06 Mar 2009

ASEAN-Australia-New Zealand Free Trade Agreement

The Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) was signed on 27 February 2009 in Hua Hin, Thailand. The ten ASEAN members are Burma, Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

It is the most comprehensive free trade agreement that ASEAN has negotiated. It is also the largest free trade agreement Australia has negotiated. AANZFTA covers all sectors including trade in goods, services, investment, intellectual property, electronic commerce, competition policy and movement of natural persons. Some of the salient features of AANZFTA are set out below.

Trade in goods and services

AANZFTA provides for the progressive reduction and/or elimination of tariffs. AANZFTA also establishes criteria pursuant to which goods which "originate" in Australia, New Zealand or an ASEAN member country will qualify for preferential tariff treatment.


AANZFTA contains a broad, non-exhaustive, "asset-based" definition of "Investment" covering every kind of asset owned or controlled by an investor including shares, property and business concessions conferred by law or contract. AANZFTA imposes obligations on the parties which enhance legal protection and certainty in relation to investment. These obligations include requirements to:

  • apply fair and equitable treatment and full protection and security to investments;
  • ensure non-discriminatory treatment in relation to measures for investors that have suffered losses due to armed conflict, civil strife or states of emergency;
  • allow funds of an investor relating to an investment to be transferred freely and without delay, subject to specified exceptions;
  • ensure that any expropriation or nationalisation of an investment is only for a public purpose, applied in a non-discriminatory manner, is in accordance with due process of law and is accompanied by prompt, adequate and effective compensation.

Movement of natural persons

The ability to enter and stay temporarily in another country to explore business opportunities, negotiate and enter into contracts and transact business is very important to economic integration. AANZFTA imposes obligations on the parties to make commitments on temporary movement of service suppliers, investors and goods sellers and other persons engaged in regional trade and investment. The parties to AANZFTA are required to publish information on temporary entry requirements, process applications promptly, and notify applicants, on request, about the status or outcome of the application. Any fees imposed in relation to the processing of immigration formalities are required to be reasonable and in accordance with domestic law.

New opportunities in the region

AANZFTA offers a plethora of new opportunities for businesses located in the region. Improved market access and greater transparency and certainty is commercially significant for those companies currently doing business, or who wish to take advantage of new opportunities, in the region. It is also particularly significant in those markets where Australia does not have a bilateral FTA (such as Indonesia, Philippines and Vietnam).

AANZFTA also has the potential to generate broader benefits than a series of bilateral FTAs by creating opportunities for Australian products to exploit regional supply chains.

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

It is expected that AANZFTA will enter into force in the second half of 2009 and no later than 1 January 2010. The Parties have agreed to conduct a general review of AANZFTA in 2016.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.