The ASEAN–Korea Trade In Services (AKTIS) Agreement: Its Impact on Indonesia and Other ASEAN Countries

Abstract

To strengthen trade in services between ASEAN and Korea, in 2009 both sides signed and implemented the ASEAN–Korea Trade in Services (AKTIS) agreement. This article is the first to assess the trade implications of this agreement for Indonesia and other ASEAN countries. Despite the increasing volume of ASEAN–Korea trade in services since 2009, it is hard to say whether AKTIS was the only factor behind this encouraging growth. The agreement’s potential trade impact is, however, quite substantial. Given the importance of enhancing further trade in services between the ASEAN countries and Korea, we propose a number of specific liberalisation measures that Indonesia and other ASEAN countries could take to further strengthen such trade with their Asian neighbour.

Guna memperkuat perdagangan dalam jasa antara ASEAN dan Korea, kedua pihak menandatangani dan mengimplementasikan Perjanjian Perdagangan ASEAN-Korea dalam Jasa (AKTIS) pada 2009. Tulisan ini merupakan tulisan pertama yang menelaah implikasi dari perjanjian ini kepada Indonesia dan negara-negara ASEAN lain. Terlepas dari bertambahnya volume perdagangan ASEAN-Korea dalam jasa sejak 2009, sulit dikatakan apakah AKTIS adalah satu-satunya faktor di balik pertumbuhan ini. Namun demikian, dampak potensial perdagangan ini cukup substansial. Sejalan dengan tujuan memperkuat perdagangan jasa antara negara-negara ASEAN dan Korea, para penulis mengusulkan sejumlah kebijakan liberalisasi yang dapat diambil oleh Indonesia dan negara-negara ASEAN untuk memperkuat perdagangan dengan negara tetangganya di Asia.

Keywords:

• AKTIS
• services
• ASEAN
• GATS
• Korea
• trade impact

JEL classification:

• F13
• F15

Notes

1 The FTA Business Forum’s (2012) report contains more information on Korea’s commitments in other subsectors.

2 Hoekman (1996) assigns values to each of eight cells (four GATS supply modes and two factors of market access and national treatment). An index of 1.0 means a subsector is fully liberalised, 0.5 means it is limited but bound, and 0.0 means it is unbound. The Hoekman index therefore quantifies a country’s level of commitment to liberalisation: the higher the index, the higher the level of commitment in that subsector.

3 There are four possible GATS modes of supply of services. Mode 1 refers to the export of services across borders, mode 2 refers to consumption abroad, mode 3 refers to commercial presence, and mode 4 refers to the temporary movement of natural persons across borders.

4 The enactment of Korea’s Foreign Exchange Transactions Act, on 1 April 1999, has seen many restrictions on foreign-exchange transactions deregulated and many currency and capital transactions liberalised (KoreaLaw.com 2016). In 2001, the second stage of liberalisation under the Act dismantled most of the remaining restrictions covering foreignexchange transactions by individuals and increased the amount of foreign currency that individuals can bring out of Korea.

5 It would be premature at this stage to try to predict the final coverage and contents of AKTIS. We therefore need to assume some form of commitment to liberalising services under the agreement. Two approaches could be used for this purpose. The first explores the feasibility of making new commitments in each services subsector, and the second makes assumptions on the resulting efficiency gains. Although the first approach could be a basis for accurate assessment, it is beyond the scope of our research. Hence, we assume two scenarios for the efficiency improvement of production factors: 0.3% and 0.5%. Many studies of services sectors under FTAs assume efficiency gains of 0.5%–3.0% (see, for example, KIEP 2010), but we adopt a more conservative assumption of the efficiency gains created by AKTIS.

6 Each country, however, has the authority to make specific commitments in line with its policy goals and strategic considerations.

7 Liberalising telecommunications is a good case in point. The on-time delivery of information along supply chains is essential for achieving international competitiveness. The experience of Singapore and other countries that have substantially liberalised telecommunications could provide some important lessons. Their liberalisation efforts have led to lower prices, higher telecommunication investments, and greater service choices, as well as to better access and a higher quality of service.

8 For more details, refer to Korea’s revised offer (TN/S/O/KOR/Rev.1) on the schedule of specific commitments (May 2005). The TiSA began official negotiations in March 2013; since then 21 countries and one region (the European Union) have participated in these negotiations.