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

relationship, particularly that between governments and fractions of capital distinguished 

by their ownership – domestic or foreign-owned capital.

7

  Neither variant of open 

regionalism makes an adequate distinction between foreign and domestic capital, although 

the former is privileged in the FDI variant.  Although it may be increasingly difficult to 

distinguish business in terms of its nationality – the ‘who is us?’ question posed by Robert 

Reich (1991: 304) – such a distinction, nevertheless, remains relevant in particular 

political contexts where policymakers and politicians do consciously make this distinction 

for various political reasons.  In these settings, and this is especially true for developing 

countries where domestic capital is usually not as well developed as foreign capital but 

often plays a crucial social/political role, governments may well respond to globalisation 

in ways that attempt to preserve and nurture domestic capital.   

 

By making an analytical distinction between foreign and domestic capital, a third 

model of regionalism is possible – developmental regionalism (Nesadurai, 2001: 74-79).  

See Table.  Deriving from the notion of the developmental state, developmental 

regionalism encapsulates the developmental state idea of state intervention in markets to 

promote national development agendas, in this case by adopting an approach to 

regionalism through which to nurture emerging domestic firms to eventually become 

internationally competitive.  This is achieved through two instruments: one, the expanded 

regional market generated through inter-state cooperation and two, temporary protection 

or privileges for domestic capital in this expanded market.  According to strategic trade 

theory from the international economics discipline, both measures can help to secure 

benefits for domestic firms over their foreign competitors.

8

  

 

                                                 

7

 The conventional treatment has been of segments of capital distinguished by their market orientation, either 

towards the domestic market or the international market.  See, for instance, Gourevitch (1977). 

8

 This insight comes from Paul Krugman’s ‘import protection as export promotion’ variant of strategic trade 

theory, which reveals that when a domestic firm is given a privileged position in the home market, it enjoys 

an advantage in scale over foreign rivals that enables the firm to realise ‘learning by doing’ benefits.  A 

larger protected home market offers greater dynamic scale and learning effects to the privileged firm.  See 

Krugman (1984).    

5 

---

 

Ideal-type Models of the Globalisation-Regionalism Relationship 

 

Theoretical 

Models  

(Ideal-Types) 

Relationship 

to 

Globalisation 

Key 

Driving 

Force 

Key Features  

Relationship to 

Foreign and 

Domestic 

Capital 

Neoliberal 

Regionalism 

 

[Variant of  

open regionalism] 

Engages with 

globalisation 

Concern 

with 

efficiency 

No new barriers to 

non-members 

imposed; 

Full deregulatory 

agenda contemplated; 

Also associated with 

agenda to reduce 

government’s role in 

all aspects of 

economic activity; 

Hence the neoliberal 

credentials. 

Does not 

distinguish 

between 

foreign-owned 

and domestic-

owned capital 

FDI Model 

 

[Variant of 

open regionalism] 

 

 

Engages with 

globalisation  

Concern 

with 

attracting 

FDI, a 

crucial 

source of 

growth; 

 

Efficiency 

may be 

either a 

primary or 

secondary 

concern.   

No new barriers to 

non-members 

imposed; 

Deregulation agenda 

could be extensive or 

limited; 

Ambivalent with 

regard to 

government’s role in 

the economy; 

More likely to be an 

instance of embedded 

neoliberal 

regionalism  

Foreign capital 

(FDI) privileged 

 

Resistance Model 

Resists 

globalisation  

Concern 

with 

political 

legitimacy 

Seeks insulation from 

global market forces; 

Dominant agenda is 

social/distributive.   

Other social 

groups, apart 

from capital 

privileged, 

notably labour 

Developmental 

Regionalism 

Essentially 

engages with 

globalisation, 

although it also 

involves 

limited and 

temporary 

resistance to it  

Concern 

with 

distribution 

initially, 

with growth 

a long-run 

concern 

Employs temporary 

protection of, or 

temporary privileges 

for, domestic-owned 

capital; 

Distribution is thus 

directed towards 

domestic capital. 

Domestic-

owned capital 

privileged 

 

Source: Nesadurai (2001: 88) 

 

Proponents of developmental regionalism, it is argued, are not necessarily resisting 

globalisation through regionalism.  They do not fully accept the anticipated dominance of 

foreign/global firms that is associated with globalisation, however, and attempt to support 

6 

---