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."