Asean looks Downunder

New Zealand, Australia and the Association of Southeast Asian Nations are this week expected to start negotiations to create a massive regional free-trade area.

The talks, due to begin at the Asean meeting in Vientiane, Laos, could give New Zealand exporters access to a market of more than 500 million people.

The negotiations are aimed at reaching a comprehensive agreement covering investment as well as trade in goods, and doubling Asean-ANZ (Australian and New Zealand) trade and investment by 2010.

Already two-way trade in goods and services between the two regions is worth more than US$34.5 billion ($48 billion) in 2003, while cumulative two-way investment amounts to more than US$8.4 billion.

Asean, made up of Singapore, Thailand, Indonesia, Malaysia, Cambodia, Laos, Brunei, Vietnam, the Philippines and Myanmar, has a combined population of more than 500 million and had an estimated GDP of US$682 billion last year.

This compares with Australia and New Zealand's combined population of 24 million and an estimated GDP of US$587 billion.

The GDP of Asean plus ANZ amounts to US$1269 billion, not far short of China's estimated GDP in 2003 of US$1437 billion.

Asean is New Zealand's fifth largest trading partner in both directions, and over the past year the fastest growing source of imports.

Trade figures from Statistics New Zealand last week recorded $3.3 billion worth of imports from Asean over the year ended October, up 21 per cent on the year before.

Export data for October has yet to be finalised, but for the year ended September New Zealand exports to Asean were $2.2 billion, flat on the previous year. But that figure does not include exports of services, which exceed $400 million a year.

The agreement is expected to take two years to negotiate and faces many hurdles, particularly because economic integration between Australia and New Zealand through the Closer Economic Relations pact is more advanced than Southeast Asia's.

Free-trade has been on the agenda since Asean and the two antipodean countries set up a taskforce in 1999 to explore a new economic partnership.

But political considerations - particularly years of antipathy fuelled by former Malaysian Prime Minister Mahathir Mohamad - knocked the proposal from the table.

But early this year, well after Mahathir's departure, the Asean secretariat thought it time to have another go.

The crucial factor was the visit of Chinese President Hu Jintao to New Zealand and Australia in October last year, which alarmed Southeast Asian business people.

Asean Secretary-General Ong Keng Yong told the Herald this year: "When the Chinese started to develop closer ties with the Australia and New Zealand sector, the business people went back to their economic ministers and said, 'Look, they are moving so fast. We were the first to start talks about a Asean free-trade deal with Australia and New Zealand and we are still dilly-dallying'.

"There was this notion that if we could combine the economies of Australia, New Zealand and Asean it would be a sizeable chunk - somewhere near to the Chinese economy."