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Asia United: How Far Should We Go with Regional Integration?
All eyes will be on the East Asia Summit in Kuala Lumpur this month as our leaders tackle the big question of greater regional integration. We explore the problems they will encounter in trying to unite such a diverse region.
In southern Cambodia, where a rough road through a turbulent countryside once connected the country to Vietnam, a transformation is taking place. A smooth new highway now links the two neighbours, and businesses are springing up along the roadside.
At the once remote, forbidding border stations, new facilities are being built to welcome visitors. Officials are working to simplify customs and im-migration regulations to ease the passage of people and goods, and modern tourist buses are taking advantage of the convenience by bringing local and international travellers into both countries.
This is one small example of a trend that is taking place across Asia. Countries are working together in many different ways to bring their economies closer - by building roads and bridges, by signing free trade agreements.
This process of regional economic cooperation and integration offers unprecedented opportunities for us in Asia. And with our huge population, what is good for Asia is good for the world.
With access to vast human and natural resources, Asian economies have grown at an unparalleled rate. Last year, developing countries in Asia - the region as a whole - grew by 7.4 per cent. This dynamic growth has lifted hundreds of millions of people out of poverty. Between 1990 and 2003, the number of people living on less than $1 a day in Asia and the Pacific declined by nearly one third.
Yet throughout the region there is an enormous disparity in income levels and living standards. More than two-thirds of the world's poor still live in developing Asia - that's 620 million people struggling to survive on less than $1 a day. If we use a more realistic $2 a day, some 1.9 billion of our neighbours are still extremely poor. This is simply unacceptable.
The key to expanding growth and lifting more people out of poverty lies in regional cooperation and integration. Not only will this regional unity reduce poverty, it will also bring greater stability to the region, improve the business climate and provide growing opportunities for investors in Asia and around the world.
Compared with Europe, Asia is a relative newcomer to regional cooperation. Before the 1997 Asian crisis, economic integration was primarily market led and private-sector driven.
After 1997, however, the market-led process was supplemented by a series of steps by Asian governments such as the 2000 Chiang Mai Initiative. Today, the geographic scope of cooperation is expanding across the sub-regions of Asia.
Countries in the greater Mekong sub-region, for example, have expanded their focus to include harmonising legal and regulatory frameworks, addressing environmental and social issues, and easing the cross-border movement of people, goods and services. The Mekong region, which has emerged as a strong regional entity, is one of the fastest growing areas in the world.
Similar initiatives are under way in South Asia and Central Asia. These two regions are trying to connect landlocked Central Asia with the seaports in South Asia via Afghanistan.
All these initiatives are moving the region towards becoming a truly united economic community through the freer flow of goods and investments, and the sharing of common resources.
But how far should we go?
Should our ultimate objective be, as in Europe, the adoption of a single Asian currency? Or, should Asia's economic integration be modelled on the North American Free Trade Area to create a giant free trade zone? Or, should we develop our own form of economic integration, combining some elements of both the European and North American models?
These issues need to be addressed to have a clear, long-term vision of where we want to go in the next quarter century.
No matter which integration model we follow - be it a NAFTA-style free trade area or a European-style economic union with a single currency - significant challenges abound. There are large differences in per capita incomes, in the depth and quality of economic institutions and human capacities, and in the political regimes across Asia.
We need to address these constraints if we are serious about deeper regional integration, including adopting a single currency. The preparatory groundwork alone will involve considerable time and effort.
Whether Asia eventually adopts a single currency or not, the regional cooperation and integration that would be required from such a move would be enormously beneficial to all of us. Simply put, cooperation and integration are the crucial ingredients for our continued prosperity.