Regional economic integration in Asia

This month will see a couple of important events towards regional economic integration in Asia. Laos will be hosting the Asean summit as well as the third Asean-India summit towards the end of the month. Prime Minister Manmohan Singh will be participating in the summit. An important event organised in conjunction with the summit is an Asean-India motor car rally to be flagged by the PM. It will vividly show the geographic contiguity of India with Asean countries, perhaps also highlighting the need for upgrading the roadlinks that exist in the region. The summit is also likely to adopt a document on long-term vision of partnership based on a document prepared by the think-tanks of Asean and India led by RIS.

The Asean summit this year becomes more critical in view of growing interest in East Asia in forming a broader grouping especially in the framework of Asean+3 (viz. Japan, Korea and China). Although Asean+3 was formed as a response to the 1997 crisis, it has begun to explore formation of an East Asian Economic Community (EAEC). The EAEC proposal was developed by the East Asia Vision Group set up at the initiative of South Korea in 2001 making a case for an EAEC combining the Asean+3 countries into a regionwide FTA. The initial response to the proposal was rather muted as some countries apprehended domination of EAEC by China. More recently, however, the proposal has started to gather support from various quarters. The Japanese government has set up a high-powered Council for East Asian Community (CEAC) in May 2004 as a think-tank. Malaysia offered to host a summit to launch EAEC in 2005.

Any regional grouping in Asia combining economies as important as Japan, China, Korea with Asean has the potential of evolving into a trade bloc comparable to EU or Nafta and emerge as the third pole of the world economy. Inability to be part of such a trading bloc can affect India?s economic and strategic interests adversely by diverting trade and investments away from it. Thanks to our highly successful ?Look East? policy, East Asia now accounts for more than a quarter of India?s trade as large as EU?s or North America?s. Therefore, it is of critical importance for India to be part of the plans of East Asian economic integration. For this, it is pertinent for India to join the Asean+3 and have it expanded to Asean+4.

The other option is to seek support for the proposal developed by RIS for an Asian Economic Community (AEC) built in a phased manner with a core group of Japan, Asean, China, India and Korea (Jacik). After it was unveiled at a think-tanks? conference in New Delhi in March 2003, the Jacik proposal has been discussed and supported at various fora. In this way, India will be one of the founding members of the core group and thus will be able to shape it in a most desirable manner.

Prime Minister Singh has already given an indication of his vision in his inaugural speech at the recent Asean-India business summit when he talked about the ?Asian economic community encompassing Asean, China, Japan, Korea and India? as an idea whose time was fast approaching. India should use the occasion of the Asean-India summit to further push the Prime Minister?s vision.

There are several reasons why the Jacik roadmap for Asian economic integration may be preferred by East Asian countries over the EAEC proposal. First, the entry of India also reduces the apprehension of a possible domination of the grouping by China. India also brings to the EAEC a large and dynamic economy with complementary capabilities in software and services. Another important feature of Jacik is in the fact that AEC is designed to expand and eventually become a continent-wide grouping in the long-term as EU, while there is no such proposal under EAEC proposal.

RIS simulations have shown that economic integration within the Jacik framework could act as a new engine of growth and help Asia regain its place as a centre of gravity in the world economy.

The author is Director General, Research and Information System for the Non-aligned and Other Developing Countries. These are his personal views