SE Asia on verge of falling into protectionism: Report
SE Asia on verge of falling into protectionism: Report
SINGAPORE (AFP): Southeast Asian economies are showing signs of slowing down on liberalization efforts, risking an erosion of competitiveness over economies such as China, Japan and India, a think-tank says.
A free trade area among the 10-member Association of Southeast Asian Nations (ASEAN) was in place, but the grouping had to speed up efforts and act more aggressively to prove the region offered major economies of scale, said the Political and Economic Risk Consultancy (PERC).
"We are growing increasingly pessimistic that Southeast Asia will actually move in this direction fast enough however," PERC said in its latest report.
"Instead, it could take exactly the opposite road or move so slowly that the hope for benefits never materialize because the rest of Asia has changed even more and multinationals have lost patience with ASEAN's attempts to become relevant from their perspective.".
PERC's recent survey of expatriate businessmen showed that among Southeast Asian countries, Indonesia, Malaysia, the Philippines and Vietnam were perceived to have turned more protectionist from a year ago.
Protectionist tendencies in Thailand were not as strong this year as in 1999, while Singapore was viewed as the most open economy in Southeast Asia.
In this year's survey of 12 Asian countries, Hong Kong took the top spot for being the most liberalized economy, followed closely by arch-rival Singapore.
Internal political problems in Indonesia, the largest of the Southeast Asian nations, hardly gave it the stature to lead the region towards liberalization, PERC said.
It noted that following the collapse of the Soeharto regime in 1998, Indonesia's market "is today more open than it has been in years."
"The problem is that economic conditions are so weak that the biggest barrier to imports is now the lack of demand. Moreover, political risks are high, as are exchange rate and payment risks," it added.
Tiny Singapore, despite its reputation for openness, faced difficulty in convincing its neighbors to take a more coordinated approach to trade, it added.
"The obvious government that would like to fill the vacuum left by Indonesia is Malaysia. Instead of wanting to pursue a more open trading system more aggressively, however, Malaysia's Prime Minister Dr. Mahathir (Mohamad) seems to be pushing for more protectionist policies," PERC said.
It was more likely Kuala Lumpur would oppose accelerating trade liberalization since its showcase industries such as automobiles and steelmaking were not yet ready to compete regionally or globally.
"Thailand, the Philippines and Brunei could try to cooperate with one another as well as with Singapore to move in this direction, but this modified group lacks the critical mass and complementary economic characteristics to be a really dynamic regional grouping," PERC said.
Respondents to the survey felt that in the Philippines, cronyism and corruption under President Joseph Estrada "has created more unofficial barriers to imports," even though Manila pursued market liberalization under the previous administration.
Reforms were proceeding in Thailand at a slow rate and with mixed benefits for foreign business, the report added, citing a new law outlawing the use of Thai nominees to hold shares on behalf of foreign owners, which could hurt small and medium-sized firms operating under such a scheme.
Expatriates' perceptions of Vietnam were poor, because of the weak demand there as well as high tariffs on imports.
"Unlike the case of China, however, foreign companies are unlikely to get very enthusiastic about Vietnam even if the country joins the WTO (World Trade Organization). The market is too small," it said.