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General Agreement on Tariffs and Trade (GATT) under World Trade Organisation (WTO) regime is the important reference on global trade, whereas the rules provided by the agreement has made transactions across national border relatively to be decelerated  . Recently, regionalism has become a feature to conduct cross border deals by which the proliferation of regional trade agreement (RTAs) and other forms of regional cooperation, triggered by European Union (EU) market integration which has so far been the most successful example of regional economic integration  , has seized attention for most countries to intensify their cooperation with other countries given the economic benefits that regional integration brings.
III.1 ASEAN Free Trade Area (AFTA)
The fundamental aim known in favour of regional integration (regionalism) is the function of expanding market and promoting competition through eliminating barriers to trade among member-countries  . Basically, as resources from previous engaged domestic production are costly will be efficiently reallocated to the direction of countries' comparative advantage and consequently, economic welfare increases  . Therefore, this circumstance will generate greater productivity and also trade opportunity.
Regarding the growth of regionalism globally, with its advantages and the commonly downbeat outlook on transnational trade under WTO, The Association of South-East Asia Countries (ASEAN) promoted some initiatives toward regional cooperation among its member countries. The ASEAN Free Trade Agreement (AFTA) held in place in 1992 was the primary initiative from all members (at first its initiators are ASEAN-5, namely, Indonesia, Malaysia, Thailand, Singapore, and Philippines) to promote the region's competitive advantages  as a single economic and production unit. AFTA will give a pledge for member countries to free trade within a 15-year timeframe by the elimination of tariff and non-tariff barriers with the ultimate goals of augmenting productivity, economic efficiency, and competitiveness. Recently, AFTA-China comes into force in the beginning of 2010, whereas all members have had the opportunities mentioned above. Moreover, ASEAN members also committed to accelerate industrial cooperation through several efforts as the ASEAN Investment Area (AIA) and ASEAN Economic Community (AEC) by 2020  .
In January 2007, at the 12th ASEAN Summit, ASEAN' Leaders emphasized their anxious commitment to accelerate the establishment of ASEAN Economic Community by 2015, in particular, the Leaders agreed to transform ASEAN into a region with free movement of goods, services, investments, skilled labour, and capital  . With The acceleration of AEC, ASEAN will establish a single market and production base, which is more dynamic and competitive with new systems of cooperation among the members to intensify the implementation of its economic initiatives. Further, it has also facilitated the free movements. After ASEAN economies were severely destructed by the financial crisis of the year 1997-1998, AIA became the fundamental framework to regain business confidence and to enhance economic recovery in the region, whereas ASEAN members decided to give priority to the promotion of ASEAN's industrial competitiveness and the encouragement of greater foreign investment into ASEAN  . This commitment stipulated through improvement of ASEAN's economic sectors and the reduction or elimination of regulations and conditions which may hamper the implementation of investment project in ASEAN.
Based on the above and taking into consideration the important of huge opportunity derived from trade to ASEAN (as a mean of investments), AFTA became a key element to open ASEAN region into what the ASEAN envisage stated on its blueprint  .
III.1.1 Compatibility Rules Of the General Agreement on Tariffs and Trade
AFTA is a key to implement regionalism in ASEAN, further, it therefore apparently become fundamental issue, prior to the basic description and the explanation of what it does entail, to ascertain AFTA within global trading systems  , and especially, the compliance of AFTA with the underlying agreement of world trade stated on GATT.
To determine the conformity of regional integration arrangements with the multilateral trading system, thus AFTA should be compatible with the mechanism of article XXIV of GATT  . Several issues may arise regarding the position of AFTA claiming the significant relaxation of the creation of free-trade area among developing countries and also the flexibility granted in observing the general requirements for an economic integration agreement, in which a member of ASEAN (Singapore) is categorized as economically developed. However, according to several journals, there seems to be no ground for exempting ASEAN members (AFTA regionalism) from compatibility with article XXIV GATT  .
