ASEAN'S ECONOMIC COMPETITIVENESS

Abstract

The Association of South East Asian Nations (ASEAN) was established on 8 August 1967 in Bangkok, Thailand with the signing of the Bangkok Declaration by the five original member nations - Indonesia, Malaysia, the Philippines, Singapore and Thailand. ASEAN's broad objectives were to accelerate economic growth, social progress and cultural development and to promote peace, prosperity and stability in the Southeast Asian region. ASEAN countries have been enjoying high economic growth rates and they are part of the fastest growing countries in the world. In analyzing ASEAN's economic competitiveness, the changing factor endowments over the years are important. ASEAN's improvement or deterioration of factor endowments such as level of savings and investment rates; external debt and educational attainment reveals the soundness of its fundamentals which is critical to the competitiveness of ASEAN. It will be beneficial to find out the changing comparative advantage of ASEAN countries, and the problems and prospects associated with the present comparative advantage. The changing comparative advantage can be found by analyzing the factor intensity composition of manufacturing value-added of ASEAN countries. A valuable addition will be the empirical testing of data. Results of empirical testing of trade competitiveness are examined for export performance and the direction at which ASEAN is heading. Measures that are required to enhance future competitiveness need to be considered. ASEAN's future competitiveness will be determined by various aspects such as macroeconomic policies, quality of labour, infrastructure and technology transfer. The implications of ASEAN free trade area (AFTA) on the future economic outlook of ASEAN should be carefully analyzed. There are many problems to resolve before AFT A can be effectively implemented and up to this point, the chances of success for AFT A are low. Hence, AFTA's contribution to the prosperity of ASEAN is expected to be small. Last but not least, the current Asian financial crisis has generated many views from economists. This is included to make the discussion complete.