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The political economy of the asean free trade area (afta) - səhifə 12

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negative correlation was not lost on ASEAN officials and leaders.


  China’s potential 

accession to the WTO and the anticipated diversion of FDI to China as a result added to 

the sense of urgency among the ASEAN leaders with regard to the FDI situation.   


Concern about the future of FDI flows to ASEAN became especially pronounced 

by the middle of 2001, and it was this that finally prompted member governments 

including Malaysia to review the AIA in September 2001.


  By this time, it seemed clear 

that growth in ASEAN was in serious jeopardy as all the main engines of growth in the 

global economy – the US, Western Europe and Japan – seemed headed into recession.  In 

fact, it had become clear by early 2001 that a global economic slowdown was imminent, 

threatening the recovery that most member economies had experienced over 1999-2000 

(MIER, 2001a&b).  Falling demand in the US during 2001, still the region’s main export 

market meant that the ASEAN region appeared to be facing a more severe downturn than 

the 1997-98 regional financial crisis.  Not only were export markets threatened, but 

foreign investment too was expected to slow further as a result.



In short, growth and FDI had, by the middle of 2001, emerged as the 

overwhelming priority for the ASEAN governments, including Indonesia and Malaysia.  

In addition, foreign investors, notably American investors pressed the ASEAN 

governments to accelerate national treatment under the AIA by citing the need to counter 

the diversion of FDI to China.


  It must be emphasised, however, that the relative decline 

of FDI inflows to ASEAN throughout the 1990s, and especially since the financial crisis, 

was not directly the result of the ASEAN-foreign distinction in the AIA.  Nevertheless, 

there was concern in ASEAN that the clause could send the wrong signals to foreign 

investors at a time when ASEAN was facing a rather precarious foreign investment 

situation.  The ASEAN decision of 16 September 2001 to allow market access and 

national treatment for all investors by 2010 in the non-manufacturing sectors was, 

therefore, directed at re-affirming ASEAN’s openness to FDI.


  The attempt at 

developmental regionalism was halted, and open regionalism (at least, the FDI variant) has 

re-emerged as the main feature of ASEAN economic regionalism in the quest for growth.   



 Financial Times, ‘Foreign investors desert Southeast Asia for China, 13 October 2000. 


 Interview with a senior Malaysian trade official, December 2000.   


 See Chairman’s Statement, Seventh ASEAN Summit, 11 November 2001. 


 Press Release of the US-ASEAN Business Council, 13 September 2001.   


 See Press Statement, Fourth AIA Council Meeting, 14 September 2001. 



Yet, it is also important to bear in mind that member governments have not agreed 

to implement complete regional investment liberalisation in non-manufacturing sectors 

anytime soon.  This is targeted for 2010, suggesting that at the national level, full 

investment liberalisation will proceed cautiously.  Domestic capital, in short, remains a 

key focus in the individual ASEAN economies, but support for it will likely be addressed 

through national instruments where possible and available rather than concerted regional 

ones.  The regional instrument has been reserved once again to realise the FDI/growth 

imperative, but this is not to suggest that domestic distributive priorities have been 

marginalised across ASEAN.  In fact, the AFTA experience confirms that the tussle 

between growth and domestic distribution is a key dynamic driving regional cooperation.  

Although not discussed in this paper, the delays in negotiating services liberalisation and 

Malaysia’s temporary withdrawal of automobiles from AFTA disciplines further reveal 

that there are sectors where regional liberalisation will proceed cautiously, driven by 

domestic distributive priorities despite the overall concern with growth.


  Thus, while 

governments in Southeast Asia may turn to regionalism as a collective policy response to 

the pressures associated with globalisation, as in the case of AFTA, it remains the tussle 

between growth and domestic distributive imperatives that will ultimately shape regional 

cooperative outcomes and the precise form of regionalism.   




Aside from its empirical insights into the dynamics of ASEAN economic 

regionalism in the 1990s, this paper is of wider analytical significance.  Theoretically, it 

confirms the domestic level as a key level of analysis in explaining the relationship 

between globalisation and economic regionalism.  Thus, regionalism may be one of three 

basic types, namely open regionalism, a resistance model, or a developmental version.  

