Globalisation, Domestic Politics, and Regionalism: The ASEAN Free Trade Area

By Helen E. S. Nesadurai | Go to book overview
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Domestic capital and developmental regionalism

Domestic distributive concerns temper the growth imperative

The particular design of the AIA component programme suggests that there is another dimension to the AFTA story apart from open regionalism and the concern with FDI that remains unexplored. It is clear that the approach to investment liberalisation adopted in the AIA sought to privilege ASEAN domestic capital in the AFTA market, at least temporarily for up to a ten-year period. The decision to offer full market access and national treatment privileges to ASEAN investors ahead of foreign investors in the AIA is certainly puzzling given AFTA’s acknowledged role as an instrument to maintain the region’s attractiveness as a site for FDI. This chapter explains this as a move by ASEAN member governments spearheaded by the Malaysian authorities to use the investment liberalisation programme of AFTA as a developmental tool to build up domestic firms, in addition to employing AFTA’s tariff liberalisation CEPT programme to attract FDI to the single regional market. It is a perspective on AFTA that has so far been missed in the literature.

Specifically, the idea was to nurture domestic capital in the face of globalisation pressures by using both the expanded regional market and the offer of temporary investment privileges to domestic-owned capital ahead of foreign investors. These temporary investment privileges took the form of earlier market access and national treatment for ASEAN national investors in the ASEAN regional market, particularly in non-manufacturing sectors. It represents an attempt at developmental regionalism. In other words, AFTA displayed the features of both open and developmental regionalism due to the political significance of foreign- and domestic-owned capital in ASEAN. While both forms of regionalism were driven by the imperative of growth, distributive concerns tempered the concern with growth in developmental regionalism.

Although developmental regionalism was not about disengaging from globalisation, policymakers and leaders in at least two countries, namely Indonesia and especially Malaysia, were not prepared to accept the hegemony of foreign TNCs that was a growing feature of globalisation. Fearing that politically important domestic-owned businesses, especially emerging firms, would be adversely affected by unfettered market


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