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The Association of Southeast Asian Nations (ASEAN) was established on 8 August 1967 in
Bangkok, Thailand, with the signing of the Bangkok Declaration by the five original Member
Countries namely Indonesia, Malaysia, Philippines, Singapore and Thailand. Brunei Darussalam
joined the Association on 8 January 1984. Vietnam became the seventh member of ASEAN on
28 July 1995. Laos and Myanmar were admitted into ASEAN on 23 July 1997 and Cambodia on
30 April 1999. The ASEAN region has a population of about 500 million, a total area of 4.5
million square kilometers, a combined gross domestic product of almost US$ 1500 million.

The Bangkok Declaration united the ASEAN Member Countries in a joint effort to promote
economic cooperation and the welfare of the people in the region. The Bangkok Declaration set
out guidelines for ASEAN's activities and defined the aims of the organization. The ASEAN
nations came together with three main objectives in mind: to promote the economic, social and
cultural development of the region through cooperative programmes; to safeguard the political
and economic stability of the region against big power rivalry; and to serve as a forum for the
resolution of intra-regional differences.

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The ASEAN Vision 2020, adopted by the ASEAN Leaders in 1997 includes:
* Looking outward
* Living in peace
* Stability and prosperity
* Bonded together in partnership in dynamic development
* Creating a community of caring societies.

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^ To accelerate economic growth, social progress and cultural development in the region.
^ To promote regional peace and stability through abiding respect for justice and the rule of
law in the relationship among countries in the region and adherence to the principles of
the United Nations Charter.
^ To promote active collaboration and mutual assistance
^ To provide assistance to each other in the form of training and research facilities
^ To collaborate more effectively for the greater utilization of their agriculture
^ To promote Southeast Asian studies; and
^ To maintain close and beneficial cooperation with existing international and regional
organizations with similar aims and purposes.

  
 



^ Mutual respect for the independence, sovereignty, equality, territorial integrity, and
national identity of all nations.
^ The right of every State to lead its national existence free from external interference,
subversion or coercion.
^ Non-interference in the internal affairs of one another.
^ Settlement of differences or disputes by peaceful manner.
^ •enunciation of the threat or use of force.
^ Effective cooperation among themselves.

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^ Asean Security Community
^ Asean Economic Community
^ Asean Socio-Cultural Community

^  

ASEAN SECU•ITY COMMUNITY (ASC) shall aim to ensure that countries in the region live
in peace with one another and with the world in a just, democratic and harmonious environment.
It regards its security as fundamentally linked to one another and bound by geographic location,
common vision and objectives namely:
* Political development
* Shaping and sharing of norms
* Conflict prevention
* Conflict resolution
* Post-conflict peace building
* Implementing mechanisms

ASC will be built on the strong foundation of ASEAN processes, principles, agreements, and
structures, which evolved over the years and are contained in the following major political
agreements: -
* ASEAN Declaration, Bangkok, 8 August 1967.
* †one of Peace, Freedom and Neutrality Declaration, Kuala Lumpur, 27 November 1971.
Declaration of ASEAN Concord, Bali, 24 February 1976.
* Treaty of Amity and Cooperation in Southeast Asia, Bali, 24 February 1976.
* ASEAN Declaration on the South China Sea, Manila, 22 July 1992.
* Treaty on the Southeast Asia Nuclear Weapon-Free †one, Bangkok, 15 December 1997.
* ASEAN Vision 2020, Kuala Lumpur, 15 December 1997.
* Declaration of ASEAN Concord II, Bali, 7 October 2003.

