Faculty of the Professions Life Impact The University of Adelaide Expanding Trade in Business Services in ASEAN Hussain Rammal School of Commerce The University of Adelaide

Life Impact The University of Adelaide Research Backgrounds In spite of the rapid growth of business services sectors in ASEAN, there exist formidable barriers to prevent the free trade of services and thereby hinder their growth. This study investigates trade-inhibiting policies and domestic regulations in five business sectors: Accounting, Architectural, Legal, Computing & Related Services, and Management Consulting. This presentation consists of country-specific reports dedicated to results from each of the 10 ASEAN member countries investigated.

Life Impact The University of Adelaide Methodology Index Approach –Restrictiveness Index in Business Services (RIBS) is constructed to represent the degree of trade restrictiveness of one sector in an economy Research Method (4 Steps) 1.Identifying trade restrictions: include both GATS- defined and de facto trade barriers. 2.Scoring procedure: primarily based on responses gathered from survey questionnaires and interviews with selected groups. 3.Weighting: weights were assigned to each form of trade barrier depending on the severity of its impact on trade. 4.Index calculation: by aggregating the weighted scores of all trade barriers in one business services sector.

Life Impact The University of Adelaide Brunei Darussalam (1) AccntArchitLegalCRSMgt Cons [5].286 [8].143 [10].262 [2].101 [2] Liberalisation commitments in four sectors Experienced major increase in its commitments from 4 sectors under AFAS 4 to 46 sectors under AFAS Moderate to Low Trade Barriers in all 5 sectors –30% limit on foreign investment in local professional firms Provides the most open legal market. Liberalisation commitments in four sectors Experienced major increase in its commitments from 4 sectors under AFAS 4 to 46 sectors under AFAS Moderate to Low Trade Barriers in all 5 sectors –30% limit on foreign investment in local professional firms Provides the most open legal market.

Life Impact The University of Adelaide Cambodia (2) AccntArchitLegalCRSMgt Cons [7].057 [10].208 [9].247 [3].047 [9] Liberalisation commitments in all five sectors Examples of trade barriers: –Foreign legal practitioners are prohibited from practicing –Foreign equity ownership in management consulting firms must not exceed 49% –Local employees must be hired in management consulting firms Provides the most open architectural market Liberalisation commitments in all five sectors Examples of trade barriers: –Foreign legal practitioners are prohibited from practicing –Foreign equity ownership in management consulting firms must not exceed 49% –Local employees must be hired in management consulting firms Provides the most open architectural market

Life Impact The University of Adelaide Indonesia (3) AccntArchitLegalCRSMgt Cons [4].450 [2].463 [4].246 [4].072 [7] Liberalisation commitments in four sectors (with the exception of Management Consulting) Committed to 12 business sections in GATS schedule, despite lack of written sectoral commitments under AFAS 4 Liberalisation commitments in four sectors (with the exception of Management Consulting) Committed to 12 business sections in GATS schedule, despite lack of written sectoral commitments under AFAS 4

Life Impact The University of Adelaide Indonesia (Cont’d) Trade Barriers by Sector Accounting: –Foreigners are bound by law to own only a minority share. Architectural: –Local employees must constitute more than 50% of staff Legal: –Two years of experience required for accreditation purposes –Foreign practitioners are allowed to work in the capacity of employees of local firms, but not allowed to appear in Court CRS: –IT practitioners are required to be members of the professional body

Life Impact The University of Adelaide Lao PDR (4) AccntArchitLegalCRSMgt Cons [8].216 [9].522 [2].203 [6].027 [10] Liberalisation commitments in three sectors (excluding Management Consulting) Increased its commitment from nil under AFAS 4 to 9 sectors under AFAS 5 Trade Barriers in Legal Services: –Foreign legal practitioners prohibited from practicing Trade Barriers in Architectural Services: –foreign practitioners are not constrained from practicing but are required to enter into joint venture with local firm Liberalisation commitments in three sectors (excluding Management Consulting) Increased its commitment from nil under AFAS 4 to 9 sectors under AFAS 5 Trade Barriers in Legal Services: –Foreign legal practitioners prohibited from practicing Trade Barriers in Architectural Services: –foreign practitioners are not constrained from practicing but are required to enter into joint venture with local firm

Life Impact The University of Adelaide Malaysia (5) AccntArchitLegalCRSMgt Cons [10].301 [7].417 [6].121 [9].048 [8] Liberalisation commitments in all five sectors trade reforms in accountancy sector have been more advanced than in the other professional services. Provides the most open accounting market Trade barriers are regarded by the Government as a way to reduce public risk Liberalisation commitments in all five sectors trade reforms in accountancy sector have been more advanced than in the other professional services. Provides the most open accounting market Trade barriers are regarded by the Government as a way to reduce public risk

Life Impact The University of Adelaide Malaysia (Cont’d) Trade Barriers by Sector: Accounting: –Qualifications of the foreign suppliers are assessed to determine whether they are equivalent to the eligibility requirements imposed on local professionals Legal: –Foreign professionals are strictly prohibited from practicing in the domestic market MC: –Foreign firms are required to form joint ventures with locals with maximum foreign equity of 70%.

Life Impact The University of Adelaide Myanmar (6) AccntArchitLegalCRSMgt Cons [1].410 [4].600 [1].423 [1].175 [1] Liberalisation commitments in three sectors [exc. CRS] Imposes the most restrictive trade barriers in the markets of Accounting and Legal services Accounting: –Absolute prohibition on foreign ownership in local firms –Foreign professionals are prohibited from practicing –Temporary entry of professionals is disallowed, so is multi- disciplinary or multi-professional partnerships. Liberalisation commitments in three sectors [exc. CRS] Imposes the most restrictive trade barriers in the markets of Accounting and Legal services Accounting: –Absolute prohibition on foreign ownership in local firms –Foreign professionals are prohibited from practicing –Temporary entry of professionals is disallowed, so is multi- disciplinary or multi-professional partnerships.

