ASEAN fractures exposed once again<\/p>\n
MANILA (Reuters): The disparate Association of Southeast Asian
\nNations (ASEAN) has always had a tough job convincing onlookers
\nof its combined purpose, and its divisions are now attracting
\neven more attention than usual.<\/p>\n
The group, with diverse members ranging from political
\ndictatorships to full-fledged democracies, has just wrapped up a
\nmeeting of economic ministers in Manila with a pledge to speed up
\nthe creation of a free trade and investment area.<\/p>\n
But with some members shutting down capital accounts to defend
\nthemselves against capital flows, the commitment to greater
\neconomic openness and integration prompted skepticism.<\/p>\n
\"I thought they were all busy establishing exchange controls,\"
\nSchroders Asia strategist Andrew Ballingal said.<\/p>\n
Malaysia has imposed currency controls and Indonesia is
\ncontemplating compulsory repatriation of export earnings as
\ndebate rages about the best way to protect emerging economies
\nfrom the disruptions caused by huge and volatile capital flows.<\/p>\n
Last week, ASEAN agreed to cut as many tariffs as possible to
\nbetween zero and five percent by 2000 rather than the later
\ndeadline of 2003.<\/p>\n
It also signed a framework agreement to establish a free
\ninvestment zone, removing all barriers to intra-regional
\ninvestment by 2010 and to outside investment by 2020.<\/p>\n
Ian Perkin, chief economist at the Hong Kong General Chamber
\nof Commerce, said that at first blush, the proposals seemed
\ncontradictory but they did, in fact, make sense.<\/p>\n
\"You have to look at this a little deeper,\" he said. \"One is
\nfor the short term, the other is for the long term.\"<\/p>\n
China was proof of foreign investors' interest in putting
\nlong-term money into economies with strong potential, regardless
\nof restrictive currency regimes, he said.<\/p>\n
But Malaysia cannot offer investors China's market potential.
\nIt has also provoked harsh criticism following allegations of
\npolice brutality by Malaysian former deputy prime minister Anwar
\nIbrahim.<\/p>\n
Anwar's allegations have come at the worst possible time for
\nASEAN. Where once it could shrug off international rebuke and
\nabide strictly to a policy of non-interference in each other's
\naffairs, now all these countries need foreign investment, and
\nmost antennae are finely tuned to international perception.<\/p>\n
Philippine President Joseph Estrada spoke out against Anwar's
\ntreatment, but said he would attend the Asia-Pacific Economic
\nCooperation (APEC) meeting in Kuala Lumpur next month. Indonesia
\nhas yet to confirm that President B.J. Habibie will attend.<\/p>\n
ASEAN has never attempted to hide its political differences,
\nchoosing instead to focus on common interests, usually issues of
\neconomic expansion and integration.<\/p>\n
But with the economic backdrop increasingly uncertain,
\ndivisions are appearing even here, with Bangkok and Manila firmly
\ncommitted to free markets while Kuala Lumpur turns its back.<\/p>\n
Fault lines resurfaced at the ASEAN meeting, when Malaysian
\ntrade minister Rafidah Aziz said she chose not to authorize a
\npackage of \"bold measures\" put together by the group to stimulate
\nforeign direct investment, which has crashed over the past year.<\/p>\n
Rafidah said she needed to get Prime Minister Mahathir
\nMohamad's approval before signing the package, to be released at
\nthe ASEAN summit in Hanoi in December.<\/p>\n
\"It's very difficult to judge the commitment to and
\nseriousness of these proposals to liberalize trade and investment
\nin a time when there's such an uncertain regional and global
\neconomic backdrop,\" said Peter Perkins, strategist at Daiwa
\nInternational Research.<\/p>\n
Perkin said bilateral agreements to settle ASEAN trade deals
\nin local currencies rather than in U.S. dollars were evidence of
\nthe group's interest in opening up to one another, but that could
\nalso signal the group would shut out outsiders.<\/p>\n
\"These talking shops are all very good anywhere in the world,
\nbut when it comes down to it, you have to convince the
\ninternational investor,\" Perkin said.<\/p>\n
\"Ultimately, they have to get the economic fundamentals right
\nwithin the ASEAN countries first, making the place attractive to
\nforeign investors.\"<\/p>",
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