The political economy of the asean free trade area (afta)
Regionalism Through AFTA:
The Domestic Politics – Domestic Capital Nexus
Helen E S Nesadurai
Institute of Defence and Strategic Studies
This Working Paper series presents papers in a preliminary form and serves to stimulatecomment and discussion. The views expressed are entirely the author’s own and not that of
the Institute of Defence and Strategic Studies.
The Institute of Defence and Strategic Studies (IDSS)was established in July 1996 as an
autonomous research institute within the Nanyang Technological University. Its objectives are to:
Conduct research on security, strategic and international issues.
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Through its Working Paper Series, IDSS Commentaries and other publications, the Institute seeks
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implications for Singapore and other countries in the region. A Chaired Professorship, the S.
Rajaratnam Professorship in Strategic Studies (named after Singapore’s first Foreign Minister), has
been established to bring distinguished scholars to participate in the work of the Institute. Previous
holders of the Chair include Professor Stephen Walt (Evron M. and Jeane J. Kirkpatrick Professor
of International Affairs, John F. Kennedy School of Government, Harvard University, USA),
Professor Jack Snyder (Robert and Renee Belfer Professor of International Relations, Institute of
War and Peace Studies, Political Science Department, Columbia University) and Professor Wang
Jisi (Senior Researcher and Director, Institute of American Studies, Chinese Academy of Social
Sciences). A Visiting Research Fellow Programme also enables overseas scholars to carry out
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The Institute provides educational opportunities at an advanced level to professionals from both
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The relationship of regionalism to globalisation is modelled in the literature either as openregionalism 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.
Dr Helen E S Nesadurai is Assistant Professor at IDSS. Her research interests are inInternational 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 ofSocial 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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