92.46 100Lao PDR (AHTN 2007) 5,891 2,323 8,214 71.72 28.28 100Myanmar (AHTN 2007) 4,992 3,248 8,240 60.58 39.42 100Vietnam (AHTN 2007) 4,618 3,481 8,099 57.02 42.98 100CLMV 16,296 18,794 35,090 46.44 53.56 100ASEAN 10 70,761 18,985 89,746 78.85 21.15 100
As from 1st January 2005, Malaysia has been transferring all completely built-up (CBU) as
well as completely knocked-down (CKD) motor vehicles which were not offered in the previous
preferential tariff concession into the CEPT. The CBU motor vehicles were included in the
CEPT at 20% while the CKD motor vehicles were phased-in at zero duty. On 19 October 2005,
Malaysia has further reduced their duties on CBUs to 15% and by 1st of January 2008 the duties
will be reduced to 0 to 5%. Lastly, the CEPT rates for both CBU public transportation vehicles
were further reduced to 5% effective from 16 January 2006.
Besides that, Malaysia has also transferred eight rice products into the CEPT during year
2005. With these transfers, Malaysia has phased-in 99.3% of its products into the CEPT.
Meanwhile the remaining 0.7% of Malaysia products which comprise with alcoholic beverages
and arms and ammunition are permanently excluded from the scheme.
Trade Impact on Malaysia
Since the year 1993, the average CEPT rates from the graph shows that Malaysia has been the
total tariff from their manufactured goods from 10.79% to 1.95% in the year 2003. Besides that,
13
statistics show that after the AFTA was established the trade amount among the ASEAN
countries has grown from USD 44.2 billion in year 1993 to USD 95.2 billion in years 2000, this
show that the trade of ASEAN countries increases 11.6% in overall. Since Malaysia is part of
ASEAN countries, through the reduction in tariffs we can see that is an impact to Malaysia.
Average CEPT Rates, By Country, 1993-2003
Country 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Brunei D. 3.78 2.64 2.54 2.02 1.61 1.37 1.55 1.26 1.17 0.96 1.04
Indonesia 17.27 17.27 15.22 10.39 8.53 7.06 5.36 4.76 4.27 3.69 2.17
Malaysia 10.79 10 9.21 4.56 4.12 3.46 3.2 3.32 2.71 2.62 1.95
Philippine 12.45 11.37 10.45 9.55 9.22 7.22 7.34 5.18 4.48 4.13 3.82
Singapore 0.01 0.01 0.01 0.01 0 0 0 0 0 0 0
Thailand 19.85 19.84 18.16 14.21 12.91 10.24 9.58 6.12 5.67 4.97 4.63
ASEAN6 11.44 10.97 10 7.15 6.38 5.22 4.79 3.64 3.22 2.89 2.39
Cambodia 10.39 10.39 8.89 7.94
Lao PDR 5 7.54 7.07 7.08 6.72 5.86
Myanmar 2.39 4.45 4.43 4.57 4.72 4.61
Vietnam 0.92 4.59 3.95 7.11 7.25 6.75 6.92 6.43
ASEAN10 7.03 6.32 4.91 5.01 4.43 4.11 3.84 3.33
Exports of ASEAN members to ASEAN countries, 1989-2003
14
1989 1992 1995 1998 2003
Indonesia 2,390,922.9 4,335,113.6 6,046,345.9 8,726,582.8 10,100,717.0
Malaysia 6,300,972.6 11,858,175.3 19,533,263.9 16,918,096.7 24,617,703.0
Philippines 530,970.3 518,827.8 2,239,100.7 3,719,357.7 6,423,036.4
Singapore 9,241,236.1 12,703,439.0 31,437,035.8 23,418,492.9 47,947,567.0
Thailand 2,278,803.9 4,102,380.7 10,698,949.2 8,257,261.8 13,648,218.0
Total ASEAN
5
20,742,905.9 33,517,936.4 69,954,695.4 61,039,792.0 102,737,241.4
From the table, we can clearly see the impact of average CEPT rates on the trade of Malaysia.
