Asean Free Trade Area (AFTA) has given a favorable business environment and it has also attracted greater foreign direct investment flows into the region.
Tariffs on goods traded within the Asean region, which meet a 40 percent Asean content requirement, would have to be reduced to between zero and five percent under AFTA.
AFTA was aimed at eliminating intra-regional tariffs, attracting FDI and improving the efficiency and competitiveness through tariff reductions.
The reduction or elimination of duties led to the expansion of the intra-Asean trade and enabled Asean to attract greater foreign direct investment (FDI) inflows into the region.
The sectors that have gained most from the implementation of AFTA are textile and apparel, automotive and footwear electrical and electronics, plastics-making industry, chemical products, rubber products, iron and steel, machinery, vegetable fats and oils.
The expansion of intra and extra Asean trade indicates that the private sectors are taking advantage of AFTA.
The liberalization initiatives have also encouraged greater intra-Asean investment flows.
FDI inflows into Asean for the period of 1995 to 2004 amounted $241.8 billion or an average of $24.2 billion per annum.
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