On July 1, hundreds of thousands of Hongkongers gathered to call for greater democratic freedoms in the run-up to September's legislative election. As the special administrative region's leaders - both opposition and government - attempt to guide Hong Kong through its latest squall, the uncertainty provides an excellent opportunity for Southeast Asian nations such as Indonesia, Malaysia and Singapore to seize the economic initiative from the Pearl River Delta region.
Political storms in Hong Kong are matched by a remarkable rapprochement in ties between Malaysia and Singapore, brought about by the change of administration in Kuala Lumpur. This has opened substantial commercial opportunities as the economic integration gathers steam.
Indirectly, enhanced ties also represent an important challenge to the Pearl River Delta, and especially Hong Kong. Rising costs, concerns about China's macroeconomic health and infrastructure are also having an impact on competitiveness.
Globally, the combination of a fully integrated economic region encompassing Indonesia, Malaysia and Singapore (straddling one of the world's busiest international waterways) is almost unbeatable. Political risk in all three - unlike in Hong Kong - has dropped substantially since the incumbent Malaysian government was returned to power in March with a thumping majority. At the same time, the incident-free Indonesian polls suggest that the world's largest Muslim nation is adjusting to the realities of democratic life. Meanwhile in Singapore, the city state is awaiting the transition from Prime Minister Goh Chok Tong to Lee Kuan Yew's son, Lee Hsien Loong.
In this respect it is hard to fault the enthusiasm of men like Manu Bhaskaran, a leading Singapore-based business consultant, when he says: 'The countries have to work together. Together we are powerful and we can out-compete anyone.'
Certainly, the 'hardware' is impressive, especially in Malaysia and Singapore. After decades of staggering investment in infrastructure there is a network of highways, airports and ports that puts the first world to shame. Shipping costs, for example, have plunged given the cut-throat competition. However, in the Pearl River Delta, costs are mounting, so much so that some manufacturers are considering relocating in pursuit of cheaper labour and lower overheads.
