ASEAN must integrate or lose out: Study

ASEAN must integrate or lose out: Study

Deutsche Presse-Agentur, Singapore

The Association of Southeast Asian Nations (ASEAN) must move
quicker toward economic integration and a single market if the
10-nation grouping is to compete effectively, particularly
against China and India, a consultants' report warned on Monday.

"Southeast Asia is losing its competitive edge", said the
study from McKinsey & Co.

Published in the latest issue of McKinsey's Quarterly,
consultants Adam Schwartz and Roland Villinger note ASEAN is
putting off investors because of unnecessary high costs,
fragmented markets and unpredictable policy implementation.

The study was based on more than 100 interviews with investors
and executives in Asian countries and around the world.

Since the 1997 Asian financial crisis, ASEAN has "slipped
dramatically" with foreign direct investment (FDI) inflows
shrinking by two-thirds and economic growth rates halving.

Investors cited sub-scale markets, unnecessary costs and
unpredictable policy implementation resulting from the lack of
integration.

McKinsey recommended the elimination of non-tariff barriers
such as differences in product standards, testing and licensing
procedures to accelerate integration.

Among the other proposals were abolishing restrictions on
cross-border investments in the regions and strengthening
regional collaboration in key areas.

"Without institutions representing the interests of the whole
group, ASEAN grants a veto to any country that resists regional
economic integration," the report said.

It noted that ASEAN's US$330 billion consumer market equals
that of China's coastal region in value and is bigger than any
other market in Asia.

"On the face of it, ASEAN should be an investor's paradise,"
the study said.