1. Eighth AEM-Mofcom (China) Consultation, Thailand, 15 August 2009

The ASEAN-China Free Trade Agreement is completed with the signing of the ASEAN-China Investment Agreement during the Eighth AEM-MOFCOM Consultation held on 15 August 2009 in Thailand. The completion of this FTA results in a combined market of 1.9 billion people and GNP of almost US$5 trillion.

2. The Malaysian delegation to the meeting was led by Dato' Mustapa Mohamed, Minister of International Trade and Industry, Malaysia. H.E. Porntiva Nakasai, Minister of Commerce, Thailand, co-chaired the Consultations with H.E. Chen Deming, Minister of Commerce, the People's Republic of China. T he agreement was signed by ASEAN Economic Ministers and the Minister of Commerce of the Peoples Republic of China.

3. This Investment Agreement has the potential of promoting investment flows and creating a more liberal, facilitative, transparent and competitive investment regime in ASEAN and China through:

• progressively liberalising the investment regime;
• creating conducive environment for ASEAN and China 's investors and their investments;
• promoting cooperation on a mutually beneficial basis;
• encouraging and promoting the flow of investments and cooperation between ASEAN and China;
• improving transparency of investment rules; and
• providing for the protection of investments.

4. The ASEAN-China Investment Agreement covers protection elements with a review mechanism to improve the transparency of investment rules and to discuss the need of progressive liberalisation of the investment regimes of ASEAN and China once the Parties are ready. This Agreement will come into force within six months from the date of signing and after all Members of ASEAN and China have ratified and notified each other.

5. The Agreement will facilitate further Malaysian outward investment to the region and China especially in these sectors :

• manufacturing (especially in electrical and electronics, glass-based industry, automotive components, and textile and apparels)
• properties;
• leasing services;
• distributive trade;
• utility production and distribution;
• transport;
• warehouse;
• telecommunication; and
• Construction.

6. In terms of investment in China, Malaysia is ranked as the 19th major investors in China and the 2nd among ASEAN countries aft er Singapore. Malaysia 's investment in China from January - June 2009 was US$229 million (RM824.4 million) compared to US$139 million (RM446.2 million) in 2008.

7. In broadening economic cooperation between ASEAN and China, this Investment Agreement will complement the already implemented Trade in Goods and Services Agreements under the Framework Agreement of ASEAN-China Comprehensive Economic Partnership.

8. The Ministers also reviewed the overall progress of economic cooperation between ASEAN and China including the implementation of the ASEAN-China Trade in Goods Agreement and the ASEAN-China Services Agreement.

9. The Meeting noted the positive developments on the implementation of the ASEAN-China Trade in Goods Agreement. Bilateral trade between ASEAN and China increased 11.9 per cent from US$171.1 billion in 2007 to US$191.5 billion in 2008. China has emerged as the third leading trading partner of ASEAN in 2008. At the same time, investments by China in ASEAN in 2008 amounted to US$1,148.1 million, from US$1,226.9 million in 2007.

10. Malaysia 's overall trade with China increased by 10.3 per cent to RM130.09 billion in 2008 from RM117.94 billion in 2007. Malaysia 's exports to China increased by 19.2 per cent to RM63.2 billion in 2008 from RM53.0 billion in 2007. Malaysia's total trade from January-June 2009 was at RM54.23 billion with export and import amounting to RM27.64 billion and RM26.58 billion, respectively.

11. This increase in trade was attributed to the significant reduction of import duties to 0-5% on a large number of tradeable products between ASEAN and China. Malaysian exporters are taking advantage of the tariff reduction/ elimination under the ASEAN-China Free Trade Area (ACFTA). Assessment has shown that both ASEAN and China achieved high compliance rates in implementing the tariff reduction commitments.

12. A total of 13,723 Forms E (Preferential Certificates of Origin under ACFTA) were issued by Malaysia in 2008, compared with 12,437 Forms E in 2007, an increase of 10.34 per cent.

13. Malaysia 's major exports under the ACFTA in 2008 include:

• Electrical and electronic products;
• Palm oil;
• Chemical and chemical products;
• Crude rubber; and
• Rubber products.

14. Dato' Mustapa Mohamed reiterated that the business sectors of ASEAN and China must work closely to leverage on the preferences provided by the FTA, to increase trade and investment as well as foster stronger business and industrial linkages.

15. The ASEAN-China Services Agreement was signed on 14 January 2007. The First Package of the services liberalisation commitment under the ACFTA was implemented on 1 July 2007. ASEAN and China are now finalising the 2nd package of the services commitments which is to be completed by the 15th ASEAN Summit in October 2009.

16. Malaysia 's offers in the services sectors include:

• architecture;
• engineering;
• telecommunications;
• financial services;
• education;
• health; and
• Tourism.

17. China's offers cover sectors such as computer and related services, management consulting services, constructions, environmental services, recreational services and transport services.

18. To further strengthen cooperation, two Memoranda of Understanding (MoU) are expected to be signed during the ASEAN-China Summit in October 2009 :

• MOU on Intellectual Property; and
• MOU on Technical Barriers to Trade.

19. The 6th CAEXPO will be held from 20-24 October 2009 in Nanning with the theme Bonded Zone and Port Cooperation. Over 100 Malaysian companies are targeted to participate, MATRADE is coordinating the participation. MATRADE has been coordinating Malaysia 's participation in this Expo since its inception in 2004. For this year's participation, five product sectors have been identified to be showcased in the Commodities Pavillion :

• food and beverage;
• SME;
• furniture; and
• Automotive.
•  

20. The Ministers also exchanged views on how ASEAN and China to utilise the two Funds of US$15 billion credit and ASEAN-China Investment Cooperation Fund of US$10 billion. Dato' Mustapa stressed the importance of establishing a mechanism for implementing and monitoring of the Funds. The priority must be on enhancing infrastructure linkages between China and ASEAN including those involving the ASEAN-Mekong Basin Development Area.

21. For more information, please contact ASEAN Economic Cooperation Division, MITI at 03 – 6203 4672 or fax 03 – 6201 9799.

Ministry of International Trade and Industry, Malaysia
15 August 2009