BLOOMBERG

Asean's six largest members agreed yesterday to scrap tariffs three years earlier than planned on goods ranging from cars to consumer electronics.

Indonesia, Thailand, Malaysia, Singapore, the Philippines and Brunei would remove import duties on goods accounting for more than a third of their trade by 2007 instead of 2010, Asean spokesman M.C. Abad said after the accord was signed in Vientiane. Cambodia, Laos, Myanmar and Vietnam will follow in 2012.

Asean nations, with 500 million people and combined gross domestic product of US$737 billion, need to remove trade barriers to spur growth after losing investment to China and India. China received US$54 billion of foreign investment last year, more than double Asean's US$20 billion.

"The economic reality necessitates moving integration forward, even if it is for only some of the Asean countries," said Song Seng Wun, a regional economist at G.K. Goh Holdings in Singapore. "China and India emerging as competitors for labour and manufacturing has forced them to be more aggressive in opening up and liberalising their own economies."

The group last year agreed to eliminate tariffs, simplify customs and set common standards for commerce in 11 "priority sectors" including cars and electronics by 2010. Tariffs on remaining goods will be cut to 5 per cent or less.

The 11 sectors account for more than a third of the annual US$720 billion in Asean's two-way commerce. Reducing barriers to trade in services and investment flows was the subject of separate discussions, Mr Abad said.

The six countries due to end tariffs in 2007 account for about 85 per cent of Asean's GDP.

Indonesian President Susilo Bambang Yudhoyono said an integrated Asean would appeal to investors seeking to reduce reliance on China.