Southeast-Asia need to rethink investment policies: bank
Southeast-Asia need to rethink investment policies: bank
SINGAPORE (AFP): Non-communist Southeast Asian countries may
have to consider new measures including opening domestic markets
to revive flagging foreign investor interest, a merchant bank
said.
Merrill Lynch International Bank said 1993 data on direct
foreign investment approvals largely confirmed earlier suspicion
that the sub-region's attractiveness was slipping as foreign
investors focussed more on China, India and Vietnam.
"Malaysia and Thailand were the worst hit, with each facing a
60-to-70 percent drop in approvals, while Indonesia experienced a
more modest four percent fall," the bank said in its latest Asian
Economic Commentary.
The bank said although the actual number of projects
implemented in Indonesia and Thailand had shown an increase,
Southeast Asian countries might still need to re-orient their
economic and investment policies.
The bank said greater domestic market access might hold the
key to reviving foreign investor interest now that the need to
re-locate industries, particularly by the Japanese and Taiwanese,
to cope with appreciating currencies had been met.
Liberal
Current investment laws relating to permissible foreign
equity, particularly in Indonesia and Malaysia, were generally
liberal as long as a major chunk of production was for exports.
However, if export obligations are not accepted, the
permissible foreign equity levels fall sharply, even to below 50
percent.
The commentary said that, in the longer term, Southeast Asia
could greatly enhance its attractiveness as a market if it
succeeded in bringing down present trade and investment barriers
within the region itself.
The Association of Southeast Asian Nations, which groups
Brunei, Indonesia, Malaysia, the Philippines, Singapore and
Thailand, launched a tariff reduction scheme in January to create
an ASEAN Free Trade Area (AFTA) in 15 years.
"Unfortunately, the signs so far have not been encouraging and
quick implementation of AFTA remains questionable," the bank
said, adding that most ASEAN countries would not start cutting
duties until almost the end of the time-frame.
Investment laws relating to supporting services industries
like commerce and finance might also have to be reviewed to
reinforce the attractiveness of the countries to manufacturing
investors, the bank said.
The next wave of foreign investment into Southeast Asia could
well be in the services industries if host governments were
prepared, under suitable conditions, to lay out the welcome mat,
it added.