JAKARTA, Mar 7 - Speaking before the Asia-Pacific Executive Forum in Manila on Thursday, ASEAN Secretary-General Rodolfo C. Severino Jr. said that, for Southeast Asia to compete with China, it should “integrate the regional economy to a degree closer to the integration of the Chinese market.”

Severino noted that the opening of the Chinese economy resulted in the surge in its growth and inflow of foreign direct investment.  China’s GDP grew at double-digit clip in 1992-1995 period and then very gradually decelerated, reaching bottom in 1999, at 4.7%, then started back up at faster rate than ASEAN countries at 6.8% in 2000 and 7.3% in 2001.  FDI into China soared from just over US$11B in 1992 to US$44B in 1997, dropping slightly to a little more than US$40B in 1999 and US$40.8B in 2000.

ASEAN countries have been confronted with more intense competitive environment arising not only from emergence of such rising economies as China and Mexico but also from the drop in the supply of FDI worldwide as a result of the global economic slowdown, Severino said.

The Secretary-General said that countries of Southeast Asia have recognized what it takes to be able to compete in this environment.  At the national level, these include more efficient allocation and use of resources, strengthening of financial institutions, advancement of rule of law, predictable policies, reduced corruption and red tape, ability to use technology, including IT, growing domestic market, and access to external markets. 

At the same time, “recognizing that small, fragmented national markets are much less attractive, ASEAN countries are doing things together to project Southeast Asia as an integrating regional market,” Severino said.  He added that integrating the ASEAN economies would meet the demand of today’s investors for large and growing domestic or regional markets in which to operate. 

The ASEAN Free Trade Area is the cornerstone of ASEAN’s efforts at regional economic integration.  About 95 percent of intra-ASEAN tariffs, representing around 90 percent of intra-ASEAN trade, is now in the 0-5 percent tariff range.  The average tariff on intra-ASEAN trade is now down to 3.2 percent. 

The lowering of tariffs to minimal levels in ASEAN has been accompanied by a substantial expansion of intra-regional trade – from US$44.2 billion in 1993 to US$97.8 billion in 2000, with the share of intra-ASEAN trade in total trade expanding from 21 percent in 1993 to about 24 percent in 2000.

While increasing its competitiveness as an economic region, ASEAN remains open to global economy, Severino assured.  “ASEAN’s response to China’s challenge is not to erect walls against it but to engage it in order to take advantage of the potential of surging Chinese market,” Severino added. 

An ASEAN-China joint experts group report indicates that an ASEAN-China FTA will increase ASEAN’s exports to China by 48 percent and China’s exports to ASEAN by 55 percent.  The report also estimated an increase of ASEAN and China’s GDP by 0.9 percent and 0.3 percent, respectively.  ASEAN will begin negotiations on establishing free trade area with China this month.