On 12 November 2017, Hong Kong and the Association of Southeast Asian Nations (ASEAN) signed a Free Trade Agreement (FTA) and a related Investment Agreement. The FTA and the Investment Agreement (“the Agreements”) cover a wide scope from trade in goods, trade in services, investment, economic and technical co-operation to dispute-settlement mechanism and other related areas. The Agreements are expected to come into force on 1 January 2019 at the earliest, subject to the completion of the necessary procedures.
ASEAN comprises ten Member States, namely, Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Hong Kong and ASEAN have always been close trading partners. As a group, ASEAN was Hong Kong’s second-largest trading partner in 2016, after Mainland China, and our fourth largest in services trade in 2015. Further, among the ASEAN Member States, Singapore, Thailand and Vietnam were Hong Kong’s top three trading partners in 2016.
On the other hand, Hong Kong is an important entrepot for trade between Mainland China and ASEAN. Since 2012, export of goods of ASEAN origin to the Mainland, and vice versa, through Hong Kong has been growing steadily at an annual rate of 6.4percent and 3.7 percent respectively.
All of the ASEAN Member States are economies along the Belt and Road. The fact that President Xi chose to announce the launch of the Belt and Road Initiative in Indonesia in 2013 has been interpreted as an acknowledgement of the important role ASEAN plays in this visionary project.
Attracted by the favourable business environment in Hong Kong which allows a free flow of capital and return on investment without exchange controls, numerous ASEAN companies have set up regional headquarters and representative offices here.
The Agreements further enhance Hong Kong’s existing strong relationship with ASEAN economies and forge the status of Hong Kong as the trading and investment hub in Asia. Broadly, the Agreements cover four major areas - tariff reduction for goods traded, lowering restrictions for trade in services, longer stay for business travellers and better investment protection.
On tariff reduction, most ASEAN states will eliminate or reduce customs duties on specified goods from Hong Kong. Singapore commits to binding all its customs duties at zero. Thailand, Malaysia and the Philippines will remove customs duties for around 65 percent of their tariff lines within three years and another 20percent within ten years. Overall, about 95 percent of their tariff lines will be eliminated or reduced within 14 years.
On lowering trade restrictions, both parties have agreed to remove restrictions on foreign capital participation and the number of people employed. On the issue of business travel, Hong Kong business visitors will be able to stay in an ASEAN country for 90 days and two years for intra-corporate transferees without a visa. As of now, most of the ASEAN Member States allow Hong Kong travellers to stay for between 14 and 30 days without a visa.
Of more interest to the legal profession is the liberalisation commitment in trade in services. The FTA covers a comprehensive range of service sectors including professional services. Among the ASEAN Member States, Thailand, Vietnam and Cambodia have made specific commitments in the legal service sector in the FTA.
In Vietnam, foreign law firms are permitted to “make consultations on Vietnamese laws if the consulting lawyers have graduated from a Vietnamese law college and satisfy requirements applied to like Vietnamese law practitioners”, but they “must commit and ensure to have at least 2 foreign lawyers, including the Chief of branch, Director of foreign law firm” in practice in Vietnam for at least 183 days within any 12 consecutive months.
Thailand has made a specific commitment to open up arbitration services which are not bound by limitations on market access with respect to the supply of arbitration services in Thailand to local users and the establishment of a commercial presence in Thailand. For legal advisory and drafting of documents concerning only international commercial law (excluding local laws and regulations), the foreign equity participation of the service provider is allowed to be up to 70 percent. For legal service, the foreign equity participation must not exceed 49 percent.
In Cambodia, there are no limitations on market access for the supply of consultancy services on foreign law and international law in Cambodia to local users. Commercial association with Cambodian law firms is not required.
The Law Society has been very active in reaching out to the international community to explore new opportunities for its members. The Law Society has signed 31 Memoranda of Understanding (MOUs) with overseas law associations in 22 different jurisdictions. Out of these, three are ASEAN Member States, namely, Indonesia, Cambodia and Malaysia. As a result of the international network built over the years, the Law Society has maintained close working relationships with many of our counterparts overseas. In November 2016, the Singapore Law Society led a delegation to visit Hong Kong and afforded an excellent opportunity for us to share practical experiences and discuss collaborative efforts for the benefit of our members. Just recently in September 2017, the Law Society held a joint seminar with the Malaysian Bar in Hong Kong exchanging updates on the legal development in both jurisdictions.
The Agreements are bound to bring about valuable business opportunities for Hong Kong enterprises and service providers. The Law Society will continue to support our members in taking advantage of the opportunities arising from the enhanced flow of goods, services and investments across the new ASEAN platform under the Agreements. Some of the Law Society initiatives will include relevant capacity building programmes (e.g. training on cross border transactions), thematic symposiums to provide updates on the global trend, and networking events to enable members to build their own connections. The Law Society is planning to organise official visits to some overseas jurisdictions which show good business potential for members. With the favourable backdrop of the conclusion of the Agreements, it is most likely that the ASEAN Member States will be our priority destinations. I look forward to members’ active participation in these initiatives. If you have any suggestions, please send them to me at email@example.com.