The aftermath of the financial crisis has opened a new can of worms for Asia. The region has to decide its degree of dependence on the non-Asian world. The decision is anything but easy.

Just about a decade ago, the Asian financial crisis had hit the region. The crisis saw the region responding in a collective manner. The collective behaviour led to figuring out Asian solutions to Asian problems. Circumstantial imperatives led to a revival of Asian regionalism. A key driver of such regionalism was the disappointment of the region with the quality of response from the West. While Western governments had stepped in with considerable vigour during other similar crises in the past, particularly in Latin America, the Asian catastrophe saw much less of such response. Asia was largely left to manage its affairs on its own. The region had little option other than devising collective responses. This was reflected in a flurry of intra-regional trade agreements. They were also reflected in the currency swap arrangements, the Chiang Mai Initiative and the tentative move towards an Asian bond market.

An important aspect of the Asian recovery after the crisis was the dual emphasis on intra-regional and extra-regional linkages. While formalisation of economic and trade agreements within the region increased, there was simultaneous emphasis on deepening links in non-regional markets. Western markets remained major sources of inspiration for Asian economies. Indeed, the onset of the robust economic cycle that the world witnessed from the early years of this decade was sustained by steady feeding of Asian exports to North American and European markets.

The situation, this time around, is different. The latest crisis was not a regional crisis like in 1997. It was a trans-Atlantic setback that matured into a contagion and affected Asia. The region is fighting a crisis that is not of its own making. As a result, it realises that the response also needs to be different. Unlike the last time, when Asia followed an ?open? regionalism model by reaching out to non-regional markets as well, should it do the same this time also?

The question will agitate policymakers from the region for a long time to come. Open regionalism might appear much less attractive now compared to the past. Far-reaching changes have taken place in Asia?s economic equation with the West. In 1998, western markets were buoyant. Asian exports could rely on them for regional recovery. This time it is not so. The region cannot expect Western markets to handhold its turnaround. Depressed conditions in North American and European markets have forced the region to think whether export orientation will deliver benefits any longer.

Fundamental changes have also occurred in the balance of economic power within the region. In 1998, Japan was the largest economy in the region. It accounted for 14.5% of the world GDP. China was the second largest with 3.3% of world GDP. The Asean-5 (Indonesia, Thailand, Singapore, Malaysia and the Philippines), India and Korea followed with 1.7%, 1.5% and 1.3% of world GDP, respectively. A decade later, the balance has changed considerably. Japan is still the largest regional economy. But now it contributes only 8.8% of world GDP. China has inched closer to Japan by contributing 8.3% of world GDP. The Asean-5 and India now contribute 2.2% each to world GDP, while Korea contributes 1.4%.

The greater China-centric character of the region will play a critical role in determining whether Asia continues to follow open regionalism. China may not decide to be as open to extra-regional actors as Japan has been. China?s economic links with other major economic entities in the region have deepened considerably over the last decade. It may decide to deepen these links further, given the subdued conditions in western markets. China has also decided to consciously energise domestic consumption and demand as major engines of growth. It is likely to import much more than it did in the past. These imports will largely come from its neighbouring Asian countries producing cheap commodities. The latter will also supply considerable raw material and intermediates, as China pursues large-scale infrastructure development. China?s heavy import of iron-ore from India is a case in point.

Asia may, therefore, see a much different regional response to the post-crisis scenario as opposed to what it witnessed a decade ago. A relatively inward-looking regional approach is likely to appeal to all other major economies in the region, such as the Asean-5, India and Korea. They all stand to benefit from synergies created by a quick turnaround of economic activity in the region.

?The author is visiting research fellow at the Institute of South Asian Studies at the National University of Singapore. These are his personal views