Asia's Manufacturing Sector Reaps Top Foreign Investment Dollars In 2005

Southeast Asian group reports total foreign investment grew to record 48% in 2005; but still behind China

KUALA LUMPUR, Malaysia (AP) – ASEAN (Association of Southeast Asian Nations) expects foreign investment to keep growing after it surged 48 percent in 2005 to a new record, but the region must redouble efforts to catch up with China, officials said Monday.

Foreign direct investment into the 10-member ASEAN rose to $38 billion last year, surpassing levels last seen before the 1997-98 Asian financial crisis, Malaysia's Trade Minister Rafidah Aziz said.

Foreign investment into ASEAN rose to $34 billion in 1997, but declined sharply after the Asian financial crisis threw regional economies into disarray.

In a statement, the ASEAN investment council said the United States, Britain, Japan, France and Finland accounted for nearly half of total FDI flows into the region last year, mainly to Singapore, Indonesia, Thailand and Malaysia.

The manufacturing sector was the top FDI recipient, with approved investment in ASEAN increasing 33 percent on-year to $27.8 billion  in 2005, it said.

''We have been in the doldrums. There have been so many uncertainties and internal problems for some countries. Economically, there is global dislocation, hike in petroleum prices and the dollar has weakened,'' Rafidah told reporters after chairing an ASEAN investment council meeting.

''In spite of that, we were able to see a positive growth in our FDI and that is a good sign,'' she said. ''We expect it to increase.''

In the first quarter of 2006, foreign direct investment into ASEAN soared 90 percent from the same period last year to $14 billion and will be on the ''upward momentum,'' she added.

Rafidah said ASEAN nations must be more aggressive in promoting the bloc as a single investment zone and accelerate opening up its industries to catch up with China, which attracts more than $50 billion a year.

''China is way above us,'' she said. ''In some areas, we are not up to the mark. We have to improve.''

ASEAN secretary-general Ong Keng Yong said the bloc must remove bureaucratic constrains hindering regional economic integration.

''It's over-regulation...we believe that for the coming year if we strengthen our attractiveness as an ASEAN destination rather than as individual member countries, we can run with (China),'' he said.

''We can't beat the Chinese. They are the most attractive market in the world but at least we will not be too far behind," said Yong.'

''Indonesia has always seen 2015 as a big deadline...but we have a lot of things that need us to put our act together. Our rival right now is China,'' said coordinating investment coordinarting board chairman Muhammad Lufti.

More in Global