Kuala Lumpur, August 27 :

Association of Southeast Asian Nations (ASEAN) set a new milestone in regional integration by agreeing last week to fuse into a European-style single market by 2015, but its members must strive to become more savvy if they want to achieve the aim, the bloc’s chief said.

After clearing the first hurdle in cutting tariffs on merchandise trade over years of negotiations, a tougher job now faces the ASEAN as it seeks to remove non-tariff barriers and free up the flow of services, investment and skilled labor across the region, said ASEAN’s secretary-general Ong Keng Yong.

Economic rivalry among its 10 members, decades-old protectionist policies and domestic political turmoil are major obstacles to forming an ASEAN Economic Community by 2015, five years earlier than originally planned. The goal does not call for a single currency system. “In the old days, we had an ASEAN bus with a 100 horsepower engine. Now we have gone into the workshop and refit the same bus with a 200 horsepower engine and use new additive for our engine, so we can drive faster,” Ong said. “We need to make the people in the bus change their mentality.”

“The Indians and Chinese are ahead us on the highway on more modern buses with their Ferrari engines. We have to catch up.” Foreign direct investment into ASEAN surged by 48 per cent on-year to a record high of $38 billion last year but the 39-year-old grouping still lags behind China, which draws more than $50 billion a year, and India. An economic chasm divides ASEAN’s six more developed nations — Malaysia, Indonesia, Singapore, Brunei, Thailand and the Philippines — and its four newer members, communist Vietnam and Laos, military-ruled Myanmar and Cambodia.

It has a market of 560 million people but accounts for only six per cent of global exports. Intra-regional trade makes up only about a quarter of the bloc’s total trade volume, compared to more than 70 per cent in Europe. ASEAN also wants to put its house in order to get more clout in dealings with key trade partners. During the week, it sealed a pact with the US to facilitate trade and investment despite differences over Myanmar’s rights record, and resumed free trade talks with India after months of deadlock.

The bloc also advanced plans for free trade zones with Australia and New Zealand as a group, as well as with China and South Korea. Ong said a study by accounting firm PricewaterhouseCoopers showed the region would lose out if it refuses to shed nationalist tendencies and promote cross-border deals.

“If you want to be part of the game, you got no choice,” he said, “There is a steady flow of money here but we must welcome investment in each other’s country so capitalists like Malaysia and Singapore can invest in Indonesia or go to Philippines to buy an airline. Right now, there are a lot of restrictions. It’s a big mountain ahead in liberalising services and investment.”

During the talks, the region’s two major auto hubs had a dispute after Thailand refused to cut import tariffs for cars made in Malaysia as it charged its neighbor was protecting them with non-tariff barriers. There are other road bumps. Most ASEAN countries keep a tight grip over key industries such as banking, health care and transport.