Saturday, April 30, 2005

Building Blocks For An Asian Economic Union

South China Morning Post

Friday, October 25, 2002

By Frank-Jurgen Richter and Thang Nguyen

The need for a more integrated, co-operative Asia is now greater than ever before. During the World Economic Forum's East Asia economic summit, held recently in Kuala Lumpur, Asian integration was repeatedly discussed. The three heads of state present - prime ministers Mahathir Mohamad, of Malaysia, Thaksin Shinawatra, of Thailand and Goh Chok Tong, of Singapore - called for more and deeper regional integration and co-operation. In his keynote address, "Deepening Regional Integration and Co-operation," Mr. Goh said the region should push for greater economic integration in East Asia, which would put it in a better position to respond to the formation of large economic blocs in Europe and the Americas.In a session on the institutions that may be needed for Asian integration, panelists voiced a similar view that Asia, with its economic potential and diversity, would be even stronger if it was more integrated. The panel included ASEAN secretary-general Rodolfo Severino, APEC executive director Alejandro Pena Navarrete and former BOAO Forum secretary-general Ajit Singh. To make Asia more integrated, the following must be done.

On the economic front, one of the most pressing issues is the gap in development among Asian countries. Within ASEAN itself, the economic structures of the 10 members differ. While the six original members are newly industrialized economies, the four new members are considered transitional economies. This wealth gap within ASEAN must be bridged to boost the body's position in the world economy. Looking beyond ASEAN, South Korea, Japan and China are the key regional economic powers that also have a crucial role in making Asia an integrated, powerful region - hence, ASEAN plus three.

For ASEAN plus three to work, ASEAN must consolidate itself first and ensure an economic balance among its members before joining South Korea, Japan and China to make yet another regional bloc. Otherwise, the under-developed countries will hold back the developed ones.In addition to pushing ahead with liberalization and increasing intra-regional trade, Asian economies ought to have more monetary co-operation. The idea of establishing a common currency, while inconceivable to some, is beneficial, and could be realized in the distant future. Like the euro, a common Asian currency would reduce transaction costs of trade flows in the region. It also would make Asia less dependent on and therefore less affected by the fluctuations of a major foreign currency, such as the U.S. dollar. On the political front, Asian countries should co-operate more, not less, in several spheres.

The first area is trade liberalization. As World Trade Organization secretary-general Supachai Panitchpakdi has pointed out repeatedly, trade liberalization is the best tool with which to fight poverty. When it comes to reducing both tariff and non-tariff barriers, however, not every country in Asia is fully committed or has successfully illustrated its commitment with measurable actions. Trade liberalization will not work, and therefore cannot benefit Asia, if only some countries do their utmost to reduce barriers, while others do not. The second area for co-operation is human-capital development. Industrialized countries such as Japan, South Korea and Singapore can help developing ones, including Vietnam, Cambodia and Laos, by funding development projects, extending technical assistance and offering more study-abroad or educational exchange programs.

The third, and most important, area is regional security. By sharing intelligence information and having their national law enforcement forces work side-by-side on such issues as sea piracy, human trafficking and drug smuggling, Asian countries can make the region safer and more stable. Now, more than ever before, Asian countries must work harder with one another and with the international community to fight terrorism.

In taking these steps, Asian countries can convince others that the region is integrated and a place of peace, growth and prosperity.

Frank-Jurgen Richter is director for Asia of the World Economic Forum. Thang Nguyen was one of the rapporteurs at the forum's 2002 East Asia Economic Summit held in Kuala Lumpur recently.

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