The ASEAN Industrial Cooperation (AICO) Scheme, which has been introduced since 1996, aims to promote resource-sharing and increase the competitive position of ASEAN’s manufacturing industries by means of production integration across borders facilitated by a tariff preferential rate of no more than 5 percent. To maintain the relevance of the AICO Scheme beyond 2002, a Protocol to Amend the AICO agreement was signed on 21 April 2004 by the ASEAN Economic Ministers. The Protocol provided for new preferential tariff rates to be given to new approved AICO projects: zero percent for Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia and Singapore; 0-1 percent for the Philippines; 0-3 percent for Thailand; and 0-5 percent for Myanmar and Viet Nam. The Philippines, Thailand and Myanmar will work towards reducing the preferential tariff rates to zero percent for AICO arrangements by 1 January 2005, while Viet Nam will do so by 1 January 2006.

The ASEAN Economic Ministers, at their meeting in September 2003, further agreed to extend the waiver on the 30 percent national equity requirement for AICO applications until 31 December 2004. As of the beginning of the year 2004, 172 applications were received, of which 118 applications have been approved. Based on the data provided at the time of application, these approved AICO arrangements are expected to generate an estimated value of about US$ 1.2 billion worth of transactions per year.

Figure 1: Summary of AICO Application Approval by Participating Countries

(As of 20 January 2004)