ASEAN to push liberalization to attract FDI

Zakki P. Hakim, The Jakarta Post, Jakarta

Southeast Asian nations need to further liberalize their economies to attract more global foreign direct investment (FDI) amid tougher competition for FDI.

Secretary-General of the Association of Southeast Asian Nations (ASEAN) Ong Keng Yong said on Thursday that establishing a more open trading system was crucial because it would make the region's economies more efficient, one of the key factors that investors find attractive.

Speaking to reporters following a one-day meeting of the 7th ASEAN Investment Area (AIA) council, he said that other regions had become increasingly more attractive in terms of FDI destinations as they push ahead with liberalization.

Ong said the council also realized that to attract more investment, ASEAN countries needed to cooperate closely to cut red tape and protect intellectual property rights (IPR).

Increasing the flow of FDI to Southeast Asia is crucial to help the economies grow faster and fully recover from the devastating impact of the late 1990s financial crisis. But the competition for global FDI has been tough, particularly due to China's economic resurgence. China has enjoyed strong FDI flows over the past couple of years.

FDI to China last year totaled US$53 billion, up from $40.5 billion in 1999. In comparison, FDI to ASEAN countries reached $20.3 billion, more than double the $8.63 billion recorded in 2000, according to data from OECD (Organization for Economic Cooperation and Development), but well off the pre-1997 (pre- crisis) level of $34.09 billion.

Foreign investment in ASEAN countries last year mainly went to the financial intermediation sector (27 percent), manufacturing (23 percent), mining and quarrying (20 percent) and trade and commerce (11 percent).

The 10 member nations of ASEAN are Indonesia, Singapore, Thailand, Malaysia, the Philippines, Brunei, Vietnam, Cambodia, Laos and Myanmar.

The AIA meeting, which was focused mainly on investment flows into the region over the past few years, was held a day before the 36th ASEAN Economic Ministers (AEM) meeting, where the ministers would seek ways to accelerate efforts to integrate the economies of the region, which has a population of around 500 million, and to boost intra-regional trade.

Ong declined to provide details about what measures are needed to accelerate the liberalization of the region's economies, saying that it would be discussed at the next AEM meet.

Elsewhere, Ong said the AIA council also realized a "noticeable trend although not dramatic" of investment relocation by Japanese firms from ASEAN back to Japan.

"The trend began two to three years ago, but the SARS (Severe Acute Respiratory Syndrome) attack might have disguised the process," Ong said.

Ong added that most of the relocated investment involved high technology firms where skilled people were employed, and it seemed that Japanese firms want to increase high-tech employment at home.

Meanwhile, Indonesian Minister of Industry and Trade Rini MS Soewandi, who chaired the AIA council, said during a press conference that the delegates focused on how to boost investment back to pre-crisis levels in 1997.

Before the Asian financial crisis in late 1997, foreign investment in ASEAN countries stood at US$34.09 billion.

"We aim to promote investment in the region, especially intra- ASEAN investment," said Rini.

According to the ASEAN secretariat data, intra-regional investment has been stable at around $2 billion per year in the last three years, which accounted for about 10 percent of the total FDI in the region last year.