ASEAN faces export challenge

ASEAN faces export challenge

JAKARTA (AFP): ASEAN economies face the challenge of maintaining their edge in exports, the engine of their rapid growth, as domestic constraints increase and competition from Asian rivals heats up.

Economists say the first signs of a slowdown from years of fast export growth are now visible and warn that the Association of Southeast Asian Nations (ASEAN) cannot dismiss it as a mere blip.

The Jakarta-based ASEAN secretariat has projected collective export growth for six of the seven ASEAN members to slow a shade from 20 percent in 1995 to a still healthy 16 percent in 1996 at 350 billion US dollars.

But the forecast -- which excludes ASEAN's newest member, Vietnam -- did not factor in a steep fall in external electronics demand hurting the group's exports.

Electronics is a key item in the export basket of Singapore, the region's biggest trading nation, as well as neighboring Malaysia and Thailand.

ASEAN, ended an annual ministerial meeting here yesterday, groups the three countries with oil-rich Brunei, Indonesia, the Philippines, and Vietnam which joined the organization only last year.

As a bloc, ASEAN is the fourth largest trader after the United States, Japan and the European Union, with two-way trade this year estimated at 700 billion dollars.

Indonesian economist Raja Silalahi said that, besides the slowdown in the volatile electronics market, infrastructure constraints and other bottlenecks were beginning to affect ASEAN's competitiveness in trade.

He also cited increasing competition from lower-cost locations elsewhere in Asia, including Myanmar, which is aspiring to join ASEAN. Vietnam, too, is posing competition to the more mature ASEAN economies, he said.

"The cost of labor there is lower, the cost of capital also, and other things like land are cheaper," he said.

"They take a share of the market and reduce our (ASEAN) exports," said Silalahi. "We will face problems competing in the market."

Investment house J.P. Morgan warned in a recent report: "It is the rise of nearby rivals and its own infrastructure and labor- force bottlenecks that threaten ASEAN's high export growth in the future."

Economists said ASEAN members should move to deal with the bottlenecks and arrest the export slowdown before they blunt the group's competitive edge.

"ASEAN should be concerned. It may reflect some factors like under-investment in infrastructure," said Robert Tay, an economist with the ASEAN secretariat.

"For a number of years, ASEAN exports have grown in a consistently higher plane compared to OECD (Organization of Economic Cooperation and Development) economies," he said.

"This downtrend or (eventual) convergence to the world average may be expected over a period of time."

Projected exports for the year, without taking into account the electronics slowdown, are impressive.

Brunei's exports are projected by the secretariat to rise to 2.7 billion dollars from 2.5 billion dollars last year, Indonesia's from 45.3 billion dollars to 51.9 billion dollars and Malaysia's from 71.5 billion dollars to 86.2 billion dollars.

The Philippines' exports are expected to rise from 16.6 billion dollars to 19.8 billion dollars, Singapore's from 111.9 billion dollars to 130.9 billion dollars and Thailand's from 56.2 billion dollars to 57.9 billion dollars.

Current account deficits were projected by the ASEAN secretariat to decelerate -- from 11.4 billion dollars in 1995 to 4.2 billion dollars in 1996.

Indonesia, the Philippines and Thailand would record lower deficits while Brunei and Singapore were expected to increase their surpluses.

A senior Indonesian official said the export growth slowdown was worrying.

"We are hoping it is temporary," he said. "But we need to do something -- increase trade within ASEAN and form strategic alliances -- to compete," he said.