Singapore: Southeast Asian countries are pushing ahead with regional free trade as they are scared of being left behind by Asia’s economic powerhouses, China and India, government ministers told a conference on Sunday.
The Association of South East Asian Nations (ASEAN), set to sign a charter next week in a step towards economic integration by 2015, face challenges such as opening up strategic sectors to foreign competition, developing consumer-led economies and the regulation of their financial markets.
“This ASEAN blueprint is going to be our wedding certificate — the cost of not integrating is like signing the death of Cambodia,” said Cham Prasidh, Cambodia’s commerce minister, at an ASEAN business and investment summit in Singapore.
The 10 ASEAN countries have a combined economy of $1 trillion, slightly bigger than India’s, but delegates said production was often driven by multinational firms, many of which were moving manufacturing operations to China.
ASEAN aims to create a single market and production base with free flow of goods, services and investment, and freer movement of labour and capital, starting by eliminating trade barriers within a few years.
“We have a window of opportunity in the next three to five years to do this ... to compete with China and India,” said Lim Hng Kiang, Singapore’s trade minister.
The biggest worry was how to face up to overseas competition in protected sectors from agriculture to automobiles.
“How prepared are we to open up our economies?” said Mari Elka Pangestu, Indonesia’s trade minister. “It all looks good on paper but there will be difficulties in implementation.”
Business executives said these difficulties included the need for better governance, reducing corruption and more flexible labour laws.
Piyush Gupta, head of ASEAN markets and banking for Citigroup in Singapore, said leaders needed to start by focusing on the nuts and bolts of financial market integration, such as reducing the complexity of trading across markets, promoting cross-border equity issuance and a transparent rating system.
But a common currency like that in the European Union was unlikely.
“Given divergent economies, it’s not on the cards in the 2015 timeframe,” Gupta said, adding that other possibilities included currencies pegged to a currency basket or co-ordination between central banks.
Haruhiko Kuroda, president of the Asian Development Bank, said he expected ASEAN’s high-tech goods exports and high-value services to increase in five to 10 years, but that developing a free ASEAN market and better higher education was crucial to making the region competitive.
“We are running behind but running fast,” said Cambodia’s Cham Prasidh.