Opening Remarks by
Haruhiko Kuroda, President
Asian Development Bank

At the Governors' Seminar on A Roadmap for Asia's Economic Cooperation and Integration

3 May 2005
Istanbul, Turkey

I.  Introduction

Honorable Governors and Alternate Governors, Distinguished Guests, Ladies and Gentlemen,

Let me join Vice-President Jin in welcoming all of you to today's seminar. This is the second year that ADB has organized an open forum at which members of the Board of Governors have been invited to share their views and insights on topics of vital importance to the future development of Asia and the Pacific. On behalf of the ADB's Board of Directors, Management, and Staff, I wish to express our sincere appreciation to all of you for your participation.

II.  Regional Cooperation and Asia's Economic Performance

Ladies and Gentlemen, as we all know, Asia as a whole has achieved unparalleled dynamism over the past four decades. As a result, poverty has declined notably and millions of people are living better lives.

However, progress has not been uniform, and further reduction of poverty in many countries remains a challenge. One of the lessons of history is that economies that are more market-oriented and integrated with the outside world are more likely to achieve sustained high rates of growth and poverty reduction. Increased openness and integration are important contributors to the East Asian economic miracle, and to the dynamism of PRC and, more recently, India.

Much of the integration among Asian economies in the past was market- and private-sector led. In recent years, the global trend toward regional cooperation, and a desire to enhance productivity and international competitiveness, have prompted Asian countries to forge closer ties through various schemes such as free trade agreements (FTAs). Trade facilitation measures and increased connectivity among markets would help to maximize the benefits of these FTAs. Asia's efforts at greater cooperation and integration can be seen as "open regionalism" and a stepping stone to its integration with the rest of the world.

Let me provide a few illustrative examples of trade agreements within the region. In East Asia, the ASEAN Free Trade Area (AFTA) is well into its implementation phase and appears to be on track to achieve its goal of a free trade area by 2010. A number of free trade agreements have also been signed or are under negotiation between members of the ASEAN and PRC, Japan, and Korea. As these agreements expand, the proposed free trade area for the whole of East Asia may come closer to reality.

In South Asia, intra-regional goods trade is a modest 6% of the sub-region's total trade, compared with about 40% in East Asia . Intra-regional trade thus has a significant potential to grow further, and the South Asia Free Trade Agreement (SAFTA) that was signed last year is a positive step in that direction.

Since the 1997 financial crisis, monetary and financial cooperation has also gained substantial momentum in East Asia. The crisis forced us to realize that, with increased interdependence among countries within the region, a negative shock to one economy could easily be transmitted to other economies in the region.

Since then, the members of the ASEAN+3, which comprises members of the ASEAN together with PRC, Japan, and Korea, have engaged in regular policy dialogues. They have established a network of bilateral swap agreements under the Chiang Mai Initiative to provide liquidity support. And they have implemented measures at the regional level to boost bond market development in order to reduce the currency and maturity mismatch problem. As the effects of the crisis have now faded, closer economic interdependence among East Asian countries, through intra-regional trade and investment and public-private partnerships, is likely to sustain the momentum in monetary and financial cooperation.

More recently, the geographic scope of cooperative agreements has expanded across the different sub-regions of Asia, and we are now seeing initial signs of cooperation and integration in Asia as a whole. The India-ASEAN Comprehensive Economic Cooperation Agreement, the recent strategic partnership agreement between PRC and India, the Pakistan-PRC protocol agreement on trade, and the Bangladesh India Myanmar Sri Lanka Thailand Economic Cooperation (BIMSTEC) are some examples of regional economic initiatives across sub-regions.

III.  ADB's Role in Regional Cooperation and Integration

Ladies and gentlemen, let me now briefly outline ADB's role in promoting regional cooperation and integration, as mandated by our charter.

At the request of member countries, ADB has been actively supporting a number of regional cooperation initiatives. These include programs to develop cross-border infrastructure and associated software to increase connectivity among countries. A classic example of ADB's initiative in this area is the Greater Mekong Subregion (GMS) program. The East-West Economic Corridor is part of this program and will eventually link four GMS countries from the South China Sea coast in the east to the Andaman Sea in the west.

Other examples include the South Asia Subregional Economic Cooperation (SASEC) program, and the Central Asia Regional Economic Cooperation (CAREC) program.

In 2003, we initiated the Subregional Economic Cooperation in South and Central Asia (SECSCA) program to connect landlocked Central Asia and seaports in South Asia via Afghanistan.

All of these programs aim to facilitate the freer flow of goods and people and the sharing of common resources among participating countries. Greater connectivity through the provision of cross-border physical infrastructure and improved competitiveness through trade liberalization are moving the region towards a true economic community.

ADB has also provided various types of support to monetary and financial cooperation agreements such as the ASEAN+3 Finance Ministers process. This work has been supported through the Regional Economic Monitoring Unit (REMU), which was established in 1999 in response to the Asian financial crisis.

Effective April 1st , 2005, we established the Office of Regional Economic Integration (OREI) to replace REMU. The mandate of the new Office is to promote economic cooperation and integration of the developing member countries of ADB among themselves and to contribute most effectively to the harmonious economic growth of the region as a whole.

IV.  Conclusion

In conclusion, I would like to re-iterate that greater regional cooperation and integration within Asia holds out the promise of mutual benefit for member countries by enabling sustainable growth and reducing poverty. Regional cooperation also brings countries together and promotes a sense of community.

ADB, as a regional development bank, has a unique mission to assume a more proactive role as a catalyst, as well as coordinator and knowledge leader, for promoting regional cooperation and integration in the region. Let me assure you that ADB will continue to work with our member countries toward fulfilling this vision.

Thank you.