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 ^ 
  

The ASEAN Economic Community shall be the end-goal of economic integration measures as
outlined in the ASEAN Vision 2020. The goal is to create a stable, prosperous and highly
competitive ASEAN economic region. It aims to ensure free flow of goods, services, investment
and a free flow of capital, equitable economic development and reduced poverty and socio-
economic disparities in year 2020.
The ASEAN Economic Community shall establish ASEAN as a single market and production
base, turning the diversity that characterizes the region into opportunities for business
complementation and making the ASEAN a more dynamic and stronger segment of the global
supply chain.
ASEAN¶s strategy shall consist of the integration of ASEAN and enhancing ASEAN¶s
economic competitiveness by instituting new mechanisms and measures to strengthen the
implementation of its existing economic initiatives including the ASEAN Free Trade Area
(AFTA), ASEAN Framework Agreement on Services (AFAS) and ASEAN Investment Area
(AIA).Accelerate regional integration in the following priority sectors by 2010 - air travel, agro-
based products, automotives, e-commerce, electronics, fisheries, healthcare, rubber-based
products, textiles and apparels, tourism, and wood-based products. Facilitate movement of
business persons, skilled labor and talents. Strengthen the institutional mechanisms of ASEAN,
including the improvement of the existing ASEAN Dispute Settlement Mechanism and legally-
binding resolution of any economic disputes. In 1992, the ASEAN Free Trade Area (AFTA), it
aims to promote the region¶s competitive advantage as a single production unit. The elimination
of tariff and non-tariff barriers among member countries is expected to promote greater
economic efficiency, productivity and competitiveness.


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Programmes conducted are as follows:

* Work Programme for Social Welfare, Family, and Population

* ASEAN Work Programme on HIV/AIDS
* ASEAN Work Programme on Community-Based Care for the Elderly
* ASEAN Occupational Safety and Health Network
* ASEAN Work Programme on Preparing ASEAN Youth for Sustainable Employment and
Other Challenges of Globalization
* ASEAN University Network (AUN) promoting collaboration among seventeen member
universities ASEAN
* ASEAN Students Exchange Programme, Youth Cultural Forum, and the ASEAN Young
Speakers Forum
* The Annual ASEAN Culture Week, ASEAN Youth Camp and ASEAN Quiz;
* ASEAN Media Exchange Programme
* Framework for Environmentally Sustainable Cities (ESC) and ASEAN Agreement on
Transboundary Haze Pollution.






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AEM- ASEAN Economic Ministers

SEOM- Senior Economic officials meeting
AMM- ASEAN Ministerial Meeting
ASC-ASEAN Standing Committee
SOM- Senior Officials Meeting
AFMM- ASEAN Finance Ministers
ASFOM- ASEAN Senior Finance Officials Meeting

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The highest authority of ASEAN is the Meeting of the ASEAN Heads of Government, the
ASEAN Summit. In 1992, the Fourth ASEAN Summit in Singapore decided that the ASEAN
Heads of Government would meet formally every three years and informally at least once in
between to lay down directions and initiatives for ASEAN activities. In 1995, the Fifth ASEAN
Summit in Bangkok decided to hold annual Informal Summits in between the formal ASEAN
Summits which take place every three years. The First Informal Summit was held in Jakarta in
December 1996.

^ 
 
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)

The AEM meets formally or informally to direct ASEAN economic cooperation. The AEM was
institutionalized at the 1977 Kuala Lumpur Summit. Like the AMM, the AEM also meets
annually. The AFTA Council was established by the Fourth Summit to supervise, coordinate,
and review the implementation of the CEPT Scheme for AFTA. The AEM and AMM report
jointly to the ASEAN Heads of Government during an ASEAN Summit.

^ 
 "*()

The ASEAN Foreign Ministers meet annually during the AMM. The AMM, established by the
1967 Bangkok Declaration, is responsible for the formulation of policy guidelines and
coordination of ASEAN activities. At the 1977 Kuala Lumpur Summit, the ASEAN Heads of
Government agreed that the AMM could include other relevant Ministers as and when necessary.
During an ASEAN Summit, the AMM and AEM report jointly to the ASEAN Heads of
Government.

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The SEOM was also established as part of the ASEAN machinery at the Manila Summit and
comprises the heads of trade, industry, finance and commerce of the ASEAN Member Countries.
The Fourth ASEAN Summit agreed that the five ASEAN Economic Committees on Finance and
Banking (COFAB); Food, Agriculture and Forestry (COFAF); Industry, Minerals and Energy

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(COIME); Transportation and Communications (COTAC); and Trade and Tourism (COTT) be
dissolved and SEOM be tasked to handle all aspects of ASEAN economic cooperation. The
SEOM meets regularly and reports directly to the AEM.

^ 
 $* ()

The ASC is the policy arm and organ of coordination of ASEAN between the AMM. The ASC,
which reports directly to the AMM, comprises the Chairman who is the Foreign Minister of the
country hosting the AMM, the Secretary-General of ASEAN and the Directors-General of the
ASEAN National Secretariats. As an advisory body to the Permanent Committees, the ASC
reviews the work of Committees with a view to implementing policy guidelines set by the AMM. 

