I am in basic agreement with most of Sree Kumar's analysis and conclusions. I would like to make the following points of relevance to his paper.

First, ASEAN has taken a very bold step at the Fourth ASEAN Summit in January this year. The AFTA agreement is a milestone. However, the objective of AFTA should not be just to promote intra-ASEAN trade but, and more importantly, to improve ASEAN countries' export competitiveness and investment attractiveness vis-à-vis the rest of the world. ASEAN cannot afford to be inward looking. In other words, the emphasis should be on enlarging the economic pie rather than equitable sharing of the pie, for AFTA is relatively small in terms of market size when compared with the trading blocs of EC and NAFTA. AFTA is also very small when compared to the emerging natural economic zone of South China, Hong Kong, Taiwan and South Korea. At last year's ASEAN Roundtable, Seiji Naya and Pearl Imada had shown in their paper that the static gains from trade creation in AFTA are very small. A recent World Bank conference on regional integration (April 1992) also showed that the trade creation effect of trading blocs among developing countries is very small. So we have to focus on the dynamic gains of increased export competitiveness arising from economies of scale, increased competitiveness and innovation, and increased attractiveness for foreign investors.

Second, I would like to briefly discuss the issue of ASEAN's investment attractiveness or competitiveness. Investment co-operation is necessary to ensure the investment attractiveness and competitiveness of ASEAN countries in the context of the global competition for foreign direct investment (FDI). In that regard, Sree argues that intra-regional investments may offset some of the FDI the ASEAN countries need to attract. But ASEAN would need to attract FDI from extra-ASEAN sources for a long time to come, and thus the regional investment climate becomes critical.