EIU says ASEAN a profitable region

JAKARTA (JP): Foreign enterprises can expect greater profits when doing business in the Association of Southeast Asian Nations (ASEAN) than elsewhere in Asia, a report says.

According to Planning for Asean, the latest report from the Economist Intelligence Unit (EIU), while smaller in population than China and South Asia, ASEAN is much richer if measured by per capita gross domestic product (GDP).

"The United States Bureau of Commerce data indicates that foreign investors have received higher returns in ASEAN than elsewhere in Asia," the report said.

The report said that over the next five years, ASEAN and China would be close rivals for the title of fastest growing sub-region in Asia.

ASEAN per capita GDP is estimated at US$1,700 for 1997. From 1988 to 1996, real per capita GDP in ASEAN grew by more than 50 percent, compared with Australasia which barely managed a 10 percent increase over the same period.

"Though jobs are plentiful in ASEAN, income disparities are widening and a new economic elite is arising. Indonesia, for example, which has one of the lowest levels of per capita GDP in ASEAN also has the largest number of billionaires in Southeast Asia," the report said.

The EIU report stressed the need for companies to develop a business strategy to prepare for free trade within ASEAN -- one of the world's fastest growing regions.

ASEAN comprises Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Cambodia, Laos and Myanmar are to join soon in July. The region is home to a growing consumer market of more than 420 million people.

Under the ASEAN Free Trade Area (AFTA), launched in 1993, ASEAN leaders agreed to lower internal tariff and trade barriers by 2003. The leaders also called for a common investment policy.

"The results will be a unified market with more people than North America. AFTA planners hope free trade will boost foreign direct investment, which will in turn stimulate the growth of domestic support industries," the report said.

The Common Effective Preferential Tariff (CEPT) is the main instrument for turning ASEAN into a free-trade area. Under the CEPT, regional import tariffs will be reduced to between zero and 5 percent on all manufactured goods, while other non-tariff barriers will be removed.

The EIU report said that while all ASEAN's previous attempts at economic and trade cooperation had been failures, there were reasons to be confident that AFTA would succeed.

First, ASEAN's five large economies have matured and become more complementary with one another in the recent past.

Second, when Intercedent Asia and the EIU surveyed 150 companies and asked about the prospects of AFTA, the Asia Pacific Economic Cooperation (APEC) forum and the East Asia Economic Caucus (EAEC) -- all of which were established as "effective regional groupings" -- AFTA generated the greatest optimism.

"As the size and structure of the market changes and customers shift their locations, companies must integrate AFTA into their strategic plans to avoid losing ground," the report said. (pwn)