Competition from China is the underlying reason behind the economic difficulties faced by many Southeast Asian countries and people do not realise the seriousness of this threat posed by the rising superpower.

Professor Yoshihara Kunio from Japan's University of Kyoto told malaysiakini in an exclusive interview today said that due to the rise of China as a major exporter of manufactured goods, Southeast Asian countries cannot develop as smoothly as they did before the 1997 economic crisis that hit this region.

According to the professor, China became an economic threat to Southeast Asian countries in mid-1990s.

"But at that time, Asean (Association of Southeast Asian Nations) countries didn't notice it because a large amount of foreign money was coming. Their economy was booming. Then, came the crisis in 1997 when money was taken out and the economy suffered," Kunio said.

"It appeared that the economy crisis was a problem of money going out. So you blamed a speculator in doing so."

"Then, it appeared in 1999 that the economies were becoming stronger but became stagnant again due to the slowdown in the US," he added.

Semiconductor industry

Kunio explained that there was no export growth for Thailand in 1996 due to competition from China especially in areas of labour-intensive manufacturing such as the garment industry.

He said that it was difficult to export such products as China was able to produce them at a much cheaper rate. The country is now moving into lower technological industries such as semiconductors for export.

"If you talk to the industrial producers here (in Malaysia) who are exporting products, they will probably tell you that they are facing competition from China," he said.

Kunio said that although the economic problems endured by Southeast Asia appeared to be a problem of capital outflow, there was also the underlying problem of Chinese competition.

"Even if the US economy moves up, Asean economies cannot grow as fast as the first half of 1990s due to the China's economy also rising at the same time," he said.

China is currently in the process of joining the World Trade Organisation (WTO) and is expected to secure a place by the end of this year.

Meanwhile, when asked if Malaysia is ready for challenges posed by globalisation and global competition, Kunio said that he had 'serious reservations'.

Trade barriers

Citing the arguments made by the critics of globalisation, Kunio said that the best thing Malaysia can do on a global basis is to make the developed countries fulfill their promises to the developing countries to reduce trade barriers imposed on agricultural imports and eliminate the quota on the imports of textiles.

According to him, Malaysia should also ask for more financial and technical assistance from the developed countries because globalisation and economic cooperation go hand-in-hand.

"It's good idea to talk about debt reduction not only for poor countries but also for developing countries as a form of financial assistance," he explained.

Kunio is a leading expert on the political economy of Southeast Asia. His book, The Rise of Ersatz Capitalism in Southeast Asia was banned in Indonesia by the Suharto government and he was barred from entering the country.

His latest book, Globalisation and National Identity: The Japanese Alternative to the American Model, he presents the Japanese economic model as a possible approach for developing countries in the face of globalisation.

He currently holds the Pok Rafaeh chair at Universiti Kebangsaan Malaysia's Institute of Malaysian and International Studies.