THE ASEAN INSTITUTE DINNER KUALA LUMPUR 23 NOVEMBER 1992

Bapak Aburizal Bakrie, President of the Asean Institute,

Members of the Institute,

Distinguished Guests.

It is a pleasure for me tonight to address this gathering of prominent Asean business personalities. Each one of you is head of a highly successful company, engaged in diverse enterprises in either one of the six Asean countries, and possibly with interests in neighbouring countries or even further afield. Your achievements reflect to a large extent the economic strength of individual Asean countries.

It would not be an exaggeration to say that but for the collective efforts of its businessmen, Asean would not be the success story that it is. While governments have provided the infrastructure and political stability so critical for investments to thrive, the future of Asean's economic well-being will be determined more by the dynamism of the private sector.

If we look back upon the rapid rate of technological progress in transportation and communications, coupled with financial liberalisation and progressive deregulation, it becomes apparent that the world economy has become more interdependent and more integrated. This is clearly manifested in the growing trend towards globalisation of production and distribution, and the integration of the world's major financial and commodity markets. Though some countries have come together to form trading blocs, like the EC and NAFTA, there is abundant evidence of the shift to increasing interdependency.

We in Asean have repeatedly stressed the need for countries to adopt greater openness in market policy, and we have already worked towards the progressive removal of tariff barriers to allow a freer flow of goods and services. It is in this spirit that we in Malaysia recently reduced, and in some cases removed, import duties on some 600 items.

Asean has been politically successful in presenting a unified voice in international forums. However, we have not achieved as much in the area of economic cooperation through various mechanisms including preferential trading arrangements and the Asean industrial complementation scheme have not been successful. There are numerous reasons for this, and perhaps the most obvious is that the thrust towards greater economic cooperation took place at a time when the countries were at different stages of development. Tariff concessions in thousands of items were made but this did not contribute significantly to the growth in intra-regional trade.

Now the Asean countries have taken a great leap forward by introducing the Common Effective Preferential Tariff (CEPT) which is intended to achieve the Asean Free Trade Area, or AFTA. However, freeing the Asean economies from protection and opening them up to competition will not be a painless process. There will be the need for major readjustments and here a large measure of goodwill by the individual countries will have to be demonstrated. We should remember that other countries have made such a major transition before, and their experience shows quite clearly that the more industries are exposed to market pressures, the sooner they become competitive. with CEPT and AFTA, Asean is taking a major step down the road to free market policies, one that could substantially open up new markets to the more competitive industries.

It will take all of fifteen years before AFTA is realised. Between now and then, there is an urgent need for greater investments in the region. And the engine of greater intra-Asean investments can only be the private sector.

Despite the numerous incentives offered by individual Asean countries, intra-Asean trade still represents less than 10 per cent of overall Asean trade. In 1990, it totalled only RM 24 billion as against some RM 270 million in goods and services which Asean countries traded with the rest of the world. In the context of Asean being a market of 320 million people with a combined annual output of more than RM 330 billion, clearly Asean businessmen have their sights focused elsewhere. Many markets, for example the Malaysian, Thai and Indonesian markets, have hardly been exploited by their Asean neighbours. Indeed it is disappointing to note that numerous Asean-based companies have sought to go global, investing in the United States, Europe, Australia, New Zealand and in the Far East, and in the process have ignored markets within their immediate grasp. We have to address this matter urgently.

I have no doubt the Asean region will remain the magnet for future investments and that countries within the group will be able to sustain a high level of economic growth for the foreseeable decades. Indeed the 21st century can be the golden age of Asean. But this can only be realised if the private sector comes together and works together to bring about the realisation of a total integrated Asean economy that will raise the quality of life of our peoples. Only then can Asean be said to have achieved the noble objectives of its founding fathers.

Thank you.