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Strength in Cooperation
ADB Review [ August 2005 ]

Greater integration within Asia offers the promise of sustainable growth and poverty reduction, the Governors’ Seminar hears

By Graham Dwyer, (gdwyer@adb.org)
External Relations Specialist
and
Sharad Bhandari, (sbhandari@adb.org)
Economist

Greater regional cooperation and integration within Asia holds the promise of sustainable growth and reduced poverty in the region, Asian Development Bank (ADB) President Haruhiko Kuroda said at the opening of a seminar in Istanbul.

“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,” Mr. Kuroda said.

“Increased openness and integration are important contributors to the East Asian economic miracle, and to the dynamism of the People’s Republic of China (PRC) and, more recently, India.”

He made his comments at the Governors’ Seminar on a Road Map for Asia’s Economic Cooperation and Integration, held on the eve of the opening of ADB’s 38th Annual Meeting of the Board of Governors in Istanbul.

At the seminar, moderated by ADB Vice-President Liqun Jin, Mr. Kuroda and four ADB Governors shared their perspective on how integration can contribute to Asia’s sustainable economic growth, build resilience to external shocks, and prevent financial contagion.

Mr. Kuroda pointed out that the geographic scope of cooperative agreements has expanded across the different subregions of Asia, so that there are now initial signs of cooperation and integration in Asia as a whole.

He cited as examples the India ASEAN Comprehensive Economic Cooperation Agreement, the recent strategic partnership agreement between the PRC and India, the Pakistan-PRC Protocol Agreement on Trade, and the Bangladesh- India-Myanmar-Sri Lanka-Thailand Economic Cooperation (BIMSTEC).

“Closer economic interdependence among East Asian countries, through intraregional trade and investment and publicprivate partnerships, is likely to sustain the momentum in monetary and financial cooperation,” he added.

BUILDING BLOCKS Integration can contribute to Asia’s sustainable economic growth, build resilience to external shocks, and prevent financial contagion

Strengthening regional cooperation would help Asia maximize its advantages of great diversity, vast pool of savings, and capable human resources, Japan’s Minister of Finance Sadakazu Tanigaki told the seminar.

“Regional economic integration can promote economic growth by expanding markets, exploiting the synergies in complementary resource endowments and production structures, and by making the region more resilient to global economic shocks,” said Mr. Tanigaki, who is Governor for Japan at ADB.

“Regional cooperation and integration should contribute to the growth of the global economy and should not be exclusive of other regions,” he added.

ADB should continue to strengthen support for cross-border infrastructure, assist in strengthening regional financial markets, promote intra-regional cooperation on trade, facilitate immigrants’ remittance to their home countries, and encourage policy dialogues on the regional economy to help exchange views on economic policies of each country, he added.

Panelists broadly agreed with his assessment. There was also a consensus among speakers that Asia’s regionalism should be open and complementary to global initiatives such as those under the World Trade Organization. In particular, cooperative agreements should be managed so that trade and investment diversion is minimized.

Alternate Governor for India at ADB Rakesh Mohan noted that “in a world in which regional blocs can often be more effective than individual countries, Asia remains one of the least integrated regions, although it has been integrating."

There are merits and demerits to cooperative agreements between nations, he said. “Forging closer links between Asian nations by implementing appropriate institutional mechanisms can lead to substantial enhancement of national, regional, and global productivity and output.”

The Governor for Denmark at ADB, Ole Moesby, spoke on the European experience, outlining the three key ingredients to successful cooperation within the European Union (EU). The first was the presence of political will to integrate, he said. The second was the creation of supranational institutions, including a council of ministers, a parliament, a commission, a court of justice, and a central bank.

Mr. Moesby explained that creation of supranational institutions should not be viewed as member states abandoning sovereignty, but instead as exercising it in common with adjacent countries pursuing identical political objectives inside the same social and economic framework.

The third key ingredient was the attempts made to ensure that every member state benefits from the integration process, for example, with mechanisms to transfer resources from the richer to poorer regions in the EU.

Alternate Governor for Canada Alister Smith affirmed that, in drawing lessons for Asia from other regions, it needs to be recognized that “one size does not fit all.”

The European model of institution-building and achieving common regulatory standards is one of deep integration and can be a long process, he said. The North America Free Trade Agreement, given sovereignty concerns and federal political structures, has focused on reducing impediments to trade, investment, and financial market linkages, and on creating appropriate dispute settlement mechanisms.

The Latin American Mersosur customs union model falls between the North American model, which is one of free trade, and the European model of common market and currency, he said.

Mr. Smith noted that it is important to achieve a balanced approach that preserves national interests given the relative weight of partners.

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