Southeast Asian nations signed three economic agreements on Tuesday to encourage investment and reduce tariffs, as the region looks to integrate economically and fend off the ill effects of an ailing global economy.
Growth in Southeast Asian economies has slowed dramatically in light of the worsening health of the global economy. Analysts said the trade agreements could be a welcome bulwark against increased national protectionism, but were no short-term fix.
"It's a long-term process, not a magic solution to the current problems. The G3 countries are experiencing a sharp downturn and it's unclear how much of a spillover there will be to ASEAN countries," said David Cohen, regional economist at consultancy Action Economics in Singapore.
The trade agreements by the Association of Southeast Asian Nations (ASEAN) follow the implementation of a charter in Jakarta on Monday that is aimed at setting up an economic bloc of half a billion people by 2015.
But ASEAN, with varied political systems, vastly different economic situations and often dismissed by experts as a talk shop, may find its aims blown off course by the financial crisis. Singapore's foreign minister admitted in Jakarta there could be an increased tendency towards protectionism, in a region that has struggled to liberalise its air space or allow investment by neighbours in strategic industries.
"It hasn't got any worse — maybe that's all we can be thankful for," said Cohen. "Anything they can do to stimulate regional demand would be good."
The three agreements signed on Tuesday include the ASEAN Trade in Goods Agreement, to reduce tariffs on traded goods and to provide a clear framework of custom procedures.
Intra-ASEAN trade, which accounts for one-quarter of total ASEAN trade, was valued at $404.3 billion in 2007, said a Malaysian press statement.
The ASEAN Framework Agreement on Services, aims to improve the efficiency and competitiveness of the region's air travel, healthcare and tourism.
Finally the ASEAN Comprehensive Investment Agreement aims to protect investors by levelling the playing field and providing compensation for investors who become negatively affected if a country modifies their commitments.
"If you look at the global environment, for the next one, two years, foreign investments are likely to come down, and ASEAN must continue in its efforts to make itself a very attractive regional venue for foreign investment," Lim Hng Kiang, Singapore's trade minister, told reporters.
Trade ministers from Singapore, Malaysia, Indonesia, Cambodia and Laos and a senior official from Brunei took part in the signing ceremony. The other members of ASEAN — the Philippines, Thailand, Vietnam and Myanmar — were not represented.
All three agreements were based on older frameworks that have been refined.
"ASEAN needs to implement the principles they put out long ago. Even before the Asian crisis, in the early 1990s, they were concerned about the rise of China and the solution put out at that time was the need to create a more homogeneous market," said Don Hanna, the head of Citigroup's Asia Pacific economic and market analysis.
