ASEAN Integration in the Asian Landscape
Speech by
Haruhiko Kuroda
President
Asian Development Bank
At the ASEAN Business and Investment Summit
17 November 2007
Singapore
I. Introduction
Distinguished panelists, ladies and gentlemen:
I am honored to be here today to share my thoughts on how ASEAN's integration fits into the Asian landscape. As ASEAN moves into its fifth decade, I believe it can and should work to be an example for other Asian subregions.
II. The Asian Context of Economic Cooperation and Integration
Economic cooperation and integration will no doubt be a key pillar of the entire region's future development. China's and India's move toward more market-driven and export-oriented strategies has become a major driver for Asia's continued economic expansion. As these two giant economies continue to expand, they are becoming more and more important in the regional context.
This is true globally as well. Rapid growth in intraregional trade and cross-border investment has created opportunities to link financial systems and ease the flow of capital across borders. There have been calls from several quarters for increased regional exchange rate stability. And spheres of economic influence in the region and globally are shifting. China is now expected to become the world's third largest economy by the end of this year. All of this makes it imperative for Asia's various subregions to work together to forge effective and efficient integrated regions that can take advantage of the opportunities for increased cooperation.
Due to its economic, social, political and cultural diversity, building the broad political and social consensus required for a far-reaching pan-Asian "vision" of regional integration, as was done in Europe, would be difficult. However, a market-friendly, pragmatic and multi-track approach to integration seems workable.
Most subregions in Asia and the Pacific are now making stronger efforts to cooperate among themselves. As this process continues, "bridges" will naturally form across subregional boundaries, leading to progressively wider and more comprehensive economic integration and political cooperation.
III. ASEAN as a Driving Force Toward Integration
And that brings me to ASEAN. Now in its 40th year, ASEAN is uniquely positioned to act as a de facto "regional hub" of wider economic cooperation and integration within East Asia and eventually across Asia as a whole. Though most of ASEAN's 10 member economies are small, taken together, they form a sizable and economically powerful region. Since its inception in 1967, ASEAN has grown and gained worldwide respect. And, in geopolitical terms, it is well-placed to be an acceptable and equal partner to many larger, more powerful economies, such as China, India, Japan, and Korea. It is, for example, a natural node to pull fragmented national markets into an East Asia-wide FTA, which could encompass all of ASEAN, then ASEAN+3, and eventually all East Asian Summit members.
The signing of the well thought out and meticulously negotiated ASEAN Charter this week is probably the most important milestone in the evolution of the organization. After long years of adherence to a consensus approach, the new Charter shifts ASEAN's institutional framework toward one that is more rules-based. Yet it remains sufficiently pragmatic, acknowledging that national economic development and national priorities vary, particularly between the ASEAN6 and the newer, less developed members. Bridging this development gap within ASEAN will continue to be a key challenge.
The new Charter also provides a way to "sell" ASEAN to all of the region's 500 million people, to build the concept of "ownership" across ASEAN borders. And, it promotes ASEAN in a global context, correcting the view held by some overseas that ASEAN carries little mettle.
As ASEAN moves toward the establishment of an economic community in 2015, it is essential that the private sector be an integral part of its efforts. We have already seen the benefits of trade-related development and public-private partnerships in the innovative Nam Theun 2 project in the Lao People's Democratic Republic. The 1,070 megawatt plant will generate revenues for poverty reduction and environmental protection, exemplifying an extremely important regional public good. The $1.45 billion project is owned by a public-private consortium with European, Thai, and Lao PDR equity. ADB support includes a $20 million public sector loan, a private sector loan up to $50 million, and a political risk guarantee up to $50 million.
But if an effective, market-driven, and competitive ASEAN Economic Community (AEC) is to become reality, public-private partnerships will be a critical component crossing all four pillars of regional cooperation and integration - that is: cross-border infrastructure, trade and investment, money and finance, and the provision of regional public goods such as environmental protection and prevention of pandemic illnesses. For example, there is a huge need for enhanced cross-border infrastructure. Establishing a cross-platform regulatory environment for local currency bond issuances may be a viable means of helping finance these costly projects. The AEC, once established, would help transform ASEAN into a stable, prosperous, and highly competitive economic region where goods, services, and investment flow freely. It would also support freer capital flows, more equitable economic development, more effective provision of regional public goods, and thus help reduce poverty. The AEC will not only accelerate ASEAN's market integration process, but it will also ensure that the region can maximize its gains from its growing economic relations with major trading partners
IV. Conclusion
In summary, economic cooperation and integration for ASEAN in the Asian landscape should and will be pragmatic and in step with emerging opportunities. Given the region's diversity, size, and varying stages of economic development, the path toward economic integration will be one that naturally builds on the region's developing synergies in a multi-track, multi-speed, market-friendly way-one in which timetables are kept and, under the new Charter, obligations fulfilled.
Proceeding in this manner will ensure that opportunities to benefit from the region's growth are shared more widely among its people. ADB will continue to support your efforts in any way we can to help ASEAN achieve its worthy goals.
Thank you.
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