"Thinking Globally: Acting Regionally: Asian Economic Integration"
Welcome Remarks by
Haruhiko Kuroda
President
Asian Development Bank
At the Annual Meeting Seminar
4 May 2006
Hyderabad, India
Honorable Governors and Alternative Governors, Distinguished Guests, Ladies and Gentlemen,
On behalf of ADB's Board of Directors, Management and staff, I would like to welcome all of you to this important seminar. The impressive cast of speakers and the moderator for today's seminar includes internationally recognized academic experts and policy makers on globalization and regionalization. We very much appreciate you taking time out from your busy schedules to attend this event.
Asia's rise has generated much debate among policy makers, business circles and civil society about how to sustain economic prosperity into the future, thereby providing the means to reduce poverty and improve people's lives. As a backdrop to your discussions today, I would like to offer some thoughts on Asia's role in the global economy, the renewed impetus for regional cooperation and integration, and possible strategic responses.
Globalization is widely regarded as the defining feature of the twentieth century. And the trend towards international integration of production and trading systems has continued in the new millennium. The lifting of trade barriers, enhanced activities of transnational corporations and declining business costs have brought new opportunities and challenges for developing economies. Asia's emergence as a key player in the global economy is truly remarkable by historical standards. In 1960 Asia accounted for only 15% of total world GDP, but as of 2005, this figure has nearly doubled. Furthermore, four of the ten largest economies in the world (Japan, PRC, India and Korea) are now in Asia.
Among the many factors associated with the region's impressive economic performance are its outward-oriented development strategy, investments in education, creation of modern infrastructure and poverty reduction programs. These developments not withstanding, economic performance within Asia has been uneven. Some economies have achieved notable economic growth and poverty reduction while others have lagged behind.
In the higher performing economies, we have seen an increasing trend towards regional cooperation and integration. East Asia has been at the forefront of this trend. Driven by the emergence of global value chains, cost reductions, rapid technological progress, and trade and investment liberalization, intra-regional trade in East Asia now accounts for well over half of the region's total trade. With the seeds sown and well rooted, regional economic integration seems here to stay.
In recent years, governments have begun coordinating policies to support deeper integration. In the aftermath of the Asian financial crisis, for example, East Asian governments embarked on closer monetary and financial cooperation to strengthen the region's financial architecture. Major initiatives like the ASEAN Surveillance Process, the ASEAN + 3 Economic Review and Policy Dialogue Forum, the Chiang Mai Initiative (CMI) and the Asian Bond Markets Initiative have laid the foundations for greater cooperation among Asian governments in the future.
Building on this progress, governments and markets could profitably work together to sustain the momentum towards regional cooperation and integration in Asia. The developmental gains from such a partnership would be considerable in the long run.
The question, of course, is: how should this be accomplished? The region faces several alternatives - European style comprehensive and deep integration with a common trade and monetary policy, or the North American path of a free trade area, or another path more in line with Asia's initial conditions.
The European style of integration seems to have the greatest potential for realizing the dynamic benefits of a common trade and monetary policy, supported by fiscal, structural and regulatory coordination. However, this process took place under specific historical and political conditions and over a long period of time, Ultimately, while Asia may draw lessons from the EU, and from integration experiences elsewhere, it must seek out a path suited to its unique initial conditions. The region is culturally and politically diverse, with varying levels of economic and social development. At a practical level, Asia's future strategic direction towards integration should respond to these differences while narrowing these development gaps.
The most pragmatic scenario would be a multi-track, multi-speed approach that allows different countries and subregions to proceed with regional cooperation and integration according to their needs and levels of economic and social development. East Asia, where trade and investment is already well integrated, might focus on bringing greater coherence to trade agreements and deepening monetary and financial integration. Meanwhile, the land-locked Central Asian economies, which are in the early stages of regional cooperation, might focus on fostering connectivity through infrastructure and trade facilitation, building trust among the countries concerned and implementing structural reforms to create a vibrant private sector. As countries and subregions become more economically integrated, the resulting network of production and trading relations will underpin future economic prosperity and poverty reduction.
Ladies and gentlemen, Asia is a major player in the world economy. It has succeeded in thinking globally, and is responding to globalization by building the critical bridge - a more integrated regional economy. There are many alternatives paths that regional cooperation and integration can take in future. Asia is most likely to succeed if it adopts a unique and pragmatic approach suited to the unique circumstances of countries and subregions. This will involve a great deal of policy experimentation and close collaboration between markets and governments.
Thank you for joining us to contribute to this important discussion. I look forward to hearing the outcome of today's seminar, and I wish you all the best in your deliberations today.
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