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The SOM was formally institutionalized as part of the ASEAN machinery at the 1987 Manila
Summit. •esponsible for ASEAN political cooperation, the SOM meets as and when necessary
and reports directly to the AMM. SOM consists of heads of the Foreign Ministries of the
ASEAN Member Countries.

^ 
 

The ASEAN Secretariat was established by an Agreement signed by the ASEAN Foreign
Ministers during the 1976 Bali Summit to enhance coordination and implementation of policies,
projects and activities of the various ASEAN bodies.

The ASEAN Secretariat adopted a Mission Statement which reflects the spirit and goals of the
Fourth Summit, "Towards strengthening and intensifying intra-ASEAN cooperation". The work
of the Secretariat is guided by this Mission Statement in order to provide responsive support to
the tasks of the various ASEAN bodies.

The Secretariat has four Bureaus. The AFTA Bureau, in addition to handling the implementation
and monitoring of AFTA, also handles other related issues such as the elimination of non-tariff
barriers, the harmonizing of tariff nomenclature, the issue of standards and conformance and
customs valuation and procedures. Apart from the meetings of the AFTA Council of Ministers,

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the AEM and SEOM, the Bureau also fully services the meeting of the ASEAN Directors-
General of Customs and the ASEAN Consultative Committee on Standards and Quality.

The Bureau of Economic Cooperation handles such matters as investment, services, finance,
banking, intellectual property, food, agriculture, transportation and energy. The Bureau is also
responsible for issues related to industrial cooperation and, generally, non AFTA issues,
including those involving the private sector. In addition to the AEM, the Bureau services the
meetings of the Ministers of Agriculture, Energy, Finance, Transport and Communications and
Tourism, as well as that of their respective officials.

The Bureau of Functional Cooperation has been actively engaged in drawing up and
coordinating the implementation of the Action Plans for Science and Technology, Environment,
Culture and Information, Social Development and Drug Abuse Control. In addition to this, the
Bureau has also, among others, taken the initiative which resulted in the establishment of the
ASEAN University Network and its Charter. The Bureau reports directly to the meeting of the
Ministers responsible for the respective sectors mentioned above and also services fully the five
Committees on Functional Cooperation, their sub-committees and working groups.

The Bureau for ASEAN Cooperation and Dialogue •elations is responsible for the
operationalization of the project appraisal system adopted by the ASEAN Standing Committee.
Under this system, project appraisal, implementation, monitoring and evaluation procedures have
been set up and the Bureau provides advisory services to the various ASEAN bodies on these
procedures and in project formulation and design. The Bureau also identifies funding sources and
assists Member Countries by preparing papers on development cooperation policies and
strategies which are used as a basis for discussions with Dialogue Partners.

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()

ASEAN Free Trade Area (AFTA) was launched in 1992 to eliminate tariff barriers among the
Southeast Asian Countries with a view to integrating ASEAN economies into a single production
base and creating a regional market. This was to be achieved through the expansion of intra-
ASEAN trade, making possible both greater specialization and economies of scale. It was also to
be achieved with the inflow of more foreign direct investment which would be attracted by the
emergence of a single ASEAN market.

The ASEAN Free Trade Area (AFTA) has now been virtually established. ASEAN Member
Countries have made significant progress in the lowering of intra-regional tariffs through the
Common Effective Preferential Tariff (CEPT) Scheme for AFTA. More than 99 percent of the
products in the CEPT Inclusion List (IL) of ASEAN-6, comprising Brunei Darussalam,
Indonesia, Malaysia, the Philippines, Singapore and Thailand, have been brought down to the 0-
5 % tariff range.

The Common Effective Preferential Tariff (CEPT) Scheme, which is the main mechanism for
realizing AFTA, was launched on 1 January 1993. The CEPT Scheme covers both manufactured
and agricultural products. The product coverage in the CEPT Scheme is the most comprehensive
ever in any ASEAN trading arrangement. For instance, more than 90% of the total tariff lines in
ASEAN are already included in the CEPT Scheme. These tariff lines account for more than 81%
of intra-ASEAN trade values.

