ASEAN makes plans to woo more investments

ASEAN makes plans to woo more investments

KUALA LUMPUR (AFP): Heads of ASEAN investment agencies called yesterday for greater intra-regional cooperation as they opened talks on how to woo foreign funds amid a sharp drop in capital flowing to the region.

The heads are to draw up programs to implement ASEAN's Plan of Action on Cooperation and Promotion of Foreign Direct Investment (FDI) and Intra-ASEAN investment.

The Association of Southeast Asian Nations (ASEAN) must remain competitive to woo more foreign direct investments funds, ASEAN secretary-general Ajit Singh said at the opening of the two-day meeting.

Singh noted that between 1991 and 1994, the regional grouping's share in total FDI flows to Asia dropped from 62 percent to 31 percent.

"If this trend continues, ASEAN economies may find it difficult to sustain their pace of industrial development and economic momentum," he warned, adding that FDI played a "very significant role" in the development of the region.

Economic ministers of ASEAN, which groups Malaysia with Brunei, Indonesia, the Philippines, Singapore, Thailand and Vietnam, had drawn up what they called a bold regional initiative on investment -- the ASEAN Investment Area at their meeting in Singapore in April.

Some of the investment programs include joint promotion seminars, joint training, simplification of rules and increasing transparency of ASEAN members' guidelines.

Singh said he was aware of the competition among ASEAN countries for foreign funds "since we are using money from the same source and attracting capital from the same source."

"That is why this drop in investment is something that concerns us," Singh said, emphasizing the need to improve ASEAN's competitive edge and putting the ASEAN Free Trade Area into place as soon as possible.

Sharing Singh's concern over the capital crunch, Malaysia's International Trade and Industry Minister Rafidah Aziz said the ASEAN Investment Area plan could be harnessed to upgrade the competitive edge of member countries.

"ASEAN needs to remain competitive in order to attract a much larger portion of FDI funds," said Rafidah.

Under the proposal, there could be a free flow of intra-ASEAN investments for the benefit of ASEAN as a group, she said.

Rafidah also said ASEAN countries which were losing their lower labor cost competitiveness would need to improve their technology base by attracting high-technology, value-added investments.

These "labor-intensive" manufacturing industries could be relocated to less developed ASEAN countries, she said.

An ASEAN secretariat economic report released in Singapore earlier yesterday projected ASEAN's 1996 growth to be a shade lower at 7.5 percent from 7.6 percent last year.

The forecast by the ASEAN put Thailand's growth at 8.6 percent, the highest in the group, and Brunei's at 2.5 percent, the lowest.

The report prepared by the ASEAN secretariat tipped 7.1 percent growth for Indonesia, 8.2 percent for Malaysia, 6.5 percent for the Philippines and 7.0 percent for Singapore.

Vietnam, which only joined the group last year, was not included in the forecast.

The six countries averaged GDP growth of 7.6 percent last year. Only the Philippines will see its economy grow faster this year by 6.5 percent compared to 5.2 percent in 1995, the report said. Thailand's growth rate was projected to remain constant.

Inflation was forecast to drop across the board from an average 5.4 percent last year to 4.8 percent this year with the larger economies, which have a sizable rural base, being the big beneficiaries.

"The good news is that inflation will drop in 1996 compared to the previous year," Business Times cited the report as saying. "The biggest gainers from a moderation of inflationary pressures are expected to be Indonesia, the Philippines and Thailand."

The report forecast 3.4 percent inflation for Brunei, 7.3 percent for Indonesia, 4.4 percent for Malaysia, 6.5 percent for the Philippines, 2.8 percent for Singapore and 4.4 percent for Thailand.

The fall in inflation was attributed to an expected slowdown in aggregate demand and a better agricultural performance.