SE Asia needs to do more to open markets: study

DESPITE numerous pledges and years of effort to transform Southeast Asia into a single market, the 10-nation region remains resistant to free-flowing trade and fortified against imports, to the cost of some global companies, according to a study for one of the region's biggest investors.

The study commissioned and paid for by US automaker General Motors highlights a lack of progress by the Association of Southeast Asian Nations (Asean) to harmonise trade and investment rules, leaving the auto industry with little to show for a decade of trade liberalisation.

In the study, consultancy Oxford Economics found that tariffs in Asean on imported goods such as cars generally have fallen "dramatically", but this is undermined by industrial policies that promote some products, through tax and other incentives, but require them to have high levels of locally made components that put imported goods at a competitive disadvantage.

Policies like Indonesia's "low-cost green cars" (LCGC) and one in Thailand dubbed Eco2 neutralise the positive impact of lower tariffs, says GM.

"South Korea is GM's major manufacturing hub. There is a free trade agreement between Korea and Asean and we would like this to operate as a free trade agreement and as effectively as possible," Matt Hobbs, vice president in charge of government relations and public policy for GM International, told Reuters.

Under current conditions, GM cannot deploy vehicles made in Korea to be sold competitively in Asean countries, he said.

Asean formally established an Asean Economic Community (AEC) at its annual summit last month, aiming to create a single market with few barriers to the flow of trade, capital and professional labour in an area of 625 million people.

"In practice, we have virtually eliminated tariff barriers between us," said Malaysian Prime Minister Najib Razak, the summit host. "Now we have to assure freer movements and removal of barriers that hinder growth and investment."

Twelve years in the making, Najib said it will take another 10 years to put into effect all the measures of the AEC, which comes into being on Dec. 31. Politically sensitive sectors such as agriculture, auto production and steel will remain protected during that period.

An integrated Asean economy is meant to compete with China, India and Japan - Asean's combined GDP of $2.6 trillion would make it the world's seventh largest economy - but endemic corruption, poor governance and a lack of transparency in some members pose formidable obstacles to full integration.