An assessment of trade and investment barriers in energy services in ASEAN


The goal of the ASEAN Plan of Action for Energy Cooperation 2010-2015 (APAEC) (ASEAN Centre for Energy, undated) is to ensure that the region would have secure and reliable energy supply through regional infrastructure projects such as the ASEAN Power Grid and Trans-ASEAN Gas Pipeline. While APAEC makes no explicit reference to liberalisation of trade and investment in energy services, it is sensible to suppose that such a measure is on the menu of strategies being considered by the ASEAN leaders to meet the plan’s objective.

Bringing energy services into the fold of multilateral disciplines, however, has not had much success, except in a few preferential trading arrangements. Many countries are still protective of their domestic energy suppliers and natural resources, and thus maintain high barriers to foreign trade and investment in energy services.

Yet there are notable changes. A growing number of economies are becoming more disposed towards open and non-discriminatory market for energy. In these economies, new regulations encouraging competition and private sector ownership are replacing heavy market controls and government ownership – propelled in many cases by the poor performance of state-owned utilities. The fiscal burden of subsidies and investment deficiencies in certain activities, due to distorted incentives structure, are also providing additional impetus to market reforms.

Likewise, many economies are refraining from using price controls and import restrictions, particularly in globally-traded fuels such as oil and coal. Where there are active spot and futures trading markets and financial instruments that can help reduce price volatility, it is more logical and practical to provide free rein to market forces in determining energy prices and managing supply. Moreover, even in markets where state utility monopolies are still in control, opportunities for domestic and foreign firms to sell to such monopolies have been introduced as a way of ensuring that capacity additions and innovations are not held up by limitations in public funds.

Despite the changing landscape, significant barriers to energy trade and investment remain. This paper takes stock of these barriers and proposes measures to eliminate them through the multilateral disciplines of the Association of Southeast Asian Nations (ASEAN). The focus is on energy services, or activities related to the “exploration, development, extraction, production, generation, transportation, transmission, distribution, marketing, consumption, management, and efficiency of energy, energy products and 2

fuels.”1 The policies of the individual ASEAN members that impede trade and investment in energy services are identified and assessed. The information is drawn from the individual members’ schedule of commitments in the ASEAN Free Trade Agreement in Services (AFAS). Other issues that may affect the negotiations to reduce or eliminate trade and investment barriers are also discussed, such as current and projected energy supply and demand conditions in the region.

Joy Abrenica

Adora Navarro

(October 2014)

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