ASEAN to push liberalization to attract FDI

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.