The purpose of AFTA as regionalism in ASEAN would enhance economic liberalisation, even though, the fact that unlike European economic integration which started as an inward-looking approach to regionalism  , ASEAN economic integration is mainly equipped toward open regionalism, since it is given that the significant counter-parts of economic are outside ASEAN region  . Therefore, the nature of AFTA is ambitious, whereas various commitments undertaken by ASEAN Leaders in order to complement the creation of the AFTA with other shapes of economic integration in borderless areas. In short, regional cooperation to promote regional trade without discrimination against outsiders, in a path way that is consistent with GATT rules on economic liberalisation.
III.1.2 Framework Agreement on Enhancing ASEAN Economic Cooperation
ASEAN economic community as stipulated in the ASEAN Vision 2020 will establish a single market and production base in ASEAN. The strategies toward the integration, inter alia, as stated in ASEAN's Blueprint  :
Institute new mechanisms and measures to strengthen the implementation of its existing economic initiatives, including the ASEAN Free Trade Area (AFTA), ASEAN Framework Agreement on Services (AFAS) and ASEAN Investment Area (AIA);
Accelerate regional integration in the priority sectors;
Facilitate movement of business persons, skilled labour and talents; and
Strengthen the institutional mechanisms of ASEAN, including the improvement of the existing ASEAN Dispute Settlement Mechanism to ensure expeditious and legally binding resolution of any economic dispute.
Regarding the strategies above, it seems that ASEAN's Leaders taking the seriousness in realizing the goal of the AEC, however, according to several studies conducted by economists, what form the AEC will take is still a big question  , given the fact that ASEAN community which includes some elements of a common market (facilitate the five free of flow of ASEAN), but it excludes a common external tariff. Consequently, as ASEAN economic community is an open regionalism (unlike European community), ASEAN should immediately find an appropriate form-related with the approach it has been taken.
To ensure the progress towards realizing ASEAN economic community, all strategy involves deepening and broadening the integration of economic, for instance, products, markets, and every related aspects of economical as mentioned in three major areas of integration  ; "trade in goods and services, investment, and skilled labour". AEC will eliminate barrier to trade (both tariff and non-tariff), and harmonized procedures and classifications to facilitate trade in goods and services. In the area of investment, AEC will focus only in the term of direct investment, whereas to attract the flows into the region, AEC will introduce some new mechanisms regarding foreign direct investment. Lastly, in relation to skilled labour, AEC will prepare indicators pertaining common wage rates and employment market. The broad area of economics are taken into consideration relating to financial services, such as credit markets, bond markets, stock markets and the banking sector, as well as other support sectors including transport, telecommunication, corporate and tax  .
III.1.3 Framework Agreement on ASEAN Investment Area (AIA)
To enhance ASEAN's competitiveness in attracting foreign direct investment and intra-ASEAN investment, ASEAN introduce new mechanism, a free and open investment  . This mechanism will ensure the inflows of FDI through a framework agreement on the AIA and shall ensure the dynamic of development of ASEAN economies.
Under AIA framework, all industries shall be opened and granted by national treatment to investors at the pre-establishment and post-establishment stage of investment. Coincide with one of the five free flow of ASEAN (Free flow of investment), ASEAN has enacted its blueprint regarding actions as follow  :
Investment Protection, provide enhanced protection to all investors and their investments to be covered under the comprehensive agreement.
Facilitation and Cooperation, is a more transparent, consistent and predictable investment rules, regulations, policies and procedures.
Promotion and Awareness, Promote ASEAN as an integrated investment area and production network.
Liberalisation is a progressive liberalisation of ASEAN Member Countries' investment regime to achieve free and open investment by 2015.
This commitment is evidence that ASEAN, recently, continues to position itself as a centre for global investment and trade and remains on the radar screen for FDI among foreign investors. These actions are also intended to accelerate industrial cooperation through such endeavours as the ASEAN "one-stop investment centres" which offers tariffs and non-tariffs incentives  . For instance, Indonesia introduced a subsidiary regulation under its 2007 Investment Law that requires the establishment of One Stop Service of Investment (OSSI) for local and foreign investors, Malaysia introduced a number of liberalisation measures involving the financial sector and non-financial services sectors, while Philippine implemented reforms to address improvement of the country's competitiveness, whereas such steps are expected to further ensure the sustainability of key investment flows.
