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Wake up to China, new WTO chief warns Asia

Asian countries must wake up to China's imminent entry to the World Trade Organisation or face losing out on foreign investment, Supachai Panitchpakdi, the trade body's future chief, said on Tuesday.

"This is not to alarm but to wake you up. We'll have to get our act together, deepen our domestic reform, because now the competition is at the front door," Supachai told a conference on Malaysia's economic outlook for 2002.

The former Thai deputy prime minister, who will take over as WTO director-general from New Zealand's Mike Moore in September next year, said China will be a huge competitive force in the region.

Supachai said China enjoyed average annual foreign direct investment of $40 billion, about 80 per cent of the total FDI in Asia.

The 10-country Association of South East Asian Nations, which includes Supachai's Thailand, received about 16 to 17 per cent of the FDI.

The other ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, and Vietnam.

Supachai said he expected China's FDI to rise to about to $50 billion following its WTO entry.

"Some say the number will rise to $60 to $80 billion, but I think about $50 (billion) maybe," he said in his speech.

Supachai said he saw China's share of world trade doubling to eight to 10 per cent in the next five to 10 years' time.

"China will be the predominant player in 2005," he added.

Leaders from Japan, China and Korea moved towards closer economic ties with their ASEAN partners this week during a meeting in Brunei, but failed to touch on the question of links with a nascent free trade area in the 10-country bloc.

The ASEAN Free Trade Area kicks off in 2002, and members hope to list more goods in a zero to five per cent tariff band, and make cross-border transportation of goods easier.

LACK OF ASEAN LEADER

But Supachai saw an upside to China's WTO entry, which he said presented Asia with unprecedented growth opportunities.

"It will be a big motor for Asia. This is a superb opportunity for Asia to get together. Our over-dependence on major economies will be softened," he said.

For ASEAN, he advised faster integration of its markets to counter competition from the world's most populous nation.

"What we can do to remedy it is to enhance intra-ASEAN trade," Supachai said.

This may be easier said than done, according to Mohamed Ariff, executive director of respected think-tank Malaysian Institute of Economic Research, who chaired the conference.

While an integrated ASEAN market may have a combined population exceeding 500 million, armed with twice the spending power of the Chinese, the absence of a driving force amongst its 10 members may delay any quick implementation.

"ASEAN lacks a leader. There is no one playing the leadership role since the 1997 financial crisis," Mohamed Ariff said. "You need someone to push for the opening up of sectors and integrating.

"Indonesia used to do it but they are now plagued by their own political and domestic issues. So are Thailand and Philippines. Singapore is gung-ho about it but their economy is too small. That leaves Malaysia as the only logical choice."

Mohamed Ariff said Kuala Lumpur could secure such a role only if it pushed through reforms of its own, such as opening up its automotive sector and improving corporate governance.

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