House of Representatives

Explanatory Memorandum

Circulated By Authority of the Minister for Home Affairs, the Honourable Brendan O'Connor Mp

ANNEX D

AANZFTA SERVICES: KEY "WTO PLUS" GAINS

Professional services

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In accounting services, Malaysia has committed to aggregate 40 per cent foreign equity participation in locally registered partnerships or Malaysian accounting firms; Laos has committed to allow temporary authorisation of Australian accountants; and the Philippines has bound arrangements under which foreign accountants can practice in the Philippines under temporary permits issued by its Professional Regulation Commission.

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In legal services, Indonesia has made a commitment to permit foreign lawyers to work or take part in Indonesian law firms as employees or experts in international law ^[6] and Vietnam has committed to allow foreign lawyer organisations to employ Vietnamese lawyers and for foreign lawyers to practice in Vietnamese law firms to advise on foreign/international law.

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In engineering services, Malaysia has committed to 30 per cent foreign equity participation in multidisciplinary joint ventures; Laos has committed to allowing joint ventures with up to 70 per cent foreign equity participation for the construction of manufacturing, water supply and sanitation turnkey projects; and the Philippines has bound arrangements under which foreign civil, mechanical, metallurgical, and sanitary engineers can practice in the Philippines under temporary permits issued by its Professional Regulation Commission.

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In architectural services, Brunei has committed to allow 40 per cent foreign equity in architectural firms; Malaysia has committed to 30 per cent foreign equity participation in multidisciplinary joint ventures; Laos has committed to allow 100 per cent foreign equity in landscape architectural firms; and the Philippines has bound arrangements under which foreign landscape architects can practice in the Philippines under temporary permits issued by its Professional Regulation Commission.

Education services

2. In higher education:

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Laos has committed to allowing foreign service suppliers to establish a commercial presence with up to 100 per cent foreign equity;

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Malaysia has committed to allowing joint ventures with domestic institutions with foreign equity limit of up to 51 per cent (subject to relevance of courses to Malaysia's education objectives). Malaysia has also made commitments providing for temporary entry and stay of lecturers and experts and professionals (subject to numerical caps) and contractual service suppliers in higher education for periods of stay of up to ten years;

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The Philippines has committed to allowing 40 per cent foreign equity in establishment of education institutions to engage in twinning programs in the fields of agriculture, industrial, environment, natural resource management, engineering, architecture, science and technology and health-related programs and to allowing temporary entry and stay of experts in these fields for periods of stay of one year, which may be extended;

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Indonesia has committed to allowing foreign education suppliers, in cooperation with local partners, to establish in the cities of Jakarta, Surabaya, Bandung, Yogyakarta and Medan; and

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Vietnam has committed to reduce the experience requirement for foreign teachers in higher, secondary (for students that have completed nine years of general education), and other education services from five to three years and to expand the (WTO-committed) "fields of study" that can be delivered by foreign education suppliers ^[7] . Vietnam has also committed to provide Australian services suppliers with the same treatment afforded to services suppliers from any third country in the event that Vietnam makes commitments in cross-border supply of higher education services, as part of an ASEAN-wide FTA, that go beyond those it has made in AANZFTA.

3. In other education services Thailand has committed to allowing 49 per cent foreign equity in foreign language tuition services and to allowing temporary entry for teachers employed by firms established in the secondary, higher, adult education (professional and short course), and foreign language tuition services sub-sectors (period of stay of one year with possibility of extension). Malaysia has committed to allowing joint ventures with 49 per cent foreign equity in primary, secondary (general and technical/vocational) and other education services.

Financial services

4. In banking services, the Philippines and Indonesia have committed to foreign equity of 55 and 51 per cent respectively for acquisition of an existing domestic bank. Indonesia has also increased by six, the number of cities in which foreign banks and joint venture banks may open offices (Padang, Manado, Balikpapan, Banda Aceh, Jayapura, Ambon). Laos has committed to maintaining no market access or national treatment limitations on the supply of banking services through commercial presence or cross-border supply.

5. In insurance services, Indonesia has committed to allowing foreign equity participation of 80 per cent for foreign services suppliers. In other financial services, Malaysia has made commitments to allow joint venture requirements with foreign equity limits of 49 per cent for financial leasing and financial planning services.

