In a speech late Wednesday, Sept 28, Lee said that an integrated ASEAN market of 550 million people with a combined gross domestic product that is the third largest in Asia would be an attractive investment destination which multinational corporations could not ignore.

Lee admitted there would be challenges to integration as there are concerns it may lead to member countries giving up some sovereignty to a "supranational organisation" like the European Commssion, which steers the European Union.

For other countries, integration could also mean facing more direct competition, he said.

Analysts have also pointed to gaps in economic development, cultural diversity and differing political systems within ASEAN as another challenge to be overcome.

ASEAN groups such countries as wealthy Singapore, impoverished Laos, army-ruled Myanmar, troubled democracy the Philippines and absolute monarchy Brunei, a far more diverse range of countries than Western Europe.

"Notwithstanding these challenges, ASEAN has to make greater efforts at integration. The EU and even Latin America are progressively deepening their regional integration," Lee told business executives and diplomats at a forum on ASEAN's prospects.

He warned that if ASEAN delays the process "we will fall off the radar screen of international companies and investors."

Lee pointed out that China is already taking the bulk of foreign investment into Asia, while India's share is rising and Central and Eastern Europe are emerging as attractive business destinations.

"Should ASEAN fail to rise to the challenge, we would become marginalised and irrelevant," he said.

Leaders of the 10-nation regional bloc are hoping to establish an ASEAN Economic Community by 2020, which means having a single market and a common manufacturing base.

Lee however said ASEAN was "still decades away from becoming a fully integrated community, especially if we compare ourselves with more established groupings such as the EU."

He also said ASEAN should speed up free-trade negotiations with Japan, China, India, Australia and Zealand as part of a policy of open regionalism.

While the talks are at various stages of completion, "progress has been slow, as negotiating a deal involving ten countries on one side is complex."

"We must make faster progress on these negotiations while staying alert to new opportunities and partners," said Lee, whose country has signed free trade pacts with trading partners such as the United States, Japan, Australia, New Zealand and Jordan.

The other ASEAN members are Malaysia, Indonesia, Thailand and Vietnam.

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