Asia Should Speed Up Integration; Global Recession to be Prolonged - Sakakibara
MANILA, PHILIPPINES – The time is right for Asia to accelerate integration efforts and to strengthen cooperation among its key economies, Professor Eisuke Sakakibara of Tokyo’s Waseda University told an ADB audience on Thursday.
Mr. Sakakibara, who was Vice Minister of Finance for International Affairs in Japan from 1997 to 1999, also noted that the recession now gripping the global economy could last for years.
Asia has made huge strides in linking its economies through trade and manufacturing networks over the past few decades, but it has lagged on financial integration and building permanent institutions to represent its interests, along the lines of those created in Europe.
"Institutional building within this region is vastly lacking as compared to the European case," he said in his speech titled "Worldwide Recession and the Impact on Asia."
"We need to have more permanent entities to engage in regular consultations and I think the time has come for greater integration of nation states."
Ten years ago, when Mr. Sakakibara was Vice Minister, he proposed the creation of an Asian Monetary Fund (AMF) in response to the 1997/98 financial crisis. The proposal was rejected, Mr. Sakakibara said, because of a strong opposition from the United States, as well as a lack of consultation by the Japanese government with its Asian neighbors – especially People’s Republic of China (PRC). But now the situation has evolved and Asia is in a stronger position to create an AMF, he said.
The agreement by the 10 members of the Association of Southeast Asian Nations (ASEAN) along with PRC, Japan and the Republic of Korea to expand and multilateralize the currency swap network known as the Chiang Mai Initiative – reached recently in Bali - is a positive step forward but more needs to be done, said Mr. Sakakibara.
As the largest economies in the region, PRC, Japan and Korea should strengthen ties to drive forward the integration agenda, with support from ASEAN countries and also India. Mr. Sakakibara said the ASEAN+3 group could be expanded in the future to include India.
Turning to the global economic crisis, Mr. Sakakibara warned that some recent upbeat economic indicators were not a sign that the worst was over, with corporate performance still extremely weak and earnings forecasts still dismal.
"The current signs of recovery are like a bear market rally, and no way is this rise sustainable. A recovery could take two to five years," he said.
At the same time, a rebound in some of Asia’s key economies such as PRC and India, could pave the way for a broader global recovery.
"They cannot pull the entire world along with them but a recovery is likely to come initially from PRC and India," he said.
Mr. Sakakibara was speaking as part of ADB's seminar series on regional economic integration.
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