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“The Role of Regional Cooperation and Integration: Toward an Integrated, Poverty-free and Peaceful East Asia”

Remarks by
Haruhiko Kuroda
President
Asian Development Bank

At the IMF-World Bank Annual Meetings Plenary Session Asia Rising: Myths and Realities

18 September 2006
Singapore

Distinguished Guests, Ladies and Gentlemen,

I am delighted to join you today and make some brief remarks on regional cooperation and integration in Asia. I will focus particularly on East Asia, drawing on my contribution to the Vision Book.

Rapid growth and an outward-oriented development strategy have propelled East Asia to become a pivotal region in the world economy. As home to three of the world’s eleven largest economies – Japan, the Peoples Republic of China (PRC) and Korea – East Asia’s dramatic rise and visible prosperity is likely to be a major factor in re-writing the economic history of the 21st century as “the Asian Century”.

Nevertheless, East Asia still faces many developmental challenges. Despite rapid growth and a dramatic drop in poverty levels, in 2003 there were still some 750 million East Asian people living on less than $2 a day.¹ Development gaps are wide and growing. Environmental degradation threatens livelihoods and the sustainability of growth. Science and technology, key to succeeding in the global economy, needs to improve to support growing industrial needs and the diffusion of modern technology.

While these and other challenges require national actions, regional cooperation and integration can help build on national efforts to sustain economic growth and reduce poverty, thus narrowing the development gaps. In recognition of this fact, East Asian leaders have expressed their strong political will to accelerate the establishment of an East Asian community.

Expanded trade, direct investment, and financial flows have already created a “naturally” integrated East Asian economic zone. Building on this, East Asian countries have embarked on various regional initiatives to institutionalize and manage their economic interdependence.

One of the most important pillars of this regional integration process is improved physical connectivity. Concerted efforts to plan, design and implement cross-border infrastructure projects, together with regulatory, procedural and standards harmonization to reduce transactions and logistics costs – these are vital to capture economies of scale, build critical mass and leverage the diverse strengths of countries within the region.

The second pillar is the promotion of trade and investment within East Asia and vis-à-vis the rest of the world. The growth of free trade agreements (FTAs) is likely to accelerate following the suspension of negotiations on the Doha Development round. To maximize the potential benefits of FTAs for all countries involved, East Asia has to prepare a clear roadmap to consolidate overlapping FTAs and to establish a regionwide, best-practice FTA.

The third pillar is monetary and financial integration. Further regulatory and supervisory reforms of banking sectors and capital markets, particularly local currency bond markets; stronger regional economic surveillance and reserve pooling arrangements; and better exchange rate policy coordination will contribute to financial market development and enhance the region’s macroeconomic and financial stability.

The fourth pillar is cooperation in the provision of regional public goods to manage the rising permeability of international boundaries. Efforts here should include the prevention of environmental degradation – including better energy efficiency – communicable diseases, international corruption and cross-border trafficking.

By working together on these four pillars, East Asian leaders can help ensure that the region’s economic integration will be market friendly, growth oriented, environmentally sustainable, socially inclusive, open, and beneficial to all. I strongly believe that with broad-based support for this process, the vision of an integrated, poverty-free, and peaceful East Asia can be realized.

As Asia’s major development partner, the Asian Development Bank is firmly committed to facilitating the process of regional cooperation and integration. ADB’s Board of Directors recently endorsed a comprehensive Regional Cooperation and Integration (RCI) Strategy which seeks to guide our future activities in this area. At the heart of this strategy are solid actions on cross-border infrastructure, trade and investment, money and finance, and regional public goods. We look forward to sharing information on Asia’s progress through the soon-to-be-launched Asian Regional Integration Center website, and to working with all our partners in this important endeavor.

Thank you very much.