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.