Q What are the major implications of the ASEAN-China Free Trade Area (ACFTA) for companies in the region?
A The main impact of the ACFTA, since its inception in 2005, has been an enormous growth in trade between ASEAN [the Association of Southeast Asian Nations] and China. This increased trade flow indicates that companies in the region are getting increased market access to one of the fastest growing regions in the world – ASEAN-China.
To sustain this phenomenal growth, it is important for companies in the region to have a commercial presence, whether in trading, distribution or investments, in both ASEAN and China. For example, to secure rubber imports into China, Chinese companies have invested in rubber plantations in Malaysia, Thailand and Indonesia.
Q Will the ACFTA improve logistics performance, and if so, how?
A Logistics has always been a huge challenge for companies seeking to move products across countries and provinces. To overcome this, most manufacturing companies have chosen the easy route of sub-contracting logistics requirements out to logistics service providers [LSPs]. The challenge is for LSPs to provide better and faster services under free-trade area conditions. Unfortunately, this is much easier said than done. The ACFTA will actually have very little impact on logistics performance standards. For example, in 2005, before the ACFTA, if you were shipping a container via sea from Singapore to Guangzhou, the standard offering was approximately seven to 10 days. Today, with the ACFTA in place, it is still seven to 10 days.
To improve logistics performance, network connections, scheduled operations and speed of clearance are key factors. Increased volume of trade between ASEAN and China has significantly boosted network connections and scheduled operations. For example, there are now direct flights from Nanning in Guangxi Province to Singapore and Thailand.
However, increasing speed of clearance has been much harder to realise. This is in part because the ACFTA does not have a free circulation concept as practised in the EU.
Q Have you got any specific suggestions as to how companies can improve and accelerate their logistics operations?
A To improve logistics operations, companies have to take a holistic approach towards their supply chain management. An integrated multimodal door-to-door delivery system would be the most ideal in identifying and managing gaps.
To actually accelerate logistics, one possible option is to move customs controls away from the borders (for example, Vietnam-China) into the actual destination (for example, Guangzhou). This reduces congestion and bottlenecks at border checkpoints.
Alternatively, free-trade zones or bonded logistics centres could be created. The one between Vietnam and Guangxi is the fourth such entity approved by the National People’s Congress of China in December 2008 and the first bonded logistics centre at a Chinese international border.
With customs facilitation at border checkpoints not only between Vietnam and China, but also at all the preceding borders, such as Thailand to Vietnam, TNT is now able to move a container via our daily scheduled Asia road network from Singapore to Guangzhou in eight or nine days. If customs controls are eased further, it would eventually be possible for a container to move via road from Singapore to Guangzhou in seven days or less.
HWEE CHONG LOK
2009TNT Express Worldwide NV
Regional customs and regulatory affairs manager in the company’s Asia regional office
Head of the finance co-operation and macroeconomic surveillance unit, as well as the investments and industrial co-operation unit
Editor, A Guide to Free Trade inASEAN magazine
Senior manager, Worldtrade Management Services