Singapore cannot afford to sit around and wait. Singapore will continue lobbying its neighbors hard to liberalize trade, fearing that their insularity will hurt its own economy. Singapore's relatively high costs and tiny domestic market also limit the amount and type of new investments it can attract. Despite political and economic uncertainty and the apparent withering of AFTA, the region will still attract investment from global firms. But it will be concentrated in labor-intensive industries like textiles.
Labor is cheap, while domestic demand has picked up.
Companies that import few raw materials and whose operations supply only the domestic market care little about high tariffs. DaimlerChrysler is only one of countless multinational corporations for whom AFTA holds massive potential. But until Southeast Asia provides solid evidence of its commitment to free trade, many more global players will hedge their bets in Singapore.