III.2. Effect of ASEAN Regionalism on Cross Border M&As
The recent proliferation of AFTA (ASEAN economic community) is an open regionalism, whereas it's salient economic partners are outside ASEAN region, consequently, ASEAN has a framework in term of AIA to ensure stability of FDI inflows in the region. Regarding on world investments report 2009, global FDI flows declined in 2008, it was triggered by a substantial decline experienced by developed countries in which their share of global FDI flows brought to its lowest level in this decade to 57% compared with a high of 80% in 2000. In contrast, in developing countries was much more resilient, the inward FDI to developing countries increased to 43% in 2008, compared with 31.3% in 2007. All regions in the developing world continued to record an increase in 2008, Africa, Asia, Latin America and Caribbean with 26.6%, 17%, and 13.3% respectively.
ASEAN region marked by the decline of FDI flows by 15% in 2008. However, intra-ASEAN investment flows remained resilient, in which the FDI flows within region increased by 18.2%. The top three ASEAN investors in 2008 was European Union with share of FDI flows at 21.9%, Japan 15.2%, and United State 5.1%.
The fact that the global financial crisis in 2007-2008 is behind the decline of global FDI inflows in 2008, with the regional economic cooperation, it is expected that the nascent global economic recovery in the second half of 2009 will have mitigated the decline of FDI flows. Regarding the outlook of global FDI development, the flows are expected to climb back to their normal level by the end of 2010 and or in the beginning 2011  as investors' confidence will return and mergers and acquisitions activities strengthen.
III.2.1 Strengthen Regional Investment in ASEAN
ASEAN had been a major recipient of FDI flows even during financial crisis 2007-2008 and despite the weak recent global economic condition. With regional economic cooperation under the AIA framework, ASEAN reaffirms its commitment to provide investors with a competitive and attractive environment for investment and business operations. AIA also allows investors to harness the various complementary advantages of ASEAN Members in order to maximize business and production efficiency at lower costs, therefore it will certainly confer investors the opportunity to adopt regional business strategies and establish network operation in the region.
The AIA agreement has now unfolded various cooperation investment sectors; manufacturing, agriculture, mining, forestry and fishery, and services. Recognizing the new wave of business opportunities and development globally in the area of services, AIA has agreed to expand the scope of service  such as, but not limited to, education, health care, telecommunication, tourism, banking and finance, insurance, trading, e-commerce, distribution and logistic, transportation, and professional services. As a result, although the financial and economic crisis affected the developed countries (EU and US) due to instability in their financial market in 2008 and it was expected that FDI outflows from these countries would decline significantly, Intra-ASEAN flows remained resilient  .
The share of intra-ASEAN FDI flows went up and this consequently, increases confidence of ASEAN investors in making business operation within member countries given shared geographical and cultural similarities. Moreover, with economic cooperation under ASEAN regionalism formed, intra-ASEAN economic become more integrated and barriers to trade and investment decreased, and further, the benefits of ASEAN integration efforts become more well-known and established, finally, higher level of intra-ASEAN flows can be expected.
Since, there is no longer certainty that the recovery in the developed countries will be upturn and it is harder to forecast  , thereby, it is important for ASEAN to maintain its high level of FDI flows, as these have proven to be beneficial to ASEAN's development. The fact can be taken into consideration to sustain FDI flows in intra-ASEAN that most ASEAN countries have large current account surpluses and this could be used to invest in more stable and productive investments within ASEAN itself  . In this respect, ASEAN economic cooperation (regionalism) is important to ensure FDI capital augmenting effect of increasing the level of investment and its productive capacity and efficiency, and strengthen intra-ASEAN investment cooperation.
III.2.2 FDI Flows Through Cross Border M&As in ASEAN
The liberalization of FDI regimes has continued to rise, typically on a unilateral basis, for instance ASEAN regionalism cooperation through AIA. Most countries are now trying to attract direct investment, not just by removing restrictions, but also through active promotion and by providing high standards of treatment, legal protection and guarantees  .
