Asean Free Trade Area, (AFTA) treat or opportunity

AFTA is defined as a collective effort by ASEAN member countries to reduce or eliminate

tariffs on intra-ASEAN trade. The objective is to develop greater trade and industrial linkages
among ASEAN member countries. With an estimation combination population of 513 million
people, the establishment of the Free Trade Area among ASEAN offers vast potential for greater
economic collaboration.

AFTA has been realized through the Common Effective Preferential Tariff (CEPT) Scheme.
The CEPT has underlined that:

i. Import duties among member countries will be reduced to between 0-5% by the full
implementation of AFTA in 2010

ii. elimination of quantitative restrictions (import permit, quota) & other non-tariff barriers
(NTBs) among ASEAN Member countries

iii. progressive transfer of products into the CEPT Scheme based on each ASEAN member's
capacity and capability

There are economic benefits for all countries from forming an AFTA-CER Free Trade
Agreement. All countries gain in terms of productivity, investment, income and welfare.

With the large market, AFTA provides an opportunity for ASEAN enterprises to benefit from
larger economies of scale. Generally, businesses are in a better position to review their
operational structures by taking into consideration of a larger market potential than they used to.
It is an opportunity for them to modernize their operations by investing in modern technologies
and larger plants to cater for a larger market.

AFTA also provides an opportunity for businesses to further benefit from lower cost inputs.
In addition to lower tariffs, costs of inputs are expected to reduce due to increased competition
among suppliers. This competition will not only enhance the efficiency of input suppliers, but
will also benefit other industries in terms of boosting their competitive edge.

AFTA will increase opportunities for businesses to enlarge their regional business network.
Coupled with improved efficiency and competitiveness, this network is a window of opportunity
for many “domestic enterprises”, in particular those in the small- and medium-sized categories,
to go global

In Malaysia for example, the AFTA will bring the benefits to the company as;

i. preferential access into the larger market of ASEAN with a population of 530 million

ii. a wider base for competitive sourcing of raw materials from countries in the region
iii. larger choice of products and companies to engage in businesses

iv. opportunity to cooperate and collaborate with ASEAN partners to tap both the regional
and global markets