Trade Facilitation and Regional Cooperation in Asia Edited by Douglas H. Brooks Assistant Chief Economist, Asian Development Bank, Philippines Susan F. Stone Senior Policy Analyst, Trade and Agriculture Directorate, Organisation for Economic Co-operation and Development, France

ASEAN open skies and the implications for airport development strategy in Malaysia Tham Siew Yean INTRODUCTION ‘Open skies’, in general, reers to the liberalization o aviation markets that can be pursued on a bilateral, regional, or multilateral basis. However, the depth o liberalization may dier rom one open sky agreement to another as these agreements enhance the competition between airlines in dierent degrees. Capacity deregulation and the removal o price controls may also be treated dierently in dierent agreements. Moreover, the geographic and unctional dimensions covered may also dier rom one agreement to another (Forsyth et al. 2004). In the case o the Association o South East Asian Nations (ASEAN), with the progressive implementation o the various ASEAN open skies agreements, it is envisaged that air trac between member countries will be progressively liberalized by 2015. Ultimately, ASEAN seeks to build a unifed aviation sector by 2015, whereby designated airlines rom a member country in ASEAN will be able operate unrestricted ights to the designated airports o other member countries. For ASEAN countries, increasing competition rom the People’s Republic o China and India has created a new impetus to enhance their competitiveness, including a renewed eort to improve their transporta- tion and logistics support services, or several reasons. First, the declining importance o taris has increased the importance o other types o trade transactions costs. In particular, the rise o global and regional produc- tion networks and the increasing use o just-in-time logistics, intermodal transport and new security considerations since 9/11 have changed the ace o