CHINA'S export competitiveness will ease with rising wages and an appreciating currency. India has yet to get its physical infrastructure up to speed and faces a shortage of skilled labour.

Such indicators give Asean a window of opportunity to regain the initiative in the race for investments and markets, but whether it does so will depend a lot on how rapidly it can build up the regional integration envisioned in the Asean Charter and the Asean Economic Community (AEC) blueprint.

That was the message from business leaders and officials at yesterday's Asean Business and Investment Summit, a forum traditionally held ahead of the Asean leaders' summit to air business concerns for the region.

"The Charter is the most important milestone in the evolution of Asean as an organisation," said Mr Haruhiko Kuroda, president of the Asian Development Bank.

"It is also a useful means to sell the concept of ownership among its people and also helps build a global image for Asean. The AEC also will help transform Asean into a stable, prosperous, highly competitive economic region."

Asked by session moderator Warren Fernandez, The Straits Times' deputy editor and foreign editor, to discuss the region's chances against the backdrop of a rising China and India, some participants at a session on Asian integration described having an AEC rapidly as a "make or break issue".

"I think it is really crucial that over the next three to four years we start putting our money where our mouth is, we start getting Asean to function like a community," said Citi's Singapore country officer and head of Asean markets and banking Piyush Gupta.

In other words: Get the AEC in place and the rewards could be waiting.

Wages are rising in coastal China thanks to a labour shortage stemming from its one-child policy, and export prices are on the way up. Besides, Beijing is under pressure to let its currency appreciate.

To retain customers, Chinese companies may even be forced to locate some of their production capacity in South-east Asia.

"China has 20 million jobs in textiles and garments. If 10 million jobs could move out of China and three million of that went to Indonesia, imagine the impact," said Professor Tan Kong Yam, director of Asian Research Centre at Nanyang Technological University.

"The next five years offers a big window for Asean," he added.

A decade after the Asian financial crisis, the region is buoyant again, lifted in part by the rising ides of China and India. Investments are flowing in, trade is growing and tourists are thronging resorts and malls.

But there are also some danger signals, as bankers, economists and businessmen in the region warned.

The share of electronics in Chinese exports has risen to 40 per cent, showing the mainland is less and less of a low-cost production centre for shoes and garments.

Instead, as a study sponsored by logistics firm DHL indicated, components manufacture is slowly retreating from Asean and moving to the mainland.

The report, released on Friday by the Economist Intelligence Unit, said that trade among the six largest Asean economies has fallen as a proportion of their total exports - from 22.4 per cent in 2000 to 20.9 per cent last year - a shift which did not augur well for Asean's hopes of forging a single trading market.

It also noted that unlike China and India, where high-value exports and imports grew faster than those of low-value, four of the six Asean countries studied saw low-value exports grow faster than high-value exports, possibly because of a boom in commodity prices and demand.

Yet Asean is not without hope, as many speakers at yesterday's summit discussions made clear. But to thrive requires a collective response, and urgently too, they agreed.

As China's population ages, pointed out Mr Lee Howell, head of Asia and Global Agency for the World Economic Forum, it will face demands for a social security net. While India has one of the youngest populations in the region, skill sets are often inadequate for it to ramp up its manufacturing sector.

"Asean has the benefit of youth and an educated, skilled and able workforce. It still has an opportunity to leverage its youth," Mr Howell said.

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