6. All ASEAN countries have agreed to disciplines which promote greater transparency and timely processing of licensing applications from financial services suppliers.

Telecommunications

7. In telecommunications, Laos has committed to allow wholly foreign owned enterprises to supply most services, although joint ventures are required for telex services, electronic mail, voice mail and online information and data base retrieval. Malaysia has committed to allowing foreign equity of 49 per cent for acquisition of shares in existing licensed operators (the option of a locally incorporated joint venture with aggregate foreign equity of 49 per cent is also bound in some sub-sectors, e.g., mobile telephone services and data and message transmission services) and the Philippines has made new commitments in private leased circuit services, data and message transmission services and value-added services, such as electronic mail, with foreign equity limits of 40 per cent.

8. In addition, ASEAN countries have agreed to pro-competitive regulatory disciplines to ensure that foreign suppliers can compete on a level-playing field with major domestic suppliers, which may own or control essential network facilities and infrastructure.

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These provisions build on and go beyond the WTO Telecommunications Reference Paper. The disciplines cover interconnection, competitive safeguards, co-location; leased circuit services; regulatory transparency; resolution of regulatory disputes and review of regulatory decisions.

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Transitional arrangements apply to some countries in relation to some disciplines (Burma, Cambodia, Laos, Thailand, Vietnam).

Construction services

9. In construction services, Indonesia and Malaysia have committed to allowing joint ventures with foreign equity of 55 and 49 per cent respectively. Brunei has committed to allow foreign equity in construction firms of 50 per cent. Laos has committed to allowing 100 per cent foreign owned firms to operation in its construction sector.

Mining and Energy related services

10. In mining and energy related services, the Philippines made commitments that provide for up to 100 per cent foreign equity, subject to the President's approval, for oil and gas exploration and development and 40 per cent foreign equity for geothermal exploration and development; coal exploration and development; pipeline transport; and services related to energy distribution or power generation (up to 100 per cent foreign equity is allowed for construction of power plants under the "build-operate-transfer" scheme). Thailand has committed to allowing 49 per cent foreign equity for firms providing "related scientific and technical consulting services" in relation to oil and gas exploration (eg., geological and geophysical prospecting and surveys).

11. The Philippines has made commitments that allow up to 100 per cent foreign equity for construction of large scale mining development projects covered by a financial and technical assistance agreement under the Philippine Mining Act. Indonesia and Malaysia have also made commitments that cover construction work for mining. These commitments provide for 55 per cent and 49 per cent foreign equity respectively, subject to joint venture requirements. Laos has committed to allowing 100 per cent foreign owned firms to undertake construction work related to mining.

Environmental services

12. In environmental services, Laos has made commitments that allow for wholly foreign owned firms to provide services through commercial presence. The Philippines has made commitments in relation to sewerage services that provide for foreign equity of 40 per cent.

Computer and related services

13. In computer and related services, Laos and Malaysia's commitments contain no market access or national treatment limitations for the establishment of a commercial presence or cross-border supply of services. Thailand has made new commitments on programming services, systems maintenance and software training services with foreign equity of 49 per cent.

Tourism and travel services

14. The Philippines has no market access or national treatment limitations in relation to accommodation facilities, including hotels and resorts; Malaysia has committed to allowing aggregate foreign equity of 49 per cent in joint ventures in hotel and restaurants; food serving; travel agencies and tour operators; and Brunei has committed to allowing foreign equity of up to 70 per cent in joint ventures in tourism accommodation facilities.

Other horizontal commitments

15. Some ASEAN countries have made commitments under AANZFTA that improve on that horizontal or cross-cutting commitments that apply to all services sectors listed in their Services schedule. These mainly cover investment-related issues.

16. Malaysia has committed to a higher threshold of RMB10m (WTO level is RMB5m), which will trigger approval requirements for the acquisition, merger or takeover of a Malaysian business by foreign interests.

17. Laos has committed to allowing three forms of commercial presence in the services sectors listed in its schedule: joint venture enterprises; business cooperation by contract; and 100 per cent foreign-invested enterprises. Laos has also committed to allowing foreign natural persons and companies to lease land for up to 75 years and to own premises on the leased land.