Asean economies may be booming, but trade among member countries has fallen as a proportion of their total exports.

THE 10 Asean economies may be booming, but trade among member countries has fallen as a proportion of their total exports.

This casts a worrying shadow on the region’s long-standing ambitions to become a unified economic market by tearing down trade barriers and cooperating more closely.

The finding, in a new report, provides food for thought for Asean leaders meeting in Singapore from tomorrow to Thursday at the 13th Asean Summit.

The overly slow removal of non-tariff barriers by Asean countries, as well as China’s phenomenal economic growth, are to be blamed for the decline, said the Economist Intelligence Unit (EIU) report.

Last year, exports to other Asean nations by the region’s six biggest economies made up 20.9 per cent of their total exports, down from 22.4 per cent in 2000, the study found, using United Nations data.

In Singapore, the share of exports to other Asean nations fell to 21.2 per cent from 26.7 per cent.

‘This doesn’t augur well for Asean’s aspirations to become a single trading bloc,’ said EIU Asia-Pacific editorial director Charles Goddard.

‘Some non-tariff barriers are still not broken down. There are still significant hurdles to trade within Asean,’ he said at a press conference.

Sponsored by DHL, the report was published yesterday, to coincide with the start of the Asean business and investment summit that the express delivery giant also sponsored.

‘This report makes clear that governments of Asean nations must redouble their effors to reduce trade barriers in their own backyards,’ said DHL Asia-Pacific chief executive Dan McHugh. ‘Intra-Asean trade still has great potential to provide economic opportunity and raise living standards.’

In absolute terms, intra-Asean trade is up, but it has been eclipsed by the even faster growth of exports to China.

Its economic rise and its role as the world’s final assembly centre have made China an increasingly popular destination for Asean component makers. Exports to China account for 7.3 per cent of total Asean exports, up from 3.8 per cent seven years ago.

Citibank economist Chua Hak Bin said: ‘Ultimately, the size of trade flows is dependent on the pace at which external markets grow. The strongest markets have been China and India, which have surpassed Asean in growth.’

Still, Asean can do more to boost a greater exchange of goods within the region, said DHL South-east Asia head Yasmin Khan. While Asean has harmonised customs regulations, she said, differences in implementation still cause delay in some countries.

Asean’s plans to create a single market by 2015 will address some issues, Mr Goddard said. ‘But to be honest, quite a lot more needs to be done - and quickly.’

Economists say the dismantling of trade barriers has been slower than planned.

‘Nationalist sentiment among some Asean members is still strong,’ said Citibank’s Dr Chua. ‘There have been instances where investments from neighbouring countries were viewed with suspicion.’

Asean is unlikely to achieve a European Union-level of integration, as differences in economic development and wealth are too wide, Fortis Bank Asia market strategist Joseph Tan said.

‘I don’t think there’s sufficient political will to push towards the 2015 goal. Many member countries have more immediate domestic challenges to worry about.’



Source: The Straits Times 17 Nov 07