The CEPT Scheme requires the reduction of tariffs for all products in the Inclusion List, the
elimination of quantitative restrictions as well as other non-tariff barriers. By the year 2003, all
tariffs for products in the Inclusion List should be no higher than 5%. The tariff reductions began
in the year 1994. To ensure that AFTA is realized expeditiously, other trade facilitation measures
are also being undertaken. These include harmonization of customs matters (tariff nomenclature,
customs valuation systems, customs procedures and the establishment of a Green Lane System to
help expedite clearance for CEPT products). Considerable work is also being done to harmonize
product standards to facilitate intra-ASEAN trade. A list of 20 priority product groups, including
some major consumer durables, has already been identified.

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Between 1993 & 1995, intra-ASEAN exports grew from US$ 42.77 billion to US$ 68.83 billion.
This represents an average growth rate of 30.46% per annum, significantly higher than the
average 20% growth of total ASEAN exports. The share of intra-ASEAN exports to total exports
inched up to 22% in 1995. In 1995, nearly 59% of intra-ASEAN exports was made up of exports
of machinery and electrical appliances reflecting the extent of intra-industry trade. Other major
sectors traded within the region are mineral products (petroleum), base metals, chemicals and
plastics.

ASEAN¶s newer members, namely Cambodia, Laos, Myanmar and Viet Nam, are not far behind
in the implementation of their CEPT commitments with almost 80 percent of their products
having been moved into their respective CEPT ILS. Of these items, about 66 percent already
have tariffs within the 0-5 percent tariff band. Viet Nam has until 2006 to bring down tariff of
products in the Inclusion List to no more than 5 percent duties, Laos and Myanmar in 2008 and
Cambodia in 2010

ASEAN's exports had regained its upward trend in the two years following the financial crisis of
1997-1998 reaching its peak in 2000 when total exports was valued US$ 408 billion. After
declining to US$ 366.8 billion in 2001, as a result of the economic slowdown in the United
States and Europe and the recession in Japan, ASEAN exports recovered in 2002 when it was
valued at US$ 380.2 billion. The upward trend for ASEAN-6 continued up to first two quarters
of 2003. The total exports in 2009 averaged around US$ 810,489mn.

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The Asian financial crisis of 1997-98 caused extensive damage in East Asia. This experience
made the East Asian countries acutely aware of the need to promote regional financial
cooperation to prevent resurgence of a crisis and to attain stable economic growth. Since then,
Japan has been vigorously promoting regional financial cooperation together with the other
ASEAN+3 countries namely Brunei, Cambodia, Indonesia, Lao, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Vietnam), China, Japan, and the •epublic of Korea

The Chiang Mai Initiative aims to create a network of bilateral swap arrangements (BSAs)
among ASEAN+3 countries to address short-term liquidity difficulties in the region and to
supplement the existing international financial arrangements.

Since the financial crisis swept across the globe in 2008, the need for greater financial ooperation
in Asia has been brought into sharp relief and the pace of monetary and financial cooperation has
picked up. So far, cooperation has ranged from information exchange to establishing regional
financing facilities

Among them, the multilateralization of the CMI, allowing the members of the CMI to tap a
regional pool of Foreign Exchange •eserves to better cushion a financial crisis, offers a viable
institutional framework for future East Asian regional financial architecture. Since fund inflows
in Asia have increased remarkably after the 2008 global financial crisis, it is of vital importance
to maintain regional stability in economy, finance and exchange rate for the governments to
exchange information regularly and coordinate economic policies carefully.

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India became a sectoral dialogue partner of ASEAN in 1992. Mutual interest led ASEAN to
invite India to become its full dialogue partner during the Fifth ASEAN Summit in Bangkok in
1995. India also became a member of the ASEAN •egional Forum (A•F) in 1996. India and
ASEAN have been holding summit-level meetings on an annual basis since 2002.

In August 2009, India signed a Free Trade Agreement (FTA) with the ASEAN members in
Thailand. Under the ASEAN-India FTA, ASEAN member countries and India will lift import
tariffs on more than 80 per cent of traded products between 2013 and 2016, according to a
release by the Ministry of Commerce and Industry.

In January 2010, Singapore, Malaysia and Thailand accepted the FTA on goods. The other seven
ASEAN countries are expected to operationalise the FTA by August 2010.