There is a negative relationship between average CEPT rates on the trade of ASEAN and the
exports of ASEAN members to ASEAN countries. The lower the CEPT rate the higher the
export figure of Malaysia.
A factor that causes Malaysia’s export to increase is because through the reduction of tariffs
among ASEAN countries, the consumers of other countries can purchase Malaysia’s products at
a cheaper price as compared to their domestic products. And therefore, they are willing to
purchase more products that imported from Malaysia. Since there are more demand for
Malaysia’s product, therefore Malaysia are willing to export more to their country.
Before the introduction of AFTA, the ASEAN countries need to purchase resources with non
ASEAN countries to seek for a lower price resources, although the resources are cheaper as
compare with ASEAN countries but there are still a high transaction and transportation cost that
15
are included in the transaction. The reason why the ASEAN countries do not trade among
themselves is because the price of resources is higher due to the higher tariff charged. This
showed the result of the currency outflow from the ASEAN countries to the non ASEAN
countries. Therefore, AFTA helps the ASEAN countries to trade the resources at a cheaper rate
due to a lower transaction and transportation cost. Malaysia will be benefit from the trade by
importing the resources we need at a lower price.
AFTA provide an opportunity to Malaysia companies to cooperate with ASEAN partners by
using each other’s resources more effectively. This will increase the ability of Malaysia
companies to target in a bigger market. Therefore it increase the trading activities of the
company as a they have bigger opportunities to trade in a multinational business trading
activities. It will increase the growth in economics of Malaysia and our country will become a
well known international trading centre.
AFTA also bring negative impact on the trade to Malaysia. This is because previously
Malaysia charged higher tariffs on the rubber that imported from Thailand to protect that
domestic rubber industrial. After reducing the tariffs on imported rubber, domestic rubber
industrial lose the absolute advantage. The rubber market become more competitive and
therefore the consumer may have more options in buying rubber because domestic rubber is no
longer the best option for them. The export of the rubber of Malaysia will be reduced.
For example, agriculture sector is an important economy sector in Malaysia which contributed
9.5% of GDP in 2004 out of which 62% was contributed by Crude Palm Oil (CPO). Crude Palm
Oil is still the main sources of Malaysia’s export income which was 4% of total export in year
16
2004. Besides that, Malaysia stills the largest in the market share of CPO’s exporter which is
50% of market share in year 2004.
Rubber and logs also another 2 important sources of Malaysia’s export from the agriculture
sector. However, rice and rubber crops are mainly owned by poor Bumiputera and heavily
subsidized by the government. These subsidies are meant to alleviate their poverty. So, the
AFTA agreement tries to reduce trade barriers because the import duty of rice is the highest for
Malaysian import tariffs which is 40%.
AFTA also causes some effects to agriculture sector of Malaysia. First of all is shrinking
acreage of land under agriculture means that agriculture sector need to compete with other sector
for land when economy moves toward to industrialization. If the production cost of neighbor
country is cheaper like cost of land and labor. This make Malaysia must modify and adding
value to their product to compete with the other country. So, that has some changes in Malaysia’s
agriculture sector which is from small farming to corporate plantation business activities such as
Genting plantation and IOI group. This will lead to surplus products and pressure on domestic
product due to non tariff barriers.
Apart from that, AFTA also lead to poor productivity and quality of agricultural product of
Malaysia. This is because of slow pace of replanting of Malaysia. Replanting is important
because the productivity of palms that are more than 25 years is reducing and also increases the
cost of harvesting. Government also needs to focus on transforming traditional farming into
commercial farming because our agriculture sector is largely made up by traditional farming.
17
Traditional farming lead to our country’s agricultural productivity is lower compare to other
countries.
In additional, AFTA also lead to labor shortage in Malaysia because farming is not an
interesting job in Malaysia. Many younger prefer work at city rather than be a farmer in village.
Nowadays, younger of Malaysia is lacking “gotong royong” spirit that needed in rural farming.
So, many plantations corporate hired many foreign workers to work for them mostly consisted
by Bangladeshis and Sri Lankans. There is a need to find a alternative way to reduce dependence
of labor and rely more on technology advancement for cost effective.
