Transcript Towards Asian Economic Community: Relevance of India

Asian Regionalism
by
Nagesh Kumar
RIS
www.ris.org.in
Outline
• Impetus for Asian Regionalism
• Status of regional economic cooperation in Asia and
its limitations
• Relevance of a pan-Asian Framework
• Approaches to pan-Asian Economic cooperation
• Gains from Asian economic integration
• Relevance of India for East Asian Integration
• Concluding Remarks
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Impetus for Asian regionalism
• Response to western regionalism
• Slow progress of multilateral trade negotiations
• Emergence of Asia as a centre of final demand
• Asia emerging as the centre of gravity of the world economy with 2 of
the 3 largest economies in the world
• Urge to exploit synergies
• Initially driven by flying geeze; now vertical specialization
• 55% of Asia’s trade with itself
• Shaping the global economic governance
• Global imbalances and Asian regionalism
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Regional Economic Cooperation
in Asia
•
Bangkok Agreement, 1975
• Sub-regional
– Economic Integration in ASEAN: AFTA and beyond
– Economic Cooperation in South Asia:
• SAPTA (1993)/ SAFTA Agreement (2004)
– BIMSTEC Framework Agreement (2004)
• ASEAN+1 FTAs
• FTAs between China-ASEAN, India-ASEAN, Japan-ASEAN, ASEAN-South Korea
• FTAs between Individual ASEAN countries and +1 countries: Japan-Singapore, IndiaThailand, India-Singapore CECA, China-Malaysia, Japan-Malaysia, Japan-Philippines,
India-Malaysia
• Between +1 countries: e.g. India-China, India-Japan, and India-Korea
• Move towards broader arrangements:
• ASEAN plus Three
• East Asia Summit (EAS) or ASEAN plus six
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A Virtual Asian Community is already
emerging from a complex web of FTAs
Japan
China
Malaysia
Philippines
CLMV
Countries
ASEAN
Indonesia
Brunei
Singapore
Thailand
S. Korea
India
Frame work Agreements signed
Under negotiation
Under study
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Limitations of Existing Regional
Arrangements
• Limitations of Sub-regional/ bilateral Cooperation
• Similar factor endowments and economic structures in the sub-region
provide for limited complementarities
• Do not provide a seamless market to businesses to region-wide
industrial restructuring
 Sub-regional/bilateral cooperation cannot enable Asia to exploit the
full potential of regional economic integration
• Need for an over-arching, pan-Asian framework to
facilitate exploitation of considerable synergies for
mutual benefit
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Approaches to pan-Asian Economic
Cooperation (1)
• Consolidate the ongoing sub-regional/bilateral schemes of
cooperation
• Evolving a pan-Asian framework for cooperation: Asian
Economic Community in a phased manner
• In the first phase: evolve a structure with a core group of
countries
• Once the grouping has consolidated, extend the membership to
other countries in the region
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Approaches to pan-Asian Regional
Economic Cooperation (2)
• Taking advantage of the fact that some cooperation is already
on in ASEAN+1 frameworks, Japan, ASEAN, China, India
and Korea (JACIK) or ASEAN+3+India could form the core
group
• EAS brings together all the JACIK countries and Australia
and New Zealand
• Hence, EAS could be the right forum for evolving a broader
regional arrangement in Asia
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Approaches to pan-Asian Regional
Economic Cooperation (3)
• To develop a comprehensive economic partnership
arrangement (CEPA) of EAS
• a framework coalescing the growing web of FTAs linking the
EAS members
• EAS agreed to launch a feasibility study for CEPEA at
Cebu Summit on 15 January 2007
• CEPEA could be extended in due course to other Asian
countries to create a truly pan-Asian grouping
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Emerging EAS in relation to EU and
NAFTA
billion US$ in 2004
Parameter
EU
NAFTA
EAS
• EAS is larger
than EU and
10137
12847
16716
Gross National Income, PPP
(in Purchasing Power Parity)
NAFTA in terms
20.14
25.53
33.22
% of World total
of GDP, trade
bigger than
10505
12431
8198
GDP
NAFTA, half of
29.37
34.76
22.92
% of World total
world’s
3523
1486
1757
Exports (2002)
population and
46.50
19.62
23.20
% of World total
more than two
285
170
1757
International Reserves
thirds of world’s
foreign exchange Population (millions)
381
425
3089
Source: RIS based on World Bank, World Development Indicators 2005, CD-ROM; IMF, International Financial Statistics 2004.