India and ASEAN are currently negotiating agreements on trade in services and investment. The
services negotiations are taking place on a request-offer basis, wherein both sides make requests
for the openings they seek and offers are made by the receiving country based on the requests.

India has made requests in a number of areas including teaching, nursing, architecture, chartered
accountancy and medicine as it has a large number of English speaking professionals in these
areas who can gain from job opportunities in the ASEAN region. India is also keen on expanding
its telecom, IT, tourism and banking network in ASEAN countries.

^ $

The deepening of ties between India and ASEAN is reflected in the continued buoyancy in trade
figures.

India¶s trade with ASEAN countries has increased from US$ 30.7 billion in 2006-07 to US$
39.08 billion in 2007-08 and to US$ 45.34 billion in 2008-09. During April ± September 2009-
10, India¶s trade with ASEAN was US$ 20.19 billion, according to data released by the Ministry
of Commerce and Industry.

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In 2008-09, India's exports to ASEAN totaled US$ 19.14 billion. During April-December 2009-
10, India exported goods worth US$ 12.8 billion to ASEAN, according to data released by the
Ministry of Commerce and Industry.

India imported goods worth US$ 26.3 billion in 2008-09 from ASEAN. During the period April-
December 2009-10, India's imports from ASEAN totaled US$ 18.09 billion, according to data
released by the Ministry of Commerce and Industry.

















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^ Tariffs on almost 99% of the products in the inclusion list of the ASEAN-6 (Brunei
Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand) have been
reduced to no more than 5%. More than 60% of these products have zero tariffs. The
average tariff for ASEAN-6 has been brought down from more than 12% when AFTA
started to 2% today. For the newer member countries namely, Cambodia, Lao PD•,
Myanmar and Vietnam (CLMV),tariffs on about 81% of their inclusion list have been
brought down to within the 0-5% range.
^ •oadmap for Financial and Monetary Integration of ASEAN extends to four areas,
namely, capital market development, capital account liberalization, liberalization of
financial services and currency cooperation has been established.
^ Trans-ASEAN transportation network is in place consisting` of major inter-state highway
and railway networks, including the Singapore to Kunming •ail-Link, principal ports,
and sea lanes for maritime traffic, inland waterway transport, and major civil aviation
links.
^ A roadmap for integration of air travel has been adopted.
^ There is now interoperability and interconnectivity of national telecommunications
equipment and services, including the ASEAN Telecommunications •egulators Council
Sectoral Mutual •ecognition Arrangement (AT•C-M•A) on Conformity Assessment for
Telecommunications Equipment.
^ Trans-ASEAN energy networks, which consist of the ASEAN Power Grid and the Trans-
ASEAN Gas Pipeline Projects, have been set up.
^ There is initiative for ASEAN Integration (IAI) focusing on infrastructure; human
resource development, information and communications technology, and regional
economic integration primarily in the CLMV countries.

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w Vision
³To become the most preferred Sharia compliant Financial Institution´
w Mission
³To become a premier community bank in South east Asia. We will enhance shareholder
value by serving the personal and business needs of our markets, providing superior customer
service, investing in the communities that we serve and enriching the lives of our
employees.´



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In the current global scenario Islamic banking has increased by leaps and bounds. Majority of the
1.8bn Muslim Population lives in Asia. This Century is going to experience Asia¶s economic
growth. This means that there will be increase in the middle class segment with increased
purchasing power. The major factor which aids selling Islamic financial services is the
associated religious sentiment.

Islamic banking has been defined as banking in consonance with the ethos and value system of
Islam and governed, in addition to the conventional good governance and risk management rules,
by the principles laid down by Islamic Sharia. Interest free banking is a narrow concept denoting
a number of banking instruments or operations, which avoid interest. Islamic banking, the more
general term is expected not only to avoid interest-based transactions, prohibited in the Islamic
Sharia, but also to avoid unethical practices and participate actively in achieving the goals and
objectives of an Islamic economy.

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As compared to conventional banking, the returns on Islamic banking have been higher as of
May 2007. The diagram below compares the performance between Dow Jones 1800 banks index
with the Dow Jones Islamic market index, reflecting that the Islamic financial services market
has been performing at par with the Dow Jones index and in mid 2007 has performed even better
than it. This signifies that investments made in the Islamic financial services market have been
more rewarding making it a lucrative investment option.

