ASEAN losing out to China in investment

ASEAN losing out to China in investment

SINGAPORE (AFP): The Association of Southeast Asian Nations (ASEAN) has been left behind in the race with China for foreign investment, Singapore Trade Minister George Yeo said Saturday.

Southeast Asia must press ahead with regional integration to avoid becoming an Asian backwater, he said in a speech at a business conference in the Malaysian state of Johor.

In his address outlining the challenges to the region, Yeo also said the political turmoil in Indonesia and the danger of an abrupt slowdown in the US economy would continue to bear down on ASEAN.

In 1999, China accounted for 40 percent of foreign direct investments (FDIs) into East Asia, he said. While actual FDIs to China were little changed in 2000, approved investments jumped 50 percent in anticipation of China's entry into the World Trade Organization, he added.

He cited a survey showing China as the second most attractive destination for global FDIs after the United States.

Another study by the Japan External Trade Organization showed that ASEAN "has borne the brunt of the decline in Japan's FDI to East Asia over the past three years," he said.

Japanese investments to key ASEAN members Indonesia, Malaysia, the Philippines and Thailand "more than halved" between fiscal year 1997 and 1999. No figures for Singapore were given.

For the first half of 2000, only three Asian economies -- Korea, Taiwan and China -- received increases in FDI from Japan, while Japanese investments plunged in the five major ASEAN countries by a range of between 27 percent and 70 percent.

ASEAN also includes Brunei, Cambodia, Laos, Myanmar and Vietnam.

Overall, ASEAN's share of the investments into East Asia excluding Japan halved from 35 percent in 1996 to only 17 percent in 1999.

Northeast Asian economic growth has pulled ahead of ASEAN, despite the strong economic performances of Singapore and Malaysia, he said.

"These are worrying trends. We will be marginalized if Southeast Asia becomes an Asian backwater."

While ASEAN was taking steps to remove trade barriers, promote the region jointly abroad and facilitate electronic integration, the process "will take time and we must muster the political will to see it through."

"If Southeast Asia is divided and compartmentalized, we will be at a disadvantage.

"ASEAN must position itself as an alternative manufacturing base to China. We must present the region as an integrated market and investment area," he said.

A suggestion by Chinese Premier Zhu Rongji last year for a free trade agreement between China and ASEAN is "very positive," Yeo said.

On the regional front, Yeo said that despite posting the highest growth rates in ASEAN, the future of both Malaysia and Singapore remain tied to that of the region.

"For example, the drama currently unfolding in Indonesia today will affect both Malaysia and Singapore profoundly," he said without elaborating.