Next, we will talk about the impact of AFTA agreement on Malaysia’s automotive industry.
Malaysia has two national carmakers which are Proton and Perodua. Malaysia government wants
to protect their interest after introducing the AFTA. However, the protection given by Malaysia
in this development could prove to be a temporary reprieve.
After introducing the AFTA, all the parts and components that are needed to the car industry
will be affected including Malaysia's car industry. Non trade barriers like tariffs and custom tax
will be taken once the market is open.
From the research, we can found out that Indonesia and Thailand have already started to
reduce the tariffs for all automobile components. Only Philippines and Malaysia have not made
any move to reduce the tariffs in this sector.
The reason given by Malaysia Government is that the local manufacturers need time to
recover from the economic downturn to compete with other big car manufacturer like Toyota,
Honda and Nissan. The ASEAN countries have accepted the reason given. Currently, Malaysia
18
Consumers are actually paying significant higher price for foreign car compare to its original
price which is very unfair for them.
Although protections are given to the national car maker, national cars are still selling at high
price, mainly due to the high production costs and lack of vendor efficientct, the future may see
imported cars gaining market share. Frost & Sullivan expects that imported vehicles like Honda,
Nissan, and Toyota are expected to become 30 to 50 percent cheaper. All these developments will
mean an increase in the number of foreign cars on the road. The impact will be felt in the region's
infrastructure. There will also be a glut of used cars in the market, as people trade in their cars for
cheaper, imported ones. This development could see motorcycle users shifting to using second
hand cars, thus, affecting the prospect of the two-wheeler industry in the region.
AFTA is a threat to local manufactures but it is an opportunity to many new Malaysian car
manufacturers. By introduce the AFTA. It gives them a pressure or maybe a change to improve
themselves by competing with the big manufacturers by making more quality and cheaper cars to
benefit the local consumers. Under protection, they will never improve and stay behind of other
manufacturers.
Overall AFTA for auto will drive the regional manufacturing integration and cost
competitiveness among ASEAN countries. It will be more technology transfer to this region and
more opportunity to the labour. Local companies benefit from the implication by producing part
for car that will be marketable to the ASEAN region.
19
RECOMMENDATIONSFrom our research, we recommend that Malaysia should accurately adjust the tariffs on the
imported goods to a fair level that allowed the domestic manufacturer to compete against the
importers. The government should not over protect the domestic manufacturer by setting a higher
tariff for certain sector such as automobile and electronic equipments.
Through reducing the tariff on this sector, there will be more competition among the domestic
and foreign manufacturer. Under this situation, the domestic manufacturer will improve the
quality of the output and reduce their cost of production. For example, if Malaysia reduced the
tariff on the automobile, other ASEAN countries will also reduced their tariff on the imported
automobile from Malaysia. This will lead to an increased in the exported automobile as other
ASEAN consumers can purchase the automobile from Malaysia at a lower price.
In another hand, we recommend that ASEAN can take the European Union as an example in the
form of using the same currency. Therefore the ASEAN countries can eliminate the transaction
cost and currency volatility risk. And there will be a free trade between all the ASEAN countries.
So the ASEAN countries will have a price transparency in all of their goods and this will
increased the trade and reduced the costs to firm.
Based on the theory factor endowments, Malaysia should focus on products that they have
comparative advantage for example palm oil. Malaysia should take advantages of low tariffs of
the AFTA. Malaysia can think of importing those goods that Malaysia are not specialize at the
production of that goods and produce those goods that Malaysia have the absolute advantages on
producing that goods. For example, products related to palm oil and rubber.
20
CONCLUSION
When we complete this assignment, we need to thanks to our lecturer and tutor Pn. Maznah. It
was because she let us choose the assignment which related to AFTA. We gain much more
knowledge on the power of AFTA and how it affects the economy of Malaysia and ASEAN
member countries.
