Asian Regional Cooperation Can Strengthen Global Economy, Japan's Finance Minister Tells ADB Seminar

ISTANBUL, TURKEY (4 May 2005) - Asia should maximize its advantages of great diversity, vast pool of savings, and capable human resources by strengthening regional cooperation, Japan's Minister of Finance told an ADB seminar yesterday.

"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 Sadakazu Tanigaki, who is Governor for Japan at ADB.

He was addressing the Governors' Seminar on "A Roadmap 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.

"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 regional economy to help exchange views on economic policies of each country, he added.

Panellists broadly agreed with his assessment. There was also a consensus among speakers that Asia's regionalism should be open 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 mechanism can lead to substantial enhancement of national, regional and of global productivity and output."

He went on to list a number of areas where cooperation could benefit the region, including trade, finance, cross-border infrastructure, joint harnessing of common resources, initiatives for environmental sustainability and energy needs, and common natural disaster warning and management systems.

The Governor for Denmark at ADB, Ole Moesby, outlined the genesis of the European Union and extracted three key ingredients that led to its success in cooperation. The first ingredient was the presence of political will to integrate. The second was the creation of supra-national institutions, including a Council of Ministers, a Parliament, a Commission, a Court of Justice, and a Central Bank.

Mr. Moesby explained that creation of supra-national 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 for Europe's success in cooperation were 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.

In drawing lessons for Asia, Mr. Moesby noted that Asia's history is different and its motivations and ambitions may not be the same as in Europe.

"But Asia will need to develop ways of interacting that spur collaboration rather than competition between countries. Close cooperation is the key to sustainable economic growth - maximizing the benefits of globalization and minimizing the downsides."

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. The North America Free Trade Agreement (NAFTA), given sovereignty concerns and federal political structures, has focused on reducing impediments to trade, investment, and finacial market linkages, and on creating appropriate dispute settlement mechanisms.

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

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

ADB President Haruhiko Kuroda delivered opening remarks at the seminar. See related story: Openness and Integration Promotes Asian Dynamism.

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