FDI is a long-term active participant from foreign countries; there are two modes in which FDI flows, through conducting cross border M&As, and greenfield investments. Most literature has not distinguished between these modes although both are quantitatively important  . However, the ratio of the value of global cross border M&As to the value of global FDI (US$865 billion in 1999) is about 80%  . Further, because cross border M&As involves the acquisition of a local firm by a foreign multinational enterprise, cross border M&As bring "less" to the host country's economy than greenfield FDI (consequently, will bring "more" to home country where the acquiring firms are originally located).  Hence, the optimal government policy toward FDI flows should be tailored to the particular type of FDI: greenfield and cross border M&As.
Several of empirical studies have analyzed the determinants of the choice between cross border M&As and greenfield investments as a mode of entry into foreign locations. According to study by Harzing  some factors affect the modes of entry of firms to make investments are  :
Firms with lower R&D intensity are more likely to buy technological capabilities abroad by Acquisition, while those with strong technological advantages tend to prefer greenfield ventures to a greater extent.
The greater the cultural and economic distance between home and host countries, the lower the probability of an acquisition. Most M&As concentrate in developed home and host countries with similar cultural and business practices.
Acquisitions are encouraged by imperfections of capital markets that lead to the undervaluation of company assets. By similar reasoning, they are also encouraged by economic crises that lead to sharp falls in asset prices generally.
In developing countries, the advantage of M&As is rarely access to proprietary technology or skills (with the exception of some newly industrializing economies). The advantage lies more in rapid market entry, local market knowledge, established distribution systems and contacts with the government, suppliers or customers.
For firms to choose M&As instead of entry through greenfield investment, there has to be a supply of suitable target companies to acquire. This may not always be the case, most notably in a number of developing countries.
The fact that FDI flows to ASEAN continued to be concentrated in services and manufacturing sectors  , Intra-ASEAN cooperation (regionalism) has led to provide a big gate and attractive stimulus for investors in those particular sectors (such as, tax, and new more simple mechanism), as a result higher investments through cross border M&As are welcome to hold their business and operation in ASEAN region. This condition is consistent with the data from ASEAN Investment report for services and manufacturing, whereas both sectors are of prolonged interest in particular countries and confidence in ASEAN regional growth prospect for investment in 2010  .
III.2.3 Cross-Border M&As Activities in ASEAN
Cross border M&As can be useful and unlike most other initiatives (greenfield projects and direct sale through export), foreign investors with sufficient resources can be mobilized to contribute to the long-term goals of increased competition as well as better corporate governance. Further, foreign participation through cross border M&As could be more effective in achieving efficiency and competitiveness as well as better corporate governance, the areas in which domestic firms may not have adequate resources to attain the same goals as effectively. In this regard, ASEAN countries appear to have been successful in attracting foreign capital into committed sectors through cross border M&As activity and foreign investment, in which ASEAN members have played a significant role.
According to World Investment Report 2009, the global outlook for FDI flows in 2009 is expected to remain fragile following the global financial crisis. Developed countries experienced a significant decline of 29.2% in 2008. In contrast, the FDI flows within developing countries were much more resilient, in which the share of FDI flows rose to 43% in 2008. Asia maintains its growth rate of 17%, whereas Intra-ASEAN FDI flows is increased by13.4% in 2008 to US$ 10.7 billion.
The growth of FDI flows in ASEAN is reflected in the increasing of investments from cross border M&As and greenfield projects, this condition coincides with the seriousness of ASEAN Leaders regarding regionalism efforts and intensified economic and cooperation through integration market in a meaningful and comprehensive manner  .
The following are the progress of M&As activities occurred in some ASEAN countries during the year 2009:
The Indonesian economy  maintained its resilience in enduring the global economic crisis during 2009 as a result of the economy's lack of export exposure and this condition is reflected the Gross Domestic Product (GDP) growth of 4.2%. During the second half of 2009, there were 248 deals of M&As which are mainly in Energy and Mining, Consumer and Industrial Products, Telecommunication, and Financial services, with total estimated value of US$5.7 billion. The outlook for 2010, Indonesia has forecasted economic growth of 6% with respected to the fluctuations of world oil prices and the enactment of ASEAN-China Free Trade Association (ACFTA).
