ASEAN welcomes China's overtures for free trade

ASEAN welcomes China's overtures for free trade

SINGAPORE (AFP): Chinese overtures to be involved in a Southeast Asian free trade area received enthusiastic support on Thursday from ASEAN which fears money will be diverted from the group when Beijing joins the World Trade Organization.

The framework for discussions is China has still to be determined, but it could focus on direct exchange of trade and services, competition in a third country and allocation of investments.

China has officially made known its intention to raise closer economic ties with the Association of Southeast Asian Nations (ASEAN) when Chinese premier Zhu Rongji meets forum leaders at a weekend summit.

"At the officials level, we've been informed of China's intention to raise these issues when we have the ASEAN plus China summit," Singapore Trade Minister George Yeo said, at the end of an ASEAN ministers meeting.

"The proposals put forward by China are very positive. We welcome them and we look forward to developing closer economic relations between ASEAN and China."

Zhu along with Japanese Prime Minister Yoshiro Mori and South Korean President Kim Dae Jung, who form the ASEAN plus three group, will meet Friday morning ahead of the summit

Beijing's proposals allow for the possibility of all three participating in the ASEAN free zone scheduled to take effect in 2003.

"We welcome initiatives to have closer economic partnerships with our dialogue partners, especially China," Malaysian Trade Minister Rafidah Aziz said.

Thai Commerce Minister Supachai Panitchpakdi said an economic partnership with China would be helpful in addressing the possible negative impact of tougher competition after Beijing is admitted to the WTO, either late this year or early next.

"We seem to be suffering somewhat from the diversion of investment away from ASEAN," Supachai said.

"So we may have to think of having China work together in terms of trying to boost the marketplace for both the regions so that the allocation of investments will be more equitable."

This could involve convincing China to invest in ASEAN, which groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, Supachai said.

Last month, executives representing 25 American firms with investments in ASEAN warned that China and India were fast becoming the darlings of foreign investors at the expense of the Southeast Asian grouping.

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

By contrast, FDI to ASEAN was 16 billion dollars, 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.

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

"Only by looking at ASEAN as a region -- with 10 countries and 500 million people -- does large-scale, high-value added investment make economic sense."