Bangkok: A possible free trade agreement (FTA) between the European Union and Southeast Asia along with the governments’ recent moves to liberalize their economies could lead to a boost in sadly lagging E.U. investments in the region, an E.U. official said Friday.

“I think we will see an increase in investment in Southeast Asia because we have started exploratory talks on an eventual free trade agreement between ASEAN and the EU, and secondly, we see an improvement in a more open attitude towards foreign investment,” said Friedrich Hamburger, head of the European Commission office in Bangkok.

The possibility of setting up a free trade agrement between the E.U and the Association of Southeast Asian Nations (ASEAN) was first raised by E.U. Trade Commissioner Peter Mandelson on a trip to the region earlier this year.

Hamburger noted that E.U. investments in ASEAN amounted to only 2.8 per cent of Europe’s total foreign direct investment (FDI) worldwide in 2002, and less in 2003 and 2004 when many European companies shifted their attention to the rapidly growing markets of China and India.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore, Thailand and Vietnam.

The E.U. will host its 4th Asia Invest Forum 2005 in Bangkok, on November 14 and 15, in an effort to stimulate flagging European investment interest in the region. The forum is expected to attract 200 participants from 90 organizations representing private and public sectors.

“A surprisingly small share of E.U. FDI – less than 6 per cent – comes to Asia, including China,” said Hamburger. “This is only about half of the E.U.’s annual investment in Latin America, despite Asia clearly being the most dynamic growth area in the world.”

The E.U. ambassador to Bangkok attributed the sharp decline in European investment in Southeast Asia to the 1997 financial crisis and the protectionist measures many Southeast Asian governments put in place as result of the crash.

“Now we are seeing a slow reopening of the markets,” said Hamburger.

He noted, for example, that Thailand was mulling legislation that would allow up to 49 per cent foreign holding in local telecommunication companies, the same percentage that was allowed in Thailand prior to the 1997 crisis.

To protect the local telecommunication industry in the 1997 post-crisis period, the Thai government restricted foreign holdings in telecommunication companies to only 20 per cent.