Q: What were the key results of the 18th Association of South-east Nations (Asean) summit in May this year, and what issues should the next summit address in November?
A: The focus of the leaders was the implementation of the Asean community. We focused on the implementation of Asean’s political, economic and socio-cultural security communities, and we examined how we can ensure equitable economic development for everyone, not just the private sector. Another issue concerns Asean’s ability to manage its regional architecture, and looking at how Asean can play a central role in driving the integration process in Asia.
Going forward, the 19th summit [in November will focus upon] where the global economy is heading, and how Asean should gear itself to meet those challenges. We will also look into how to address food and energy security concerns as we integrate.
Q: Is Asean’s economic growth and advancement dependent on FDI? Furthermore, how would you assess Asean on its FDI performance, both as an outward investor and as a recipient of FDI?
A: FDI has been an important contributor to Asean’s economic advancement. Our growth will depend on FDI flowing into the region because it brings with it investment, technology, innovation, resources and it creates employment. Generally, Asean has performed quite well. In 2010, we recorded unprecedented FDI flows into the region worth $75.8bn, which exceeded inflows in 2009 worth $37.8bn.
Yet we need to look into attracting more FDI. At the end of 2010, inward FDI flows represented 4.2% of Asean’s GDP and we can do more to increase that.
Our biggest strategy has been to sell Asean as a single investment destination. We have the Asean Comprehensive Agreement which will be enforced early next year. This agreement will serve as one single agreement treating both Asean-origin investors and Asean-based foreign investors equally. We have included within this a dispute settlement mechanism, so if private companies have any particular issue, they have a mechanism of redress.
There is a lot of global competition in attracting FDI and an area we must inspect is doing business in the region and reducing transaction costs. By this I mean streamlining requirements for new businesses, encouraging more entrants into the markets, and removing beyond-the-border barriers to FDI. We are now focusing on key high-impact targets in terms of ease of doing business and what can be done to promote FDI flows.
Q: To what extent has Asean been affected by shocks in the global economy? How does the possibility of a double-dip recession affect your evaluation of Asean’s economic and financial prospects?
A: Although Asean’s exposure to the sovereign debt crisis in Europe is restricted due to limited exposure by European banks in Asean, the potential for spill-over effects of the crisis in the region cannot be discounted, especially as the crisis intensifies. This potential can be seen by the reaction of Asean economies to developments in the eurozone and US. In the past six months, growth decelerated, particularly in more open economies in the region such as Singapore. Yet this crisis has had a differential impact on individual Asean member states. The impact of the crisis was less marked in countries with strong domestic markets such as Indonesia.
Despite the continual uncertainty in the global economy, the outlook for Asean remains positive. In 2011, based on our own assessments, Asean is expected to grow between 4.9% and 5.6%. Growth will be supported by the rebound in exports, continued expansion in domestic demands and increased confidence in the region. With the establishment of the Asean economic community, the complete integration of our market by 2015 will provide a more competitive dynamic environment for investments to flow into the region.