reserves
6.12
6.83
49.65
% of World total
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Gains from broader Economic
Integration in Asia
• Substantial welfare gains
from economic
integration in scenarios of
progressive integration
• All participants benefit
• Welfare gain up to 3% of
region’s GDP
• Even the rest of the world
benefits from deeper
integration
million US$
Scenario I Scenario II Scenario III
Japan
107626
111807
150695
Korea
13043
13317
14076
China-HK
6327
7100
16328
ASEAN (5)
13451
13553
19405
India
6971
7379
9937
JACIK
147418
153156
210441
Rest of the world -27293
-45306
109916
World
120125
107849
320357
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Gains from Economic Integration in
Asia: Further Evidence
Brooks et al. 2005 ADB study
• Regional trade and integration offers Asia great potential for rapid
and sustained growth
– Much of Asia’s benefits from global trade liberalization can be realized by
regional initiative alone
– Regional integration will lead to economic convergence, rising growth
rates and benefit poorer countries
– Transfer the growth stimulus from China and India to their neighbours
– Increase trade and incomes for the rest of the world
 AEC could be an ‘arc of advantage, peace and prosperity’ Prime
Minister Dr Manmohan Singh
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EAS versus ASEAN plus Three
• Welfare gains are
significantly higher for all
partners in EAS than in an
APT framework
• Gains to the region higher
than India’s gains
Asia
India
ASEAN (5)
– Possibly due to dynamism and
synergies that India brings to
the grouping in terms of
services and software to the
hardware and manufacturing
prowess of East Asia
China-HK
Korea
JACIK
Asean+3
Japan
0
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50000
100000
150000
200000
million US$
13
250000
Relevance of India for East Asian
Integration
• India’s emergence as a dynamic economy of Asia with strong macrofundamentals
• East Asia has emerged as the largest trade partner of India with rapid growth of
trade
• Evolving FTAs with ASEAN and China, Japan and South Korea
• Strong complementarities between India and other East Asian economies
• Indian economy getting increasingly integrated with East Asian production
chains especially in knowledge-based segments such as chip design, embedded
software, R&D
• Indian companies are also evolving Asian production networks
• Complementary demographic trends
• Geographic, historical and cultural bonds with East Asia
• A bridge between East and West Asia
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Other areas of cooperation for EAS
•
•
•
•
Monetary and Financial Cooperation
Regional Cooperation for Energy Security
Cooperation in S&T and Disaster Management
Regional institution-building
– evolving an Asian Identity
• Regional Cooperation in Global Economic
Governance
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Monetary and financial cooperation
• Growing consensus on the importance of reserve pooling
• Need to build on the Chiang-Mai Initiative
• A modest pooling of 5% of region’s reserves in a regional
institution: e.g. ARB, AIB, RBA
• Exchange rate stability
• An ACU as a unit of account backed by the Asian Reserve
• Asian Fund for financing huge infrastructure investments and regional
public goods
• Huge requirement for infrastructure investments in EAS region
• Additional demand generation to enable fuller utilization of capacity
• Finance is on the EAS agenda
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Cooperation for Energy Security
• Potential for fruitful regional cooperation
• Joint exploration/ oil equity in third countries as
well as within the region
• Regional oil/gas grid
• Common strategic reserves
• Asian energy market
• Energy conservation
• Maritime security/ protection of sea lanes
• Cebu Declaration on East Asian Security
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Concluding Remarks and the Way
Forward (1)
• Substantial potential of pan-Asian economic integration in helping
Asia resume a high growth path by complementing ongoing subregional approaches in realizing the Asian Dream
• Also a win-win for the rest of the world
• Growing economic interdependence will also promote peace and
reconciliation and disaster management
• EAS can play an important role in fostering broader regional
cooperation in Asia by evolving a CEPEA and exploiting
opportunities for regional cooperation in finance, energy security,
mitigation of natural disasters, in shaping the global architecture etc.
• With its dynamic economy and synergies with East Asian countries,
India is in a position to contribute to such cooperation
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Thank you
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