China's WTO entry places squeeze on Southeast Asia

China's WTO entry places squeeze on Southeast Asia

Bernice Han, Agence France-Presse, Singapore

China's entry into the global trading community next month
will place even more strain on Southeast Asia, already reeling
from the worldwide downturn and repercussions of the September
attacks in the United States, research reports said.

Unlike Hong Kong and Taiwan which are set to gain from
Beijing's formal accession into the World Trade Organization on
Dec. 11, Southeast Asia is seen as a loser in the medium-term on
the currency and foreign investment fronts, the reports said.

"The most obvious challenge to Southeast Asia will be
investment," Southeast Asia's biggest lender DBS Bank said in a
report this week.

"Taking the blame here is China's twin allure of cheap and
abundant labor, coupled with the promise of a huge domestic
market," the Singapore-based bank said.

According to DBS, Southeast Asia's share of the foreign direct
investment (FDI) that flowed into the region outside of Japan was
a paltry 8.6 percent in 2000, compared with the 80 percent share
held jointly by China and its territory, Hong Kong.

Southeast Asia's declining FDI share -- it had 33.5 percent in
1996 -- is also a reflection of the region's failure to improve
its financial systems after the 1997-98 crisis, said DBS Bank.

"Investors are still wary the region is still licking its
wounds from the Asian crisis, and that not enough progress has
been made on reforms to rehabilitate weak financial systems," the
bank said.

"For Southeast Asia, the message is simple. The room for
complacency is getting narrower. Time to get back on the path of
reforms."

On the currency front, U.S. investment bank JP Morgan said the
Thai baht and Indonesian rupiah are likely to be Asia's biggest
losers.

It said "the Thai baht will face some similar pressures to the
rupiah following China's WTO entry as both trade and FDI inflows
are likely to be lower."

Thailand is however expected to fare better than Indonesia,
the U.S. company said as "Thailand's government is perceived to
exert a more stable influence on local markets, and because
markets themselves are relatively more open and liquid."

Turning to Hong Kong, JP Morgan said the territory will reap
the benefits of China's WTO membership over the next five years.