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The political economy of the asean free trade area (afta)

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No. 31 

Attempting Developmental 

 Regionalism Through AFTA: 

The Domestic Politics – Domestic Capital Nexus 


Helen E S Nesadurai 





Institute of Defence and Strategic Studies 




AUGUST 2002 





With Compliments 







This Working Paper series presents papers in a preliminary form and serves to stimulate 

comment 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. 

Provide general and graduate education in strategic studies, international relations, defence 

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Promote joint and exchange programmes with similar regional and international institutions; 

organise seminars/conferences on topics salient to the strategic and policy communities of the 




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Rajaratnam Professorship in Strategic Studies (named after Singapore’s first Foreign Minister), has 

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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 

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The Institute convenes workshops, seminars and colloquia on aspects of international relations and 

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Institute’s activities include a regular Colloquium on Strategic Trends in the 21


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The Institute has also participated in research projects funded by the Ford Foundation and the 

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Institute aims to develop and nurture a network of researchers whose collaborative efforts will 

yield new insights into security issues of interest to Singapore and the region.   



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. 
















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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