S'pore warns against ASEAN protectionism
S'pore warns against ASEAN protectionism
SINGAPORE (AFP): Singapore urged fellow Southeast Asian nations Thursday to step up economic reforms despite the easing of a severe crisis, warning that a slide into protectionism would be ineffective and costly.
As signs of resistance to short-term tariff reduction emerged in the region, Prime Minister Goh Chok Tong stressed the need for more aggressive liberalization efforts by the Association of Southeast Asian Nations (ASEAN).
Opening annual talks of trade ministers from the 10-member group, Goh said the political transition in Indonesia, a slowdown in major export markets and geopolitical factors posed challenges to Southeast Asia's economic rebound.
"Positive signs of recovery in the region have raised hopes that things will get better. But to conclude that we can now slow down the pace of liberalization is to draw the wrong lessons from the crisis," he said.
Two years after regional economies were shaken by currency turmoil, output growth has returned, exchange rates have largely stabilized, inflation has been tamed, and exports are growing strongly. The International Monetary Fund estimates growth in ASEAN countries this year to average 2.6 percent.
"Despite these improvements, I would caution against any hasty conclusion that things would only get better," Goh said.
"ASEAN faces both internal and external challenges," he added, noting that foreign investment and bank lending activities remained weak.
He said regional political stability "will be a crucial factor" and that developments in Indonesia, the largest ASEAN member with two-fifths of its population, will be closely watched by investors.
ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Together they have some 500 million consumers and a gross domestic product of US$700 billion.
Goh said the health of the US, Japanese and Chinese economies would affect ASEAN's prospects, and stressed the importance of a stable relationship among the three Asia-Pacific powers.
"An unstable one will snuff out economic recovery in the region," he said.
Goh brought up the challenge posed by other regions also opening up their markets, and the danger of protectionism within ASEAN.
"We could risk being sidelined in the next wave of economic growth, or worse, hollowed out as foreign trade and investments flow to those economies," he said.
"Protectionist policies aimed at stemming foreign competition have not been viable in the past, and such a response in ASEAN will be counter-productive to our efforts to grow our economies," Goh said.
Goh did not single out any country but on Wednesday, Malaysia confirmed it would shield its vital automotive industry from a tariff-reduction scheme aimed at creating an ASEAN Free Trade Area.
Malaysia's Trade and Industry Minister Rafidah Aziz said her country was unlikely to include cars in the tariff-slashing plan that was to become operational on January 1, 2000. Malaysia slaps heavy duties on imported cars to protect its national car Proton.
Indonesia, the worst hit by the economic crisis in the region, also indicated it could defer opening up its car market.
Goh reiterated his call for a joint ASEAN marketing campaign in industrial countries in the form of investment roadshows.
"This specific proposal is aimed at showing that ASEAN is back in business," he said.
Despite the car tariff-slashing snag, ASEAN members have reiterated their long-term goals.
They agreed Wednesday to expand a cross-investment scheme and to turn the region into a completely free trade area by 2018, two years earlier than the deadline set by the broader Asia-Pacific Economic Cooperation (APEC) grouping.
ASEAN leaders decided at a summit in Hanoi last December to put 90 percent of all intra-ASEAN trade within the zero to five percent tariff range by next year.