Can the EAS realise the Asian Dream?

The East Asia Summit (EAS) scheduled to be held in Kuala Lumpur later this month, and attended by leaders of Asean10, Japan, China, South Korea and India, and of Australia and New Zealand, is a landmark event in the history Asia?s regional economic cooperation. This summit could take initial steps towards the launch of a broader and inclusive scheme of economic cooperation that could hasten the re-emergence of Asia as the centre of gravity of the world economy.

At a high-level conference organised by RIS in New Delhi in November in collaboration with the Institute of Southeast Asian Studies in Singapore, heads of major Asian think-tanks and other experts brainstormed on the agenda of the EAS. At the conference, there was great interest in building on the growing functional economic integration and emerging web of FTAs linking Asean and its summit-level dialogue partners?namely Japan, China, India and South Korea and possibly with Australia and New Zealand into an inclusive East Asian Community. This could eventually grow into a broader Asian Economic Community. The conference felt that EAS could take steps to create an institutional framework for promoting regional cooperation in areas such as trade and investment, monetary and financial cooperation, energy security, among other areas.

The participants of EAS are currently involved in about 60 FTAs between themselves, creating a virtual community. However, these bilateral or sub-regional FTAs are sub-optimal, as they do not provide a seamless market. Hence, the conference felt that EAS could take steps to create an East Asian FTA (EAFTA) as a framework agreement, coalescing and consolidating all mutual FTAs of EAS participating countries.

An Asian Monetary Architecture of EAS countries could be another priority for pooling reserves and the creation of an Asian Currency Unit (ACU) as a unit of account for facilitating intra-regional trade and exchange rate stability within the region. Energy security should also be high on the agenda. EAS should launch an Asian Energy Forum as an Asian counterpart of the International Energy Agency to pursue regional cooperation?including Asian strategic energy reserve, a pan-Asian gas grid, development of Asian energy market, among other areas.

The other proposals included an architecture for cooperation in science and technology, a platform for discussion of global economic governance, cooperation and coordination between networks of think-tanks, initiatives for greater people-to-people exchanges, and cultural interactions for strengthening an Asian identity. There was a clear consensus at the conference on the need to follow an inclusive pan-Asian approach for initiatives taken by EAS than an exclusive approach (such as limited to Asean+3), especially in view of the profound synergies that exist between the sub-regions and that will make integration more fruitful. For instance, India will bring its own dynamism to the grouping with a $700 billion economy growing at 7-8% per annum and a 300 million strong middle class and its potential to emerge as the third largest economy in the world.

Beyond that, it also implies profound synergies with East Asia, such as a software and services dominated economy that complements well with hardware and manufacturing driven economies of East Asia. With booming demand for infrastructure investments that are projected to be over $500 billion, India can provide a huge market for East Asian investors and underutilised construction and engineering capacities.

Rapid integration with East Asia as a part of the Look-East policy followed by India since 1991 has made the region the largest trade partner of India, ahead of the EU and the US. India is already evolving an FTA with Asean, is studying FTAs with Japan, China and South Korea, and, is hence, very much a part of the growing web of FTAs linking the East Asian countries. India is increasingly getting linked with the East Asian production networks as East Asian companies begin to exploit India?s strengths in R&D, software and design by locating their global R&D centres in India. China?s Huawei Technologies, like many others, employs hundreds of engineers doing chip design in Bangalore; Hyundai made India a global sourcing base for compact cars; and Toyota is sourcing engines from India for Southeast Asian markets. Daewoo Trucks is linked with the production chain of Tata Motors following its acquisition by the latter. India could also act as a bridge for East Asia for south, west and central Asian countries.

Furthermore, it can be argued that India?s participation will make the grouping more balanced and less susceptible to domination by any particular large country. Because of these considerations, there is growing popular support for more inclusive approaches for regional integration. A survey conducted by the World Economic Forum over 37% of new Asian Leaders view an extended Asia?Asean+4, including China, Japan, India, and Korea as the most desirable model of economic integration, with only 26.8% preferring Asean+3. RIS simulations of welfare gains from economic integration in Asia clearly establish the case of India-East Asia integration as a win-win for Asia. A grouping combining both of Asia?s large dynamos viz. China and India is likely to be a global powerhouse.

To conclude, leaders of EAS countries have a historic opportunity to take a major step forward in the direction of broader regional economic integration in Asia that will realise the Asian dream and make the 21st century an Asian Century!

The writer is director-general, Research and Information System for Developing Countries (RIS). These are his personal views