Which project ultimately emerges is determined at the domestic level, where the domestic 

social and political setting mediates globalisation in significant ways.  The analysis of 

AFTA has demonstrated that the particular domestic setting influences the way 

international events are interpreted by policymakers and other groups, their potential 

impact assessed and policy choices made.  In short, while the systemic level – 



 This is discussed more fully in Nesadurai (2001). 


globalisation – may well provide the initial trigger or impulse for regionalism, domestic 

political dynamics that shape the nature of domestic coalitions mediate the final outcome.  

It is precisely this form of interaction that gave rise to the distinct approaches to economic 

regionalism we have seen in ASEAN.   






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1.    Vietnam-China Relations Since The End of The Cold War 

Ang Cheng Guan 



2.    Multilateral Security Cooperation in the Asia-Pacific Region: Prospects and 


Desmond Ball 



3.    Reordering Asia: “Cooperative Security” or Concert of Powers?  Amitav Acharya 



4.    The South China Sea Dispute re-visited   Ang Cheng Guan 



5.    Continuity and Change In Malaysian Politics:  Assessing the Buildup to the 

1999-2000 General Elections 

Joseph Liow Chin Yong 



6.    ‘Humanitarian Intervention in Kosovo’ as Justified, Executed and Mediated 

by NATO:  Strategic Lessons for Singapore 

Kumar Ramakrishna 



7.    Taiwan’s Future:  Mongolia or Tibet?  Chien-peng (C.P.) Chung 



8.  Asia-Pacific Diplomacies: Reading Discontinuity in Late-Modern 

Diplomatic Practice  

Tan See Seng 



9.    Framing “South Asia”: Whose Imagined Region?  Sinderpal Singh 



10.   Explaining Indonesia's Relations with Singapore During the New Order 

Period: The Case of Regime Maintenance and Foreign Policy 

Terence Lee Chek Liang 



11.   Human Security: Discourse, Statecraft, Emancipation   Tan See Seng 



12.   Globalization and its Implications for Southeast Asian Security: A 

Vietnamese Perspective 

Nguyen Phuong Binh 



13.   Framework for Autonomy in Southeast Asia’s Plural Societies   Miriam Coronel Ferrer 



14.   Burma: Protracted Conflict, Governance and Non-Traditional Security Issues  Ananda Rajah 





15.   Natural Resources Management and Environmental Security in Southeast 

Asia: Case Study of Clean Water Supplies in Singapore  Kog Yue Choong 



16.   Crisis and Transformation: ASEAN in the New Era   Etel Solingen 



17.   Human Security: East Versus West?  Amitav Acharya 



18.   Asian Developing Countries and the Next Round of WTO Negotiations  Barry Desker 



19.   Multilateralism, Neo-liberalism and Security in Asia: The Role of the Asia 

Pacific Economic Co-operation Forum 

Ian Taylor 




20.   Humanitarian Intervention and Peacekeeping as Issues for Asia-Pacific 

Security  Derek McDougall 



21.   Comprehensive Security: The South Asian Case  S.D. Muni   


22.   The Evolution of China’s Maritime Combat Doctrines and Models: 1949-


You Ji 



23.   The Concept of Security Before and After September 11 

a.  The Contested Concept of Security 

  Steve Smith 

b.  Security and Security Studies After September 11: Some Preliminary 

Reflections    Amitav  Acharya 



24.   Democratisation In South Korea And Taiwan: The Effect Of Social Division 

On Inter-Korean and Cross-Strait Relations 

Chien-peng (C.P.) Chung 



25.   Understanding Financial Globalisation  Andrew Walter 



26.   911, American Praetorian Unilateralism and the Impact on State-Society 

Relations in Southeast Asia 

Kumar Ramakrishna 



27.   Great Power Politics in Contemporary East Asia: Negotiating Multipolarity 

or Hegemony? 

Tan See Seng   




28.   What Fear Hath Wrought: Missile Hysteria and The Writing of “America” 

Tan See Seng 



29.   International Responses to Terrorism: The Limits and Possibilities of Legal 

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Asean  Ong Yen Nee




30.   Reconceptualizing the PLA Navy in Post - Mao China: Functions, Warfare, 

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31.   Attempting Developmental Regionalism Through AFTA: The Domestic 

Politics – Domestic Capital Nexus 

Helen E S Nesadurai 



Document Outline

  • No. 31
        • Helen E S Nesadurai
  • Institute of Defence and Strategic Studies
  • Singapore
  • AUGUST 2002
  • Introduction
                • Ang Cheng Guan
                • You Ji
              • Tan See Seng


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