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$ is a major south East Asian country and a part of G-20 forum. Indonesia is
experiencing an economic growth of 5-6% on yearly basis. With a population of around 230
million it is 4th most populous country in the world. Almost 88% of the population of Indonesia
is Muslim, though the government doesn¶t adhere to any religion. The penetration of sharia
compliant services in the Indonesian market is currently only 0.7%. Government of Indonesia
has taken certain corrective measures to accommodate sharia complaint financial services in the
main stream. The foreign direct investment permitted in the banking sector is 99%. In the light
of this information we have selected Indonesia as a country to sell are sharia complaint financial
products.

‡ Prior to 1992 ± several non financial institutions offering Islamic financing to ruralareas.

‡ 1992 ± to meet demand for interest-free banking, the government allowed Sharia banking
operations in Act no. 7 of 1992 (legal foundation for Sharia banking operations).Several
amendments made in 1998 and in1999, the New Act no. 23 gives the central bank authority to
conduct its task according to Sharia principles.

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‡ 2002 ± Bank Indonesia issued blueprint for Islamic banking.

‡ 2006 ± Bank Indonesia allowed conventional banks with Sharia banking units to offer Sharia¶s
products and services.

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w Indonesia, home to the world¶s largest Muslim population, is a democracy that promises
religious freedom to its citizens. In spite of this in recent times political parties are trying
to promote Islamic ideologies among the masses. Till 2010 Sharia-based laws have been
passed in more than half of Indonesia¶s provinces. More than 50 regencies in 16 of the 32
provinces in Indonesia have passed laws linked to sharia. For example In Padang ± the
capital and largest city of West Sumatra, Indonesia ± all schoolgirls, including non-
Muslims, are required to wear a headscarf. Major reason being groups such as the
Committee for the Implementation and Maintenance of Islamic Law (KPPSI) are
encouraging its members to vote for politicians who favor sharia. This is the reason why
the countries inclination towards Islamic ideology is increasing which becomes more
conducive to have an Islamic banking system in Indonesia

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Major findings show that the main difference among the four type of banks (not including
Islamic banks) are that state owned banks and foreign private are perceived as safest to place
consumer¶s fund while the domestic private banks and regional banks are perceived as less
secure. On the other hand, in term of facilities that provide convenience and hospitability of the
bank, the domestic private banks are perceived higher than the other three types of banks. The
foreign private banks are perceived to have facilities that provide convenience only in a global
perspective. In addition, the foreign private banks are perceived a bank for consumer loan, a
bank that has a high interest loan rate and a bank that has a low interest saving rate. The regional
banks, are mostly perceived as targeted for small medium enterprises, has a low saving and
lending interest rate and a limited area of coverage. So we are leveraging on these facts &
positioning our bank as the one which complies with sharia law as well as provides the facilities
which can suffice the expectations of customers.

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Depending on the customers perceptions the perceptual mapping is illustrated as follows:

Positioning- 01-&",""2












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On the basis of customers tendency towards Islamic banking the market can be divided into three
segments i.e. Sharia loyalists, floating market, and conventional loyalists. Sharia loyalist segment
is price insensitive probably because of their strong belief. So is the conventional loyalist
segment for the opposite reason. The floating segment is the one who very sensitive to price..the
belief on Islam actually represents a value in his/her overall Islamic values. If a person values
using an Islamic bank high in his/her overall Islamic value system than he/she will tend to
choose an Islamic bank. On the other hand if this value is relatively weak within his/her overall
Islamic value system the motivation to use an Islamic bank will be low. The Sharia loyalists &
conventional loyalists are price insensitive whereas the floating segment is highly price sensitive.
So in order to cater to this segment it is necessary to provide attractive facilities & convenience
which would compel them to switch to Islamic banks. Anyways the Islamic loyalists would tend
to be a part of Islamic banks. The only effort would be to pitch the floating segment &
conventional loyalists.

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Once our business gets well established in the urban market we are considering the option of
foraying into the rural market with the concept of microfinance in compliance with Sharia laws.

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  P&#/

www.aseansec.org
www.ibef.org
www.islamic Center.kau.edu.sa
International Business by Dr. •. Chandran
International Business by Sumati Verma
International Business by P. Subba •ao
•eport of Price Waterhouse Cooper (PwC)






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