How did globalisation influence the ASEAN member governments to embrace AFTA as a regional project? What specific dynamics associated with globalisation account for the particular manner in which AFTA unfolded during the decade? Were domestic political economic dynamics also involved in shaping regional responses to globalisation? These questions are addressed in this chapter and the next, which explain how domestic and therefore regional responses to globalisation were mediated by the political salience of both foreign- and domestic-owned capital in the ASEAN countries. This consequently led to two distinct types of regional projects within AFTA—open regionalism, to be discussed in this chapter, and developmental regionalism, which will be examined in Chapter 4. There is already a large literature that explains AFTA as a project of open regionalism aimed at countering the threat of FDI diversion away from the ASEAN economies amidst intense international competition for globally mobile investment capital. Accurate to a degree, this book demonstrates that the concern with FDI was only part of the AFTA story, albeit an important one.
The FDI explanation has been discussed at length in the literature and will not be repeated here, except to re-iterate its main points. Instead, the chapter emphasises how the structural power of foreign investment capital, reinforced by its key role in the domestic political economy of the ASEAN countries, made AFTA vital as a means of defining a distinctive space of production for global capital in the wider Asia-Pacific region, particularly in competition with China. The chapter also emphasises three additional points. First, it explains why the ASEAN countries, already fairly well integrated with global trade and investment flows and already embarking on economic liberalisation programmes domestically, decided to engage in regionalism as a response to concerns about FDI diversion. Why not continue with and hasten domestic economic restructuring, which had proved eminently successful in drawing FDI to these countries from the late 1980s? Second, the chapter shows that although AFTA was a project of open regionalism aimed at engagement with the global economy, it displayed only limited neoliberal characteristics. Third, the