Proposed trade agreement with Japan will lift ASEAN's GDP

Proposed trade agreement with Japan will lift ASEAN's GDP

Agence France-Presse, Singapore

A proposed trade pact with Japan could lift ASEAN's economic output by two percent and boost its exports to the Asian economic giant by US$21 billion, a senior Singapore trade official said Thursday.

ASEAN must enhance its business environment in order to continue attracting Japanese foreign direct investment (FDI) which has remained strong despite the rising attraction of China, Minister of State for Trade and Industry Raymond Lim said.

"The gains from working together will be substantial," Lim said in a speech at the annual ASEAN-Japan Business Meeting.

"The benefits of a FTA (free trade agreement) with Japan would even surpass those from a FTA with China due to the complementary nature of the Japanese and ASEAN economies," he said.

In a trip to the region earlier this year, Japanese Prime Minister Junichiro Koizumi's call for a closer economic partnership with the Association of Southeast Asian Nations (ASEAN) received backing from the region's leaders.

If the vision of a proposed trade pact is realized, Lim said the 10-member regional bloc's export volumes to Japan would grow by $21 billion by 2020, while Japanese exports to the region would also receive a similar boost.

"ASEAN's GDP (gross domestic product) growth will be boosted by 2.0 percent," he added.

Trade between Japan and ASEAN between 1995 and 2001 was worth $54 billion, higher than the $48 billion between China and Japan.

"The economic ties between Japan and ASEAN therefore remain strong," Lim said.

Isao Kaneko, president and chief executive of Japan Airlines, who co-chaired the meeting, said Japan has "consistently directed approximately twice as much foreign investment" into the 10- member regional bloc than it has to China.

He said the proposed ASEAN-Japan free trade pact should be further expanded to cover all of East Asia, which would include China and South Korea.

"There may be different ways to go about it: bilateral, multilateral or comprehensive ways in forming regional integration," he told the delegates.

"The important thing is, however, that we make steady progress as an ultimate goal in the formation of an economic partnership of all the countries of East Asia," he said.

During a meeting in Brunei last month, the trade ministers of ASEAN and Japan said they should start considering a framework that could lead to an FTA within 10 years.

ASEAN, which groups Cambodia, Laos, Myanmar, Vietnam, Singapore, Brunei, Indonesia, Malaysia, the Philippines and Thailand, is about the finalize a framework agreement on a proposed free trade pact with China which they also hope to seal within 10 years.

The framework -- which will guide negotiators -- is to be signed by the leaders of ASEAN and China when they meet for a summit in Cambodia next month.

South Korea has said it has directed a feasibility study on the possibility of a free trade accord with ASEAN.

ASEAN however is not keen on an East Asian free trade area, saying the regional bloc would be overshadowed by its bigger and wealthier Northeast Asian neighbors.

This is why ASEAN prefers to negotiate separate free trade pacts with China, Japan and South Korea. +