ASEAN Tiger burning bright once more

By NARENDRA AGGARWAL

SOUTH-EAST Asia, the tiger that lost its stripes, is back with a roar. Five years after the outbreak of the Asian financial crisis in 1997, the region is fast regaining its reputation as an economic area with a bright future.

Among others, its regional neighbours -formidable economies in their own rights - are proving keen to deepen economic ties with this market of 500 million people.

At the just-concluded 34th Asean Economic Ministers meeting in Brunei, the emerging powerhouse of China, along with Japan, South Korea, India, Australia, and New Zealand, were all courting the 10-nation grouping.

They came dangling ties of all forms - free trade agreements (FTAs), closer economic partnerships and bilateral regional trade and investment treaties.

Whatever the name, the bottom line was the same: Asean's neighbours wanted mutual trade barriers to be brought down so goods can move more freely between them and South-east Asia. With an eye on the future, they also pushed for the "free trade" concept to cover services and investments.

Why is Asean - consisting of Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Cambodia, Laos, Myanmar and Vietnam suddenly so attractive?

A big reason is that South-east Asia is well on its way to becoming one trade area as envisaged under the Asean Free Trade Area (AFTA) agreement. The older Asean members are very close to the finish line, having lowered tariffs on 98 per cent of the goods imported by them to 5 per cent or below on average.

The four newer members - Cambodia, Laos, Myanmar and Vietnam - have been given more time to lower their tariff barriers and become fully integrated in Afta.

Solid evidence of the attractiveness of Asean comes from a new study which shows that foreign direct investment rose a robust 13 per cent to U8$13 billion (S$23.1 billion) last year.

No doubt, the bulk of this was reinvestment. But the fact that foreign investors chose to plough their earnings back in the region is a huge vote of confidence in Asean. It is also very encouraging that most of the money went to new projects, instead of buying existing businesses.

As for FTAs, there seems to be a race among the regional economic powers to cement their relations with Asean. China hopes to conclude one within 10 years. As FTA negotiations can often be protracted, it has promised an "early harvest" in the form of tariff-free access for selected goods as early as 2004.

Spurred by China's swift action, Japan has also jumped into the fray. Though a late starter, Tokyo is seeking a "Closer Economic Partnership" with Asean through a pact that will include elements of an FTA, and it is even willing to include the sensitive area of agriculture in the negotiations.

Malaysia, too, has done a about-turn on FTAs. Once openly critical of Singapore's push for bilateral FTAs, Minister for International Trade and Industry Rafidah Aziz now expresses unqualified support for the FTAs being sought with Asean.

Not to be left out, India now wants to join Afta. Its claim is based on it having a long common border with Myanmar. That application will be examined at the coming Asean leaders' summit in Cambodia in November.

These developments are a big plus for Singapore's push  for free trade agreements.   The Asean Economic Ministers meeting in Brunei showed that the 10-nation grouping is back in business. The tigers are burning bright.

[The writer is The Straits Times Economics Correspondent.]