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

sought to nurture domestic-owned capital amidst global market competition.

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    The  final 

section of the paper addresses the question of why member governments were promoted to 

halt their attempt at developmental regionalism in September 2001.   

 

The Analytical Framework: Developmental Regionalism and the Domestic  

Political Economy 

 

Contemporary regionalism is generally conceived of as a response to the pressures 

and incentives associated with economic globalisation (Gamble and Payne, 1998; Hveem, 

2000; Mittelman, 2000: 111).  One source of these pressures and incentives is the growing 

economic inter-linkages between countries that generate common interests in cooperation 

(Hurrell,1995: 56).  But, globalisation is much more than the interactions and 

interdependencies between countries.  Globalisation is best regarded as a multi-faceted 

structural phenomenon generating multiple pressures and incentives arising from the 

complex interplay of its material, institutional and cognitive dimensions (Higgott, 2000: 

70).   

 

Material changes in production, trade and finance, especially since the 1980s have 

heightened both the pressures on governments as well as competition among them as they 

seek to generate wealth for their societies by attracting transnational corporations (TNCs) 

to locate within their territories (Stopford and Strange, 1991: 1).  Increasingly, the assets 

required for wealth creation in the ‘new’ world economy centre on information, 

technological innovation as well as management and organisational competence, what are 

termed ‘created assets’ that reside within these global firms (Dunning, 1993: 6).  While 

previously salient ‘natural assets’ such as labour, land and natural resources remain 

important in many sectors, governments wishing to involve their economies in higher 

valued-added economic activities have become increasingly reliant on the wealth-creating 

resources controlled by TNCs (Stopford and Strange, 1991: 1).  In addition, neoliberal 

economic rules instituted at the multilateral level, especially through the WTO, 

increasingly prescribe free markets and proscribe government intervention in and control 

of economic activity, which effectively adds a second set of pressures on governments 

unable to employ traditional policy instruments to meet domestic social and political 

                                                 

4

 The analysis focuses on the original ASEAN members – Indonesia, Malaysia, the Philippines, Singapore 

and Thailand, as these were responsible for initiating major policy decisions in AFTA. 

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objectives (George, 2002).  Moreover, these multilateral rules are creating an environment 

in which TNCs face fewer and fewer restrictions worldwide on their activities.  This has 

contributed to a shared consciousness among governments of heightened global market 

competition vis-à-vis the global corporate giants and a sense of the growing dominance of 

these TNCs in markets everywhere.  Governments, therefore, not only react to actual 

external pressures associated with globalisation they often respond in anticipatory fashion 

to perceived challenges to the competitiveness of the home economy and of home country 

firms (Palan and Abbott, 1996: 32).  Regionalism can emerge as one such response to 

these multiple pressures.   

 

The literature identifies two ideal-type models of the globalisation-regionalism 

relationship, with open regionalism the dominant theoretical model as well as in practice 

(Mittelman, 2000: 126).  Open regionalism

5

 is aimed primarily at advancing the 

competitive position of business in global competition (the liberal economic 

interpretation) or to attract wealth-creating FDI to the region amidst competition with 

other sites for it (the economic realist interpretation).

6

  The main driving force behind open 

regionalism is the concern with economic efficiency, or more broadly with ensuring 

economic growth through participation in global wealth creating activities.  An alternative 

ideal-type model of the globalisation-regionalism relationship in the literature is the 

‘resistance to globalisation’ model of regionalism (Hveem, 2000: 75-78).  Resistance 

projects are driven largely by concern with non-economic or social values like distribution 

and social justice, seeking to preserve through regionalism particular forms of domestic 

social/economic arrangements that are arguably difficult to sustain individually amidst 

globalisation (Mittelman, 2000: 116-30).  While proponents of regionalism in this model 

seek to resist globalisation, the advocates of both variants of open regionalism accept full 

engagement with globalisation.   

 

While providing useful insights into the relationship between globalisation and 

regionalism, these two models are limited in their treatment of the state-market 

                                                 

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 The term ‘open regionalism’ originally meant a form of regionalism that was based on the principles of 

unilateral liberalisation as well as non-discrimination in tariff preferences between members and outsiders 

(Drysdale and Garnaut, 1993: 187-88).  The term is now used in a more general sense to characterise 

regionalist schemes that are fundamentally about engaging with the global market (Gamble and Payne, 1996: 

251). 

6

 The conceptual distinctions between the two variants of open regionalism are discussed in Nesadurai 

(2001: 60-70). 

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