ASEAN risks 'losing to China and India'

ASEAN risks 'losing to China and India'

CHIANG MAI, Thailand (AFP): China and India are fast becoming the darlings of foreign investors and ASEAN must promote free trade to avoid being pushed aside, top U.S. businessmen said Thursday.

The executives representing 25 American firms with investments in the region told Southeast Asian economic ministers at a forum here Malaysia's move to shield its automotive industry was a backward step in efforts to liberalize the key sector.

Malaysia's action to delay tariff cuts on its automotive sector from 2003 to 2005 has cast a shadow over the Association of Southeast Asian Nations (ASEAN) meeting in this northern Thai city.

"Implementation of AFTA is central to this region's ability to attract large-scale capital inflows," said Gerald Kania, president of ASEAN operations for Ford.

"By itself, no ASEAN country has the market size and economies of scale to justify major manufacturing investments," he said.

"Only by looking at ASEAN as a region -- with ten countries and 500 million people -- does large-scale, high-value added investment make economic sense," he said in news conference on the sidelines of the meeting.

Ken Richeson, executive director of the U.S.-ASEAN Business Council, said foreign direct investment (FDI) to China last year totaled US$40 billion, or 42 percent of the total capital flowing into Asia.

By contrast, FDI to ASEAN was $16 billion, or just 17 percent of the total.

This is the lowest level of investment in ASEAN since the early 1990s and the smallest as a percentage of total Asian investment inflows since the 1980s, he said.

In the early 1990s, ASEAN accounted for 61 percent of total Asian investments, with only 18 percent directed at China, according to Richeson.

The businessmen said there have been great strides to meet the AFTA objective to liberalize trade in most goods by 2003.

However, more needed to be done "as you get down into specifics like automobiles," Richeson said.

Normalized U.S.-China trade ties and Beijing's future entry into the World Trade Organization "will make China even more attractive as an investment target for American companies and European companies as well," Richeson added.

The U.S.-ASEAN Business Council also called in a report on the 10 members of ASEAN to further reduce barriers that are obstructing the growth of the air express sector.

Otherwise, the council said, the group risks stifling a sector that generated US$50 billion in economic activity for the region and is projected to grow 50 percent this year.

Restrictive civil aviation agreements, cumbersome customs clearance procedures and restrictions on investment in ground transportation operations are the key challenges facing the sector in the region, the council said.

"Although the potential for growth in integrated express services in ASEAN is significant, the industry will be unable to reach its full potential -- and generate the maximum benefits for national economies -- unless governments take action to overcome a variety of barriers," the council said.

"This permits them to develop efficient and far ranging air service networks," the council said.

"These networks, in turn, permit integrators to offer customers more services to more markets, to improve the utilization of their aircraft, and to minimize the need to acquire the most expensive, large, long range aircraft."