Domestic capital and developmental regionalism: Domestic distributive concerns temper the growth imperative
The particular design of the AIA component programme suggests that there is another dimension to the AFTA story apart from open regionalism and the concern with FDI that remains unexplored. It is clear that the approach to investment liberalisation adopted in the AIA sought to privilege ASEAN domestic capital in the AFTA market, at least temporarily for up to a ten-year period. The decision to offer full market access and national treatment privileges to ASEAN investors ahead of foreign investors in the AIA is certainly puzzling given AFTA’s acknowledged role as an instrument to maintain the region’s attractiveness as a site for FDI. This chapter explains this as a move by ASEAN member governments spearheaded by the Malaysian authorities to use the investment liberalisation programme of AFTA as a developmental tool to build up domestic firms, in addition to employing AFTA’s tariff liberalisation CEPT programme to attract FDI to the single regional market. It is a perspective on AFTA that has so far been missed in the literature.