Kuala Lumpur, August 21 :

Foreign direct investment (FDI) in Association of Southeast Asian Nations (ASEAN) surged by 48 per cent to $38 billion last year, but China remains the darling of global investors, Malaysia’s trade minister said today.

Investment flowing into the 10-member ASEAN in 2005 saw it reclaim levels last seen before the 1997 Asian financial crisis, when it peaked at $34 billion, Rafidah Aziz said.

“People now realise ASEAN is a dynamic entity. I expect it to increase,” she said at regional economic talks here, adding however that ‘China is way ahead of everybody’ in terms of attracting global investment.

Foreign direct investment data for the first quarter of 2006 released by the ASEAN investment council showed a 90 per cent increase to $14 billion from $7.4 billion in the same period last year. “The council is optimistic that the growth in FDI flows into ASEAN would continue to be promising,” it said after convening today ahead of ASEAN economic ministerial talks which will be held here throughout the week.

Rafidah lamented that policy differences and red-tape impeded investment inflows but said that ASEAN was working towards removing these stumbling blocks.

“Of course it is true. Our bureaucracies are different. Our economic governant is different. There are still some differences in the way we approach policy measures,” she said. “We cannot harmonise totally but where we can harmonise to the extent that ASEAN becomes attractive we will do it.”

Rafidah said ASEAN has agreed to jointly work to lure investments. “When we are competing as a group with others outside the region then it makes sense for us to have joint promotion and harmonisation of our strategies for attracting investments,” she said.

At their talks this week Southeast Asian economic ministers are under pressure to accelerate the creation of a single trade bloc to combat the rise of China and India which are drawing away foreign investment from the region. ASEAN is aiming to advance economic integration by five years to 2015, casting aside tariffs and red tape which make the unified China market more attractive to manufacturers.

ASEAN secretary-general Ong Keng Yong said ASEAN needed to deregulate in order to compete for FDI. “Although it is a positive trend upwards, more is needed,” he said, “Overall I think we are not as effective as we want to be because there are too many bureaucratic rules and practices to overcome.”

The major sources of investment into ASEAN in 2005 were the United States, Britain, Japan, France and Finland. “Together these countries accounted for 48 per cent of total FDI into ASEAN,” the council said.

Some 79 per cent of FDI last year was in financial services including insurance, manufacturing, trade, it said, adding that mining and quarrying were other strong sectors.