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.