country company (tycoon) investment(US$ mil.) Thailand Charoen Pokphan Indonesia China Strategic Investment
(ael Hong Leong) 260
Lippo Ltd(Mochtar Riady) 130
Lippo Ltd 40
Malaysia Kuok Group(Robert Kuok) 300
Kuok Group 130
Berjaya Corp(Vincent Tan) 100
Total US$7,300
foreign investors to further their economic development, Southeast Asian countries have experienced strong competition from China at the same end of the development spectrum. Since the mid-1980s. the ANICs have joined forces with the- 375
1
Japanese investing in Southeast Asia to gain access to lower cost production factors which no longer exist in their home countries.79 While Chinas economic development has been speeding up to fully comply with reformist policy, more and more foreign investors have been pulling their businesses, in labour-intensive industries in particular, out of Southeast Asia because production factors there, over time, have no longer been as competitive as they were when businesses were set up a few years ago.
As one of Malaysia's single largest investors in manufacturing sectors, Taiwanese investors, for example, have complained that the Malaysian government is unlikely to widen its industrial incentives, is unable to control fast increasing labour cost, and is not reliable about the difficulties of securing visas which are of particular importance for Taiwanese enterprises and their expatriate executives and imported technicians.80 In early 1993, the then vice-Economic Minister of Taiwan, P.
K. Chiang, stated that Malaysia's investment climate was getting worse due to rising labour costs and social problems. Moreover, George C. H. Wang, the director of Taipei's Economic and Cultural Centre in Malaysia, a leading organ of Taiwanese business, pointed out that changes in the economic situation, China's accelerating economic reforms as well as those in many other countries, such as Vietnam and Indonesia, have offered better investment incentives and a declining interest in Malaysia.81 Indeed, an analysis by the Taiwanese Ministry of Economic Affairs suggests that the recent decline of Taiwan's investment in Southeast Asia has resulted mainly from the changed investment situation there, caused by soaring labour costs, and the cancellation of tax preferences.82
:tors investment in Southeast Asian countries has decreased sharply. The Japanese, the biggest foreign investors in the region, have been lured by the Chinese "ultimate market" with its 12 billion-strong consumer market, the world's most attractive investment opportunity in the early 199Os.85 Since 1990, Japanese investment in China has nearly tripled to a current annual rate of $882 million.86 The trend in Japanese direct investment in Asia seems to be away from Thailand and Indonesia, in favour of investment in China and Vietnanl.87 It is yet to be proven to what extent these industries' withdrawal of capital from Southeast Asia has been encouraged from China. Nevertheless, clear evidence exists that the Taiwanese, another of the region's biggest investors, have a1.oo cut their investment in Malaysia. the (for its plunging foreign investment)".89
Apart from competing for foreign investment, these countries have gradually been facing increasingly strong competition from Chinese exports in labour-intensive industries such as footwear, textiles, and electronics.90 According to a shift-share analysis of competition amongst ABEAN, China' and the ANICs in the Japanese market, for instance, the results suggest that ASEAN exports have suffered the most from the recent entrance of China into the Japanese market. 91 In seven of the ten standard International Trade Classification (SITC) categories, China has a competitive advantage, compared to ASEAN, especially in crude materials and machinery plus transport equipment. It is notable that the competition has mainly stemmed from their similarity in terms of economic development and their exports of labour-intensive industrial products.
377
Another two studies have also discovered that China and ASEAN do compete directly for market shares in labour intensive industries, such as clothing, textiles, footwear, furniture, textile yarn, thread and toys, in the United States, Japan, other Asia-Pacific countries and Europe.92 The two economies have tended to pursue economic development by following the ANTCs model of industrialisation through the export of labour intensive products to developed countries. Since the export markets for these products are restrained by worldwide economic recession and protectionist pressures from developed countries, it has been inevitable that tense competition has arisen between the two and has cast a shadow on their future relationship. 93 Although there is yet to emerge an obvious regional integration framework in the Asia-Pacific region, every subregional grouping has inevitably hinged on each others' development, because their common characteristic of outward -looking economic development, has, to some extent, tied them to the larger framework of an international industrial division of labour. Each developing grouping is likely to be acknowledged by others because of their mutual interests.
The CEA has not been excluded from this linkage.
For the ASEAN countries, the possible economic impact of the CEA, whether positive or negative, deserves to be analysed further. As the CEA is a natural and 'loose formation",94 the governments' unwillingness, as of yet, to become involved in its formation implies that the current economic transactions, either inter-regional or intra-regional, will not be changed. So long as the CEA remains the concern of the private sectors, the increasing intra-regional economic ties are likely to accelerate Asia-Pacific regional economic cooperation to help along regional economic development. In the long-term, a strong Chinese economic group right next to the ASEAN would probably outweigh any other regional grouping and become the leader in the region. For now, the development of subregional groupings is likely to boost the de facto ':Japanese Yen Bloc" in Asia-Pacific.
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