SE Asia must boost free trade area: WTO chief designate

SE Asia must boost free trade area: WTO chief designate

KUALA LUMPUR (AFP): Southeast Asia must strengthen its free trade zone and seek new members to meet even stronger competition from China after it joins the World Trade Organization, the WTO's next chief said on Thursday.

The ASEAN Free Trade Area (AFTA) "will have to take a good look at the goal we set for ourselves," WTO director-general designate Supachai Panitchpakdi told an economic forum.

When the Association of Southeast Asian Nations (ASEAN) created AFTA in 1993, the aim was to create a wider marketplace so it could compete with China.

While AFTA had been effective in promoting regional trade, Supachai said it had largely failed in attracting foreign direct investment.

About 60 percent of foreign investment in Asia now went to China compared to 16 percent into ASEAN -- a reverse of the trend eight years ago.

"We have not been successful in stemming the tide... investment still flows in larger and larger numbers proportionately into China," said the former Thai deputy premier and commerce minister.

ASEAN must rethink its economic integration efforts especially with China's prospective WTO entry by late this year or early 2002, he said.

"We should move as soon as we can into deeper economic integration within ASEAN. We are now working only on the mobility of products. We have to also enhance the mobility of capital and the mobility of human resources," Supachai said.

ASEAN members should see how they could cooperate in jointly managing their exchange rate regimes, he said.

AFTA had focused on manufactured products and was only now moving towards liberalizing agriculture and services, he said, adding that progress was still slow.

It should also actively seek new members.

Supachai said he had proposed linking AFTA with the Closer Economic Relations grouping formed by Australia and New Zealand.

"I have quite strong hope that in due time ASEAN will be really looking for new members beyond our borders," he added.

Supachai said AFTA, whose aim is to create a single market of more than 300 million people, must engage China as soon as possible.

"Everybody will be coming and fighting to get some market niches. That is the raison d'etre for China joining WTO... we might be net losers if we are too late and there might be pressure for China to put down some new rules on these products."

He said China should also be incorporated into an ASEAN investment area.

Under AFTA, ASEAN's six original members must cut tariffs on imports for agreed products to a maximum of five percent by January 1, 2003.

The original six ASEAN members are Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. Vietnam, Laos, Cambodia and Myanmar have joined in recent years.

Supachai said ASEAN, which recently set up a network of bilateral swap arrangements, should work on institutionalizing the network to form a so-called Asian Monetary Fund for "funding of last resort."

This would stem a crisis immediately rather than waiting for help from the International Monetary Fund but the fund "should not be delinked totally" from the IMF.