Also, ASEAN as a combined economy would rank among the world’s top 10 in terms of foreign direct investment inflows. Fears of China taking every foreign direct investment (FDI) dollar from ASEAN have not been matched by reality. ASEAN still managed to attract US$60 billion of FDI last year, with intra-regional investment accounting for a sizeable portion as foreign investors, especially from within Asia, see countries such as Indonesia and Vietnam as alternative manufacturing bases as the cost of doing business in China rises. In fact, relative to the sizes of their economies, ASEAN attracted more FDI than China — China absorbed US$108 billion of FDI last year, while its GDP was three times the size of ASEAN’s.
That said, further enhancements are badly needed to increase foreign investor interest in ASEAN. The region’s economic integration is still at an early stage and much more work is required to remove barriers to the trade of goods and the free flow of capital, information and talent. These measures are relevant to businesses as they enhance access to the whole ASEAN consumer market from any one member country.
Amid the rise of China and India, there are ongoing concerns that some of South East Asian nations may be marginalized. This is primarily a result of the economic and political diversity of ASEAN members. For example, the World Bank’s Doing Business Survey 2010 ranks Singapore as the easiest place in the world to do business, while it ranks Laos 167th out of 181 countries. Politically, ASEAN’s members range from Indonesia, the world’s third-largest democracy (after India and the US), to Myanmar at the other end of the spectrum. Brunei’s economy is heavily dependent on oil and gas. Thailand, Vietnam, Indonesia and Malaysia have considerable agricultural production bases. By contrast, Singapore has few, if any, natural resources and relies on imports for local consumption and manufacturing, while financial services and trading drive its economy. Singapore, ASEAN’s richest member, has a per capita GDP 150 times higher than its poorest, Myanmar, and 15 times the ASEAN average. While Singapore, Malaysia and Thailand boast the region’s best ports, airports and transportation networks, other ASEAN countries are disadvantaged because of poor logistics and infrastructure.
Clearly, ASEAN’s smaller members need a common platform to represent their interests and ASEAN could become that key channel through which these members can make their voices heard on the global stage.
The challenge for ASEAN leaders who converged in Thailand this month for the 15th ASEAN Summit was therefore to convince the business sector and investors that ASEAN is a workable concept. The ASEAN Charter, adopted by all 10 members last year, is an important step forward towards integration. The plan to establish an ASEAN Economic Community by 2015, while ambitious, is necessary to push the region’s integration forward and thus help establish ASEAN as a global economic powerhouse.
Tai Hui is regional head of research, Southeast Asia, at Standard Chartered Bank.
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