ASEAN Trade Plan Gets Boost 
International Herald Tribune
July 20, 1991
Michael Richardson

A plan to create a free-trade area with a market of 300 million consumers in Southeast Asia gained momentum Friday as senior officials warned that failure to pursue economic integration would put the region at a competitive disadvantage to Europe and the United States.

Opening the annual meeting of foreign ministers of the Association of South East Asian Nations, Prime Minister Mahathir bin Mohamad of Malaysia endorsed a recent proposal by Thailand that "we work toward establishment of an ASEAN Free Trade Area sometime by the turn of the century."

He said that trade liberalization would strengthen ASEAN and "reinforce our trade links with other countries and regions."

Arsa Sarasin, Thailand's foreign minister, said that an increasing global trend toward economic integration, as seen in the emerging single market in Europe and the formation of a free-trade area linking Canada, the United States and Mexico, "presents ASEAN both with new opportunities for trade and investment as well as the challenge of more intensive economic competition."

The proposal for a phased reduction of tariff and nontariff barriers to sustain rapid rates of economic growth in ASEAN and make it more attractive to foreign investment was put forward by Prime Minister Anand Panyarachun of Thailand. It has already been endorsed by Prime Minister Goh Chok Tong of Singapore.

But Mr. Goh said he thought it might take 20 years to create an integrated ASEAN market, rather than the 10-year time frame that Mr. Anand suggested.

The other members of ASEAN are Brunei, Indonesia and the Philippines.

Analysts said it was significant that three of the ASEAN heads of government have now come out in support of the free-trade plan.

All six leaders are to hold a summit meeting in Singapore in January to set new programs for the group, which has been more successful at political and diplomatic cooperation than in developing economic cohesion since it was formed in 1967.

However, some analysts cautioned that disparities in the size, structures and levels of development of national economies in ASEAN would make an across-the-board phaseout of tariffs by the end of the decade difficult to achieve.

Indonesia, by far the largest ASEAN country, has proposed that tariffs be reduced only in selected industrial sectors, although it has said that all tariffs in chosen sectors would be cut.

ASEAN officials and economic ministers are to work out concrete proposals over the next six months to put to the summit meeting in Singapore for final decision.

The Philippines has said that whatever is decided at the meeting should be made legally binding through an ASEAN treaty of economic cooperation. In the past, cooperation proposals have been announced by political leaders of ASEAN, only to run into vested national interests and rivalries.

Despite preferential trading arrangements that have reduced tariffs on nearly 16,000 individual items, trade between ASEAN nations accounts for only about 20 percent of the group's total trade, most of which is with the United States, Europe and Japan.

However, officials said that in recent years most ASEAN states had substantially lowered import barriers to become more internationally competitive and that this process would continue.

Mr. Mahathir said that with rapid economic growth, disparities between countries in the region would narrow considerably by the end of the decade. External and internal markets for ASEAN products will also have expanded by then, "thus making the problem of competing economies less relevant," he added.

Fear of being left behind by other emerging growth centers is also driving ASEAN toward closer economic integration.

Foreign Minister Wong Kan Seng of Singapore said that unless ASEAN could "match and even outstrip" the United States and Europe in structural economic reforms, trade and investment might be diverted away from Asia toward the bigger regional markets.

Copyright © 2006 The International Herald Tribune