SE Asia set for 2-speed race to single market

Kuala Lumpur, Aug 17: Southeast Asia's race toward economic integration threatens to divide the region at talks in Malaysia next week, with bigger economies keen to take the lead.

The region's more mature economies such as Singapore and Malaysia are expected to push at a meeting of economic ministers for a single Southeast Asian market to be achieved by 2015, five years' sooner than the existing target of 2020.

But the least-developed members of the Association of South East Asian Nations (ASEAN), which is driving the integration process, are uncomfortable with the idea and want to stick with 2020, an official familiar with the meeting's agenda said.

''It must have some flexibility for less-developed countries,'' the official said, adding that only five or six of ASEAN's 10 members were confident of meeting a 2015 timetable, Singapore, Malaysia, Thailand, Indonesia, Brunei and the Philippines.

ASEAN encompasses more than 500 million people and has a collective economy bigger than India's. But its members span the development spectrum, from a modern services-based economy such as Singapore to one of the world's poorest nations, Myanmar.

ASEAN also groups Cambodia, Laos and Vietnam.

It has trouble moving at a single pace, but its more mature economies are under pressure to cut the cost of doing business in the region because of stiff competition for trade and new investment from Asian rivals such as China and India.

Under the plan for a single market, goods would flow freely across borders and restrictions on flows of capital and labour would ease, making the region a cheaper place to do business and allowing home-grown businesses to expand and compete globally.

ASEAN has been a free-trade area since 1993, but many goods are still currently excluded and services are not covered.

RIVALS WITHIN

The more developed ASEAN states also face competition from within the group, especially from Vietnam, home to 82 million people and some of the lowest production costs in the world.

''Within ASEAN, there is also pretty intense competition for investment,'' said Dom LaVigne, Singapore-based regional director of the US-ASEAN Business Council.

In Malaysia and Singapore, the two most developed ASEAN states, foreign direct investment (FDI) slipped 9 percent and 1 percent respectively between 2004 and 2005, according to UN data.

In contrast, FDI in Vietnam is booming. In the first quarter of 2006 alone, it grew 24 percent from a year earlier, Vietnamese figures say.

ASEAN economic ministers will also focus on cutting the costs of doing business by harmonising product standards, including labelling and safety rules, and customs procedures.

Currently, foreign goods that have already cleared customs on arrival in ASEAN face further checks and differing inspection regimes as they move around inside the region.

ASEAN is also set to sign a trade and investment framework agreement next week with visiting US Trade Representative Susan Schwab. There is talk the agreement could lead to an ASEAN-US free-trade deal but US diplomats have played this down.

After the suspension of world trade talks last month, the focus of trade has switched to bilateral and regional trade deals. ASEAN is moving toward free-trade deals with Japan, China, India, South Korea, Australia and New Zealand.

ASEAN has also taken small, first steps toward trade liberalisation with the EU and the United States.

REUTERS