GROWTH CENTRES IN SOUTH EAST ASIA 63 of the emerging markets for private capital in the developing areas, four countries in the Association for South East Asian Nations (ASEAN). Section II discusses the experiences of Indonesia, Malaysia and Thailand, the three major performers in terms of domestic growth and capital inflows—henceforth referred to as the ASEAN-3. The analysis examines the real-financial nexus of growth and stability in these areas. It is noted that, while a great deal of reliance was placed on liberalization of markets, such efforts in these areas were matched by a significant dose of State surveillance over national economic policies. A related issue concerns the sustainabilty of their growth path, particularly in view of the possible degree of vulnerability that seems to arise from the openness of these economies. The analysis in Section II is divided into three parts, dealing respectively with: (a) the links between industrialization, trade, foreign investment and State policies; (b) financial stability and the underlying factors; and (c) the risk of financial upheavals occurring in these countries, especially in those with financial openings. The last mentioned aspect draws on the frequent financial turmoil both in the developed as well as in some developing countries that have failed to maintain the requisite degree of surveillance over capital flows. Section IV reviews the issues concerning the role of the State vis-a-vis the market in the three high-growth economies of South East Asia. A final section contains some concluding observations. I: DEVELOPING COUNTRIES IN THE INTERNATIONAL CAPITAL MARKET Despite their small share in the international capital market, the developing countries are seen in financial circles as having a higher order of investment potential, compared to the advanced economies. It has actually been claimed by Baring Securities, a renowned investment house in the United Kingdom, that the "emerging markets will regain their position lost at the beginning of the First World War". In terms of this forecast, the developing countries in Asia, Africa, Europe and Latin America should receive, by the end of this century, around 40 per cent of global portfolio investment, which at the beginning of the 1900s was the major vehicle for international financial flows (Baring Securities, 1992, pp. 3-6). Table 1 provides a picture of the global flows of private capital and their composition since the mid-1980s, with the distribution of portfolio and bank credit flows as well as FDI. It is interesting to observe that developing countries absorbed more than one-quarter each of the global total in FDI and equity flows during 1990-93. The ASEAN's share in the global flow of portfolios and FDI caught up by the early 1990s, reaching the level held by the NICs (Table 2). A steady shift in the flow of FDI, away from the NICs and in the direction of the ASEAN (or South East Asia), is evidenced by the stock of FDI held by these two regions during the 1980s (see Table 3 on the stock of FDI held by the different host regions during 1980-94). The estimated stock of FDI in South East Asia seems to have been comparable to sums held by the NICs since the beginning of the 1980s. These observations may by