Speech by Rajat M. Nag, ADB Managing Director General, at the book launch of "National Strategies for Regional Integration: South and East Asian Case Studies" and "Pan-Asian Integration: Linking East and South Asia", Manila, Philippines
Ambassadors, distinguished guests, ladies, and gentlemen:
I am extremely happy to be here this noon to formally launch two important books that delve into some intriguing issues involving developing Asia's ongoing thrust toward regional cooperation and integration.
Many people have examined how East Asia is integrating, from its roots in ASEAN 40 years ago to the creation of ASEAN+3—which includes China, Japan and Korea—following the Asian financial crisis in 1997/98. Reserve pooling and capital market development are just two of the initiatives that have gained substantial traction over the past several years.
Also, there has been increasing interest in South Asian cooperation through organizations such as the South Asian Association for Regional Cooperation (SAARC) and the South Asia Subregional Economic Cooperation (SASEC) Program. Developing subregional ties in trade, for example, are beginning to take root in the region around the Indian subcontinent.
But nowhere has there been any earnest attempt to analyze the important links between these two primary subregions of our Asian continent. It is critical that we do so. The East Asia Summit process has now firmly brought India into the integration process. Along with China, these two large economies hold the key to much of the expected economic development in the decades to come.
These two economies are leading our Asia and the Pacific region away from the recession that has stymied economic growth around the world. In fact, a couple of hours ago our Chief Economist Jong-Wha Lee—who is also Head of OREI—launched our Asian Development Outlook Update in Hong Kong. The Update revises our prognosis for developing Asia for this year and in 2010. And it is precisely the two sub-regions of East and South Asia—led by China and India respectively—which showed the largest jump in our growth forecasts.
China's GDP growth forecast for this year was revised upward to 8.2% from the original March forecast of 7.0%, while India's was pushed up a full percentage point, from 5.0% to 6.0%. These two dynamo economies are leading the region out of the current economic crisis.
So it is very timely that these two volumes are being published. The first book, Pan-Asian Integration: Linking East and South Asia, looks at the sub-regions as a whole, but concentrates on trade and investment between China and India, the two regional powerhouses. The study estimates that a broad Pan Asian free trade agreement—covering goods, services and trade costs—involving East and South Asian economies offers welfare gains to global income of around $261 billion. This is significant for anyone's balance sheet.
The second, National Strategies for Regional Integration: South and East Asian Case Studies, examines eight economies—five from South Asia and three from East Asia—to find out how each country's integration with its neighbors and more distant regional economies can be improved. Looking mostly at trade and investment, the study finds that links with the dominant economy of the sub-region are crucial—along with market orientation and involvement of the private sector—in showing that national interests and economic development are actually best promoted when countries cooperate and are better integrated.
The two books together argue conclusively that reducing barriers between economies, whether in trade, capital flows, providing seamless cross-border infrastructure—which requires huge investments over long periods—is key to allowing the benefits of integration to be felt by ever-larger swathes of society. Fighting protectionism, for example, in times of economic crisis such as these, may often be politically difficult. But it is essential that the free flow of goods, services, and people across borders is allowed to generate economic growth. The value of economic stimulus in the large economies like China and India can then have positive ancillary effects on neighboring economies—that can supply raw or intermediate materials in production networks—or where labor mobility not merely helps in, say, manufacturing, but can also provide valuable remittances to augment a country's current account.
I must add that these two publications once again illustrate how OREI continues to expand its role in giving ADB value beyond its lending operations. As our regional cooperation think tank, OREI has taken the lead in pushing the edge of the knowledge envelope, so to speak, as we in Asia gather pace in our inexorable drive toward greater economic cooperation and integration—a pan-Asian regionalism that is integrated regionally and globally connected.
I congratulate the authors and editors of these studies, and hope they continue to offer new insights into how we can proceed with integration to the benefit of a prosperous and inclusive sustainable growth model for our region.