Gloomy skies over ASEAN economic ministers meeting

Gloomy skies over ASEAN economic ministers meeting

SINGAPORE (AFP): Southeast Asian economic ministers meeting in Cambodia this week are faced with the task of sustaining growth while their trade-dependent economies are hammered by the US slowdown, analysts said.

Their job is made more difficult by pockets of political instability which are dampening investor interest in the region at a time when China's allure as an investment haven is growing.

"It's a question of marketing ourselves with the right strategy," said Malaysia's International Trade and Investment Minister Rafidah Aziz.

Economic ministers from the Association of Southeast Asian Nations (ASEAN), a 10-nation market of 500 million people, will meet from May 2-7 in the Cambodian city of Siem Reap, site of the ancient Angkor Wat temples.

Their counterparts from China, Japan and South Korea are expected to join them under the so-called ASEAN plus three umbrella.

A spokesman for the ASEAN secretariat in Jakarta, M.C. Abad, said proposals to expand a free trade arrangement with Northeast Asia -- China, Japan and South Korea -- as well as Australia and New Zealand are expected to be tabled.

World Trade Organisation (WTO) issues such as the need for greater access for industrial goods, as well as agriculture and services, and the need to simplify the accession process for developing countries to the global trade body, were also likely to be raised.

An underlying issue was to make ASEAN relevant as an entity, analysts said.

"Frankly, the group has not done much to promote itself as a group," said Pande Raja Silalahi, an economist with the Centre for Strategic and International Studies in Jakarta.

"Everyone is promoting themselves to foreign investors, vying with others in offering better terms."

Expanding the ASEAN Free Trade Area (AFTA) to cover Australia and New Zealand could prove to be difficult for consensus-driven ASEAN, given strong opposition by Malaysia, analysts said.

In an apparent reference to Australia and New Zealand, Malaysian Prime Minister Mahathir Mohamad has warned against attempts by "some countries" to gain backdoor entry to AFTA using bilateral free trade pacts with ASEAN members.

"The challenge is how to make ASEAN more effective as an organisation and how to restore confidence, translated in terms of increased investment flows," said Jose Tongzon, an economics professor at the National University of Singapore (NUS).

Dealing with the US economic slowdown and tougher competition from China are the other challenges, he told AFP.

Southeast Asian nations, led by affluent Singapore, have been forced to slash economic growth forecasts this year as the US -- a key market for ASEAN exports -- looks set for a sharper economic fall than anticipated.

With the region still smarting from the blows of the Asian financial crisis in 1997 and 1998, ASEAN ministers should put aside their differences at Siem Reap to forge better economic cooperation, said Chaiwat Khamchoo, Dean of Political Science at Chulalongkorn University in Bangkok.

The general economic environment would be a major topic of discussion, along with strategies for the more advanced members to help their less developed neighbours, he said.

Thailand's priorities would be to push for better cooperation on tourism -- a crucial driver of the ailing Thai economy -- as well as on electricity generation in the Mekong sub-region which also covers Cambodia, Myanmar, Laos and Vietnam.

The other ASEAN members are Brunei, Indonesia, Malaysia, the Philippine and Singapore.

In the long-term, ASEAN economies should cut dependence on the US market by diversifying exports, promoting intra-ASEAN trade and reducing reliance on the US dollar through barter arrangements, Tongzon said.

AFTA, which would see tariffs brought down to between zero and five percent by 2003, should be strengthened to give the group a greater leverage against China, he added.

But the analysts said political bushfires were keeping investors at bay, pointing to troubles in Indonesia, ASEAN's largest member, and instability in the Philippines.

"Promoting ASEAN is not just a matter of perception. You also have to show the real thing in terms of improved environment," Tongzon said.