The Malaysian economy  shows growth by 3% in fourth quarter of 2009, after contracting 3.9% in the second quarter and 1.2% in the third quarter. This condition is caused by investors' caution to make new investments in 2009 following the uncertain economic and financial climate. On the other hand, Malaysia also faces intense competition from other emerging economies (other ASEAN countries) such as Indonesia, Vietnam, and Philippines  . The total value of M&As deals during 2009 declined by 56% to US$10.2 billion. Sectors that featured heavily in 2009 were the telecommunications, petrochemicals, power, financial services, and property, whereas the M&As deals were spread across both domestic and Cross-Border. Malaysia's M&As market is expected to be more active in the year 2010 supported by improving fundamental indicators such as a recovering economy and financial markets, bringing much needed confidence to the investment community.
In the Philippines, the economy  in 2009 is marked by the improvement of its national GDP at 1.6%. This condition is supported by the continued raised level of government spending. In 2009, there were 162 deals of M&As with the total value of US$ 6.6 billion in the Energy and Power, Consumer Staples, and Telecommunication sectors. Since the political landscape in 2010 will be dominated by the May Presidential elections, M&As deals would be expected into the first quarter, and during the second quarter investors will be very cautious waiting for the election results. Regardless of the political issue, trade levels in 2010 are expected to increase significantly as a result of the ACFTA with China, whereas China and Philippines have an agreement of the reduction of duties to zero for more than 7,000 trading items.
The Singaporean economy  in 2009 has contracted by 2% following the decline of its GDP of 2.8%. This condition is caused by the effect of the global and financial crisis in which become the worst ever recession strikes the country. The total value of announced M&As activities in 2009 is US$ 20.7 billion covering 608 deals. Most of M&As activities in Singapore are conducted as Cross-Border M&As involving foreign investor, such as from the United Arab Emirates (UEA), US, China, EU, and UK spreading in many area of industries (Manufacturing, Shipping, Services, Telecommunications, and Power). Singapore's M&As outlook for 2010 will be closely linked to regional and global economic and credit conditions, whereas M&As deals are likely to rise with increasing number of buyout transactions. This is likely to be encouraged by various upcoming government initiatives to support business restructuring through M&As, including tax allowance to defray M&As transaction costs as announced in the 2010 Singapore Budget in February.
In Thailand, the economy  in 2009 has begun to improve with positive signs being detected in the level of both exports and domestic consumption, in which the GDP index was 2.8% and Economy growth to 3% during the year. The manufacturing sector expanded as the number of sales orders increased in line with the improvement in the global and domestic economies. M&As activities in second half of 2009 picked up to US$ 2.5 billion. Cross-Border M&As deal with foreign investors from Outside ASEAN (UEA, Japan, US, EU) and Intra ASEAN (Malaysia, Singapore) in several sectors such as, Energy, Mining, Financial Service (Bank), Telecommunications, Hospital, and Power. Economic growth for the 2010 outlook is expected to continue and coincides with the governments spending through a number of stimulus packages, such as Mass Rapid Development project, private sector expenditure, and trade liberalization under ACFTA. According to 2009 Foreign Investor Confidence Survey Report, despite the unfavourable global economic climate, most investors will maintain their level of investment in Thailand. However, this condition is still vulnerable to a number of risk factors including political uncertainty and government instability.
In Vietnam, the economy  in 2009 marked an annual rate of GDP growth reached 5.3%, inflation rate 6.9%, it was the lowest rate in the last six years. The ongoing trade deficit, the decline of export and import put Vietnam under pressure during the year. M&As activities show the strong volume in the second half of 2009 conducted by foreign investors, in particular by Asian Investors (China, Taiwan, Japan, Korea, Singapore, Malaysia) indicating growing confidence amongst international companies. Notable deals announced during the year include financial services (Insurance and Banking), Manufacturing, Property, IT, Telecommunications, and Hotels. Vietnam government announced the outlook for GDP rate at 6% in 2010, since fundamental factors facilitating macroeconomic growth have not been unduly affected by the current crisis. Therefore, Vietnam expects continued growth in M&As activities with deals between domestic companies will accelerate Vietnamese corporations look for M&As target to invest their surpluses cash. The important government initiative that may have considerable impact on the M&As activities is the expected consolidation of various stated owned Enterprises due to the need to rationalise operation and improve exporting competitiveness.