Wed, Nov 21, 2007 - Page 11 News List

ASEAN leaders ink EU-style economic blueprint

LOFTY GOALS Goods, services, investment and skilled labor will be allowed free movement. But protectionism, politics and poverty will make implementation difficult


Southeast Asian leaders adopted yesterday a blueprint to transform the region into a EU-style economic bloc that can counter China and India -- though analysts warn of a tough road ahead.

The roadmap sets targets and timelines to fuse ASEAN's 10 disparate economies into a single market and production hub by 2015.

Goods, services, investment, skilled labor and capital will be allowed to move across borders freely under the ASEAN Economic Community (AEC), though it will not involve a single currency like the euro.

Economists said the ambitious plan would boost the economic muscle of the sprawling region of 550 million people, roughly the same market size as the EU.

But they warned protectionism, political instability, poverty and snail-pace implementation are key hurdles to its success.

"These are very nice goals to stick up on the wall. Some are doable, but to achieve a single market is tough, unless all the countries are ready to open up," said Song Seng Wun, regional economist with CIMB-GK Research in Singapore.

"It's not going to be easy, given different stages of development in the region, the competing economic needs as well as the various political landscape," Song said.

A wide economic gulf divides Malaysia,Indonesia, Singapore, Brunei, Thailand and the Philippines -- from ASEAN's newer members -- Vietnam, Laos, Myanmar and Cambodia.

Economic assimilation in ASEAN has been sluggish and the region -- which has a combined GDP of roughly US$880 billion -- accounts for only 6 percent of global exports.

Myanmar's poor human rights records and political problems are also barriers to ASEAN's plans to boost linkages with its key trading partners, the US and the EU.

"Their hopes for more integration is likely aimed at maintaining their competitiveness versus China and India," said David Cohen, director of Asian forecasting at Action Economics in Singapore.

"It is a step in the right direction; 2015 is a reasonable target, but it might not be achievable. Protectionist policies can come in the way when countries try to integrate," Cohen said.

He cited Malaysia's policy of giving privileges to ethnic Malays in government contracts, jobs and other areas, which shut out opportunities for other investors.

Most ASEAN countries keep a tight grip over key industries such as banking andhealth care.

The AEC spells out plans to allow up to 70 percent foreign equity ownership in air transport, health care, information technology and tourism by 2010, for logistics services by 2013 and for other sectors by 2015.

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