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.