Under AFTA, six members of the Association of Southeast Asian Nations (ASEAN) cut tariffs
on nearly 8,000 items. The six countries include Malaysia, Indonesia, Singapore, the Philippines,
Brunei and Thailand. Four of the less developed ASEAN nations including Cambodia, Laos,
Burma and Vietnam will have a further period to phase in the tariff cuts.
AFTA have bring a lot of benefit to the member countries, the main benefits which found out by
our group is consumer gain the most benefit. It was because AFTA has elimination of tariffs
21
should result in product price reductions throughout ASEAN. For example, Consumers will
benefit from cheaper prices of goods given lower tariffs on a host of raw materials used by the
region's producers. Some of processing factories are expected to enjoy cheaper imported raw
materials in the face of the tariff elimination which help in cost reduction for increase market
competition.
At the same time, this Agreement help ASEAN countries' products gain access to a regional market
that incorporates many substantial advantages. One of the substantial advantage is it attract more
Foreign Direct Investment (FDI) to the member countries. Lastly, ASEAN will be integrated into a single
market which is an important point because the market will be stronger and larger with a high
population. Therefore, the export and investment sectors will generate higher potential in the long
term.
REFERENCE 1. Chubashini Suntharalinga, the impact of AFTA on Malaysian economy and small scale
producers, viewed 1 march 2012, http://www.seacouncil.org/seacon/images/stories/publications/afta_malaysia.pdf
2. Goh Lim Thye, the impact of AFTA on Malaysian trade flow, viewed 1 march 2012, http://psasir.upm.edu.my/8318/1/FEP_2002_16_A.pdf
3. Azmi Shahrin Bin Abdul Rahim, Globalization, Trade Liberalization and the likely impacts of WTO and AFTA on the agriculture sector in Malaysia, viewed 1 march 2012, http://economics.dstcentre.com/Globalization
4. Tengku Mohd Ariff Tengku Ahmad and Ariffin Tawang, Evaluating the Effects of Trade Liberalization on Malaysian Agriculture with Emphasis on the Palm Oil and Paddy Sub-sectors, viewed 1 march 2012, http://www.asiadhrra.org/downloads/libmats/pdfs/agrinteg/Evaluating_the_Effects_of_Trade%20Liberalization_%20on_Malaysian_Agriculture.pdf
5. Republic of Philipines, THE ASEAN COMMON EFFECTIVE PREFERENTIAL TARIFF
22
SCHEME FOR THE ASEAN FREE TRADE AREA, viewed 29th Feb 2012, < http://www.tariffcommission.gov.ph/afta-cep.html>
6. Association of SouthEast Asian Nations, 2009, The ASEAN Free Trade Area (AFTA), viewed 1st March 2012, < http://www.asean.org/12021.htm>
7. Ministry of International Trade and Industry, 2008, Developments in the Implementation of the CEPT Scheme for ASEAN Free Trade Area (AFTA), viewed 1st March 2012, < http://www.miti.gov.my/cms/content.jsp?id=com.tms.cms.article.Article_b5ec7532-c0a81573-aba0aba0-af01c157>
8. ASEAN Free Trade Area. View on 29 February 2012. http://en.wikipedia.org/wiki/ASEAN_Free_Trade_Area
9. AFTA. View on 29 February 2012. http://networkmalaysia.com/subtitle/articles_afta.htm
10. ASEAN Free Trade Area. View on 29 February 2012. http://www.worldtradelaw.net/fta/agreements/afta.pdf
11. AFTA. View on 29 February 2012. http://www.miti.gov.my/cms/content.jsp?id=com.tms.cms.section.Section_8de83760-7f000010-72f772f7-f5047602
23
School of Business Studies
Plagiarism Statement
Read, complete and sign this statement to be submitted with your written work.
We confirm that the submitted work are all our own work and are in our own words.
Name (Block Capitals) Regn. No. Signature
1. ……………………………… …………………………… ……...……………
2. ……………………………… …………………………… ……...……………
3. ……………………………… …………………………… ……...……………
4. ……………………………… …………………………… ……...……………
5. ……………………………… …………………………… ……...……………
Programme ………………………………………………
Tutorial Group ………………………………………………
24
Date ………………………………………………
25