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Business

Schröder's Asia Trip Highlights Vital Trade Links

German Chancellor Schröder has embarked on a five-day trip to southeast Asia dominated by business talks with key trade partners. Expert say his visit could provide a boost to the depressed region.

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German Chancellor Schröder, left, with Malaysian Foreign Minister Syed Hamid Albar in Kuala Lumpur on Sunday.

Accompanied by Economics and Labor Minister Wolfgang Clement (photo, right) and Head of Siemens and Chairman of the Asia Pacific Council Heinrich von Pierer, Chancellor Schröder is to visit Malaysia, Singapore, Indonesia and Vietnam in the coming days.

Business talks and the intensifying of trade relations are to top the agenda. Germany has strong trade ties to the countries belonging to the Association of South East Asian Nations (ASEAN) and Schröder’s visit to the region is being awarded high priority by Berlin.

Schröder's visit seen as a massage for the soul

But even more importantly, the chancellor’s delegation is likely to receive an eager welcome by the region’s leaders, who have been struggling with poor growth and sputtering economies in the face of the global economic slowdown.

Rüdiger Machetzki, expert at the Institute for Asian Studies in Hamburg, told DW-WORLD that the chancellor’s visit is symbolic and necessary to lift the depressed spirits in the region. "The visit is very important for the region as a kind of massage for the soul," he said.

Though Malaysia, Singapore, Indonesia and Vietnam are considered as models in the floundering region with growth rates of at least three percent each, the four destinations aren’t immune to the problems plaguing the region since the Asian economic crisis in 1997.

Southeast Asia stuck in a rut

Experts say the reason for the economic malaise in the region despite growth rates that sound like a dream to Europe is easy to explain. Machetzki said that unlike in the West, the southeast Asian region needed an enduring economic growth rate of at least five to six percent to make any kind of tangible progress. He said an atmosphere of gloom would descend if the countries slipped from an economic growth rate of five percent because of the huge numbers affected. According to Machetzki, Indonesia alone has to find jobs for 2,5 million workers yearly due to rapid population growth.

Experts also say the competitive edge enjoyed by the southeast Asian region until just a few years ago is history now. Instead the countries have to contend with China and even Mexico beating them to their share of the world market.

Machetzki says the companies in the region desperately need to replace their largely redundant and old machinery to keep up with the tough competition. But finding the money for it is a big problem. "That’s why it’s good, when one travels there and says ‘don’t lose hope, we’ll support you’," Machetzki said.

Germany has strong economic interests

It remains unclear what Chancellor Schröder is likely to offer the region in economic terms, but there’s little doubt that Berlin has a strong economic interest there.

Singapore is Germany’s most important partner in the region with a foreign trade volume of €7,7 billion and direct German investments amounting to €4,3 billion. About 600 German companies are based there.

German industry is mainly interested in ship-building projects in Indonesia which its 500 islands, while in Malaysia Schröder’s delegation is expected to hold talks on German participation in constructing a more than 600-kilometer-long rail track. The opening of a high-tech Siemens center in Malaysia and German interest in helping Indonesia expand its regional waterworks is also expected to figure in the talks.

Signal to Islamic countries

Though trade talks will be the focus of Schröder’s visit, the fight against terrorism and the consequences of the Iraq war are also likely to figure on the agenda.

Experts say that concrete decisions or agreements other than the intensifying of cooperation in the war against terror aren’t expected because the United States plays the key role in these matters. "But despite that, the visit could at least be a signal to Islamic countries such as Indonesia that one can understand their difficulties with the U.S. on account of their rejection of the war on Iraq," Bernhard Dahm of the University of Passau said.