ASEAN breaks with tradition, allows liberalized markets

ASEAN breaks with tradition, allows liberalized markets

Jalil Hamid, Reuters, Genting Highlands, Malaysia

Southeast Asian nations decided on Saturday to break with
tradition by adopting a new formula to speed up market-opening
and keep up with growing competition from powerhouses like China.

Economic and trade ministers from the 10 member Association of
South East Asian Nations (ASEAN) said a so-called "10 minus X"
principle would be adopted in areas such as open-sky policy,
telecommunications, financial services and equity investment.

Under the formula, member countries that are ready to open up
their markets can move forward without having to wait for rest --
a departure from the normal procedure of moving together.

"Those who are ready can go first and those who are not can
come on board as and when they are ready," Malaysia's
International Trade and Industry Minister, Rafidah Aziz, told a
news conference at the end of the one-day meeting at the
Malaysian resort of Genting Highlands.

"It's a more pragmatic way of implementing some of the
programs."

Her Singapore counterpart, George Yeo, hailed the agreement as
a "breakthrough" and said the plan would overcome delays faced by
some countries in areas like aviation and telecommunications.

"Some countries are understandably less prepared to move now
than others," he said of the open-sky policy which allows foreign
carriers to pick-up passengers from any destination within ASEAN.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The move to hasten liberalization comes as the region battles
to regain its investment charm amid rising competition for funds
from China and other parts of the world.

Last year, much of the foreign direct investment in Asia went
to China. A low cost base is seeing it displace Southeast Asia as
the continent's preferred manufacturing hub, economists say.

A World Bank report in March said China attracted US$44
billion of Foreign Direct Investment last year, up 16 percent
from 2000. Thailand's share fell 32 percent.

The ministers earlier met top executives from U.S. consulting
firm McKinsey & Co. The firm is doing a nine-month study for
ASEAN on how the region can boost its competitiveness. At the
same time, ASEAN is also conducting its own study comparing its
own trade and investment policies with those of China.

Singapore's Yeo said currently it was easier for individual
member countries to invest in and trade with China rather than
among themselves.

"This is because we have been too leisurely in our internal
liberalization process," he said.

Separately, Rafidah said ASEAN auto producers had no basis to
demand compensation for Malaysia's move to delay tariff cuts on
imported cars by two years to 2005.

Under the ASEAN Free Trade Agreement, members are due to
reduce tariffs next year to between zero and five percent on cars
made within the region, but Malaysia has said it needed more time
to prepare state controlled car maker Proton for competition.

"At the moment, none of the ASEAN countries, whether Thailand
or any other country, is a principal supplier of automotive
products to Malaysia," she said. "On that basis alone, there is
no standing to demand anything from us."

Foreign auto giants such as Ford [F.N] and General Motors
[GM.N], which have plants in Thailand, have complained that
Malaysia's delay effectively denies them greater access to
Southeast Asia's biggest car market.

The economic ministers, who said the region's economic
recovery was on track after last year's U.S. led slowdown, will
meet again in Brunei in Sept. 11-15.