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ASEAN needs single market to beat competition from China, India.

VIENTIANE, Sept. 27 Kyodo

Southeast Asian governments will have to create a single market to lure foreign investors amid fierce economic competition from China and India, ASEAN chief Ong Keng Yong said Tuesday.

''If we want to be competing with China and India, we should be having one seamless kind of arrangement, not 10 countries but one common area like one single market,'' Ong, who is secretary general of the Association of Southeast Asian Nations, told reporters after a meeting of ASEAN trade ministers and top investment officials.

After years of whittling away tariffs and eliminating investment barriers with various trade and investment liberalization schemes, the region still feels disadvantaged against the two emerging Asian economic giants.

Under the ASEAN Free Trade Area, maximum tariffs among countries in the region have already been slashed to 5 percent from as high as 100 percent previously, although tariffs for some sensitive products such as automobiles and parts are still at about 20 percent.

The group has also been trying to portray the region as a single location for investment with the ASEAN Investment Area.

But businesses still have to contend with non-tariff barriers, differing trade policies and some tariffs.

China, in contrast, offers a huge single production base and market without such problems.

The ASEAN trade ministers and investment officials discussed the issue during the ASEAN Investment Area council meeting earlier Tuesday and agreed in principle to look at ways to harmonize trade policies and lower the cost of business transactions for investors in the region.

The meeting of the council took place on the eve of the opening of an annual meeting of ASEAN economic ministers and related meetings Wednesday.

''Each ASEAN trade policy is quite prohibitive in terms of transactional costs, paying tariffs, (and) on top of that, cross-border, I have to declare customs,'' Ong said, describing the cost burden investors face.

''Actually, we are very attractive as a foreign direct investment location, but after a while it may be likely (investors) will be attracted elsewhere...if we want to assure ourselves of this high level of FDI for the next five years, we have to start thinking what are the problems that our investors face.''

Foreign direct investment into the region rose almost 40 percent to $26 billion last year despite the threat of global terrorism and the outbreak of infectious diseases such as avian influenza in some countries.

The United States was the top investor in the region, accounting for about 20 percent of the total, followed by Japan at 10 percent.
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Publication:Asian Economic News
Date:Oct 3, 2005
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