No. 31
Attempting Developmental
Regionalism Through AFTA:
The Domestic Politics – Domestic Capital Nexus
Helen E S Nesadurai
Institute of Defence and Strategic Studies
Singapore
AUGUST 2002
With Compliments
This Working Paper series presents papers in a preliminary form and serves to stimulate
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ABSTRACT
The relationship of regionalism to globalisation is modelled in the literature either as open
regionalism aimed at integration with the global market or as a project of resistance to
global market forces. Neither of these ideal-type models adequately accounts for an
empirical puzzle associated with the ASEAN Free Trade Area (AFTA). Although AFTA
is acknowledged as a project of open regionalism aimed at attracting FDI to the Southeast
Asian region, its members surprisingly chose to accord foreign investors full market
access and national treatment privileges at least ten years later than to ASEAN national
investors in AFTA’s investment liberalisation component programme. How do we
explain this seeming contradiction? By making a conceptual distinction between foreign-
owned and domestic-owned capital, a distinction that is particularly salient in the
Southeast Asian context where domestic-owned, often ‘emerging’ capital performs vital
social/political roles and whose survival is crucial in sustaining elite rule, this paper
advances a third model of the globalisation-regionalism relationship. Developmental
regionalism, which draws on strategic trade theory from the International Economics
discipline, describes an approach to regionalism in which an initial period of partial and
temporary resistance to global competition is employed to build up domestic firms able to
eventually engage in global competition. In particular, it was to preserve domestic
businesses that were closely allied with members of the political/ruling elite that led
certain member governments in ASEAN to advocate a developmental role for AFTA
through its investment liberalisation programme, while still using the regional tariff
liberalisation component programme as the ‘carrot’ to attract FDI.
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Dr Helen E S Nesadurai is Assistant Professor at IDSS. Her research interests are in
International Political Economy (IPE), with special emphasis on the globalisation-
regionalism relationship, and on questions of development and governance in an era of
globalisation, particularly as they relate to Southeast Asia. She has published in various
journals such as The Pacific Review, ASEAN Economic Bulletin, and the Asian Journal of
Social Sciences,
while her book on Globalisation, Domestic Politics and Regionalism: The
ASEAN Free Trade Area is due to be published by Routledge in 2003.
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