Life Impact The University of Adelaide Myanmar (Cont’d) Legal: –Foreign lawyers are prohibited from practicing, since the license to practice can be awarded only to Myanmar nationals Architectural: –Foreign firms are required to form a joint venture or partnership with a local firm CRS: –Only ASEAN economy that regulates professional fees for IT services and requires foreign firms to partner with locals MC: –Only ASEAN country that requires management consultants to take professional examination which is administered quarterly

Life Impact The University of Adelaide Philippines (7) AccntArchitLegalCRSMgt Cons [2].443 [3].502 [3].189 [7].076 [6] Liberalisation commitments in three sectors (excluding Management Consulting) Instituted reciprocity arrangements allow foreign accounting, legal, and architectural professionals to practice domestically, provided they have ‘equivalent’ licensing requirements allow Filipino professionals to practice in their domestic markets Otherwise there is absolute prohibition on foreign equity in local firms, as well as practicing of foreign professionals Temporary entry of foreign professionals is subject to economic needs test (ENT) Liberalisation commitments in three sectors (excluding Management Consulting) Instituted reciprocity arrangements allow foreign accounting, legal, and architectural professionals to practice domestically, provided they have ‘equivalent’ licensing requirements allow Filipino professionals to practice in their domestic markets Otherwise there is absolute prohibition on foreign equity in local firms, as well as practicing of foreign professionals Temporary entry of foreign professionals is subject to economic needs test (ENT)

Life Impact The University of Adelaide Singapore (8) AccntArchitLegalCRSMgt Cons [9].336 [6].219 [8].116 [10].084 [4] Liberalisation commitments in four sectors Effectively committed to 8 sectors under AFAS 4 and 9 sectors under AFAS 5 Provides the most open market of Computing and Related Services Liberalisation commitments in four sectors Effectively committed to 8 sectors under AFAS 4 and 9 sectors under AFAS 5 Provides the most open market of Computing and Related Services

Life Impact The University of Adelaide Singapore (Cont’d) Trade Barriers by Sector Accounting: –Passing the final accountancy examination of the CPA Australia or American Institute of Certified Public Accountants (AICPA) is recognised equivalent to passing local final examination in accountancy in Singapore Legal: –Nationality requirements has been loosened in 2000 by permitting joint law ventures (JLVs) and formal law alliances (FLAs) between local and foreign firms. Architectural: –Foreign firms must maintain a certain ratio between local and foreign employees: they must hire 2 local employees for every foreigner employed

Life Impact The University of Adelaide Thailand (9) AccntArchitLegalCRSMgt Cons [3].456 [1].438 [5].241 [5].090 [3] Liberalisation commitments in four sectors Foreign firms required to enter into joint ventures with local firms. Requires foreign firms to hire locals: –For every foreigner hired, 4 locals must be employed (Mgt Cons. sector) –50% of directors must be Thai citizens (Architectural sector)) Imposes the most restrictive barriers in architectural market: –Reserves all professional practices to their nationals. Liberalisation commitments in four sectors Foreign firms required to enter into joint ventures with local firms. Requires foreign firms to hire locals: –For every foreigner hired, 4 locals must be employed (Mgt Cons. sector) –50% of directors must be Thai citizens (Architectural sector)) Imposes the most restrictive barriers in architectural market: –Reserves all professional practices to their nationals.

Life Impact The University of Adelaide Vietnam (10) AccntArchitLegalCRSMgt Cons [6].397 [5].331 [7].146 [8].079 [5] Liberalisation commitments in all five sectors Trade Barriers by Sector: Accounting: –Foreign suppliers must pass local examination to practice. Legal –Foreigners are allowed to practice international law but cannot appear in courts. –Case-to-case assessment of the foreign lawyer’s certificate is required to determine whether they are qualified to practice. Liberalisation commitments in all five sectors Trade Barriers by Sector: Accounting: –Foreign suppliers must pass local examination to practice. Legal –Foreigners are allowed to practice international law but cannot appear in courts. –Case-to-case assessment of the foreign lawyer’s certificate is required to determine whether they are qualified to practice.

Life Impact The University of Adelaide Vietnam (Cont’d) Trade Barriers by Sector (Cont’d): Architectural: –A maximum and minimum amount of professional fees is set by the regulatory body or the standard-setting professional association –Joint venture with local firm is mandated with maximum foreign ownership of 49% MC: –Maximum foreign ownership in local firms is 30% (up to January 2008) –At least 20% of employees in foreign firms must be local –The period of visa for foreign executives, senior managers and specialists is 3 years

Life Impact The University of Adelaide Recommendations 1.Improve AFAS commitments: E.g. relax prohibitions on foreigners from forming partnership with local professionals E.g. Minimise restrictions on forms of establishment, as well as nationality and residency requirements 2.Monitoring: Constantly measure changes in commitments & actual market reforms using indices such as RIBS 3.Movement of professionals: Separate policies on temporary service providers from the normal immigration procedures Negotiate for trade-friendly policies on permanent movement of professionals 4.Negotiation: Shift from ‘positive list’ to ‘negative list’ approach of negotiating trade liberalisation commitments

Life Impact The University of Adelaide Recommendations (Cont’d) 5.Transparency: Improve predictability in the administration of domestic regulations. Use international standards to achieve harmonisation. 6.Mutual Recognition Agreements Push for reciprocity arrangements in all regulated professional sectors. 7.Increase AFAS Awareness Encourage professional bodies to undertake more active roles in the negotiation of trade liberalisation commitments.