Asian Regionalism

ASIAN
REGIONALISM
What is Regionalism?
■ Regionalism is the set of conscious

activities carried out by states
within a region to cooperate
■ Regionalism is the formal process
of intergovernmental collaboration
between two or more states
Regionalism
■ The product of Economic
Interaction
■ Not Political planning, but a result
of outward oriented growth
strategies.
■ Asian countries have grown not
only richer but also closer together.
BENEFITS OF REGIONALISM TO
ASIA
AN INTEGRATED ASIA CAN…
■ link the competitive strengths of its diverse economies in order to
boost their productivity and sustain the region’s exceptional growth;
■ connect the region’s capital markets to enhance financial stability,

reduce the cost of capital, and improve opportunities for sharing risks;
■ cooperate in setting exchange rate and macroeconomic policies in

order to minimize the effects of global and regional shocks and to
facilitate the resolution of global imbalances;
ASIA
■ pool the region’s foreign exchange reserves to make more resources
available for investment and development;
■ exercise leadership in global decision making to sustain the open

global trade and financial systems that have supported a half
century of unparalleled economic development;
ASIA
■ generate productivity gains, new ideas, and competition that boost
economic growth and raise incomes across the world;
■ contribute to the efficiency and stability of global financial markets

by making Asian capital markets stronger and safer, and by
maximizing the productive use of Asian savings;
ASIA
■ diversify sources of global demand, helping to stabilize the
world economy and diminish the risks posed by global
imbalances and downturns in other major economies;
■ provide leadership to help sustain open global trade and

financial systems; and
■ create regional mechanisms to manage health, safety, and

environmental issues better, and thus contribute to more
effective global solutions of these problems.
Asian Regionalism
EXTERNALIST GENERATIVE THE REGION AS AN

VIEW VIEW ALTERNATIVE TO
GLOBALIZATION
Externalist View
■ Colonial Rule and Dominance (Japan and Thailand)
■ WWII (Japan and US)
■ Export Oriented Growth
■ IMF and WB (Indonesia – Suharto; Thailand – export; Philippines – Fr. Marcos
■ Liberalization
■ Employment Practices
■ Politics (Rising Middle Classes) and Culture
2nd wave
1st wave
1960s-1980s
1950s-1970s
South Korea, Taiwan,
Japan
Hong Kong, Singapore
3rd wave
1980s-1990s 4th wave
Thailand, Malaysia, Urban centers in China
Indonesia, Philippines
Generative View
■ Spice Trade
■ Early Modern World Economy
■ Colonialism
■ Rise of Japan, China, India
■ International Migrant Labor
■ Remittance from Migrant Workers [(Ph = 11%)]
■ Regional Free Trade Agreement
■ Open Regionalism
■ Asian Products in Global Market
Region as Alternative to Globalization
■ Japan’s Colonialization
■ Early Modern World Economy
■ Asian Way (consensus, no restraint, respect for values like thrift
and hardwork)
■ Regional Arrangements
■ Santi Suk (created own currency) – Local Movement
■ Asian Monetary Fund
Growth and The rise of The emerging
integration Regionalism Regional Agenda
• Flying in sequence • Measuring • Production
• The crisis and its legacy interdependence • Financial Markets
• Renaissance • How markets drive • Macroeconomics
• Asia in 2020 integration • Social and
• How policy makers are environmental issues
responding • Cooperation
The crisis and
its legacy
Growth
Flying in
sequence and Renaissance
Integration
Asia in 2020
GROWTH AND INTEGRATION
• Asian regionalism is emerging against the
backdrop of a remarkable half century of
economic development.
GROWTH
AND • In the four decades from 1956 to 1996, East
INTEGRATI Asian living standards—as measured by
ON real (inflation adjusted) output per person
—rose at a rate faster than has ever been
sustained anywhere else.
• Competition in global markets is at
the heart of what is now understood
as the East Asian development
model.
FLYING
IN
• When the model emerged in the
SEQUENC
E 1950s, its focus on labor-intensive
exports was new; the prevailing
“big push” development strategy
favored large, coordinated in a bid
to achieve economies of scale
• East Asian development instead

FLYING relied on the region’s abundant asset
IN of relatively well educated, low-
SEQUENC wage labor and in time leveraged it
E with ample savings and investment
• In the Second World War, most
of the East Asian region was
synonymous with rapid, largely
THE unexpected economic
CRISIS development.
AND ITS
LEGACY • The 1997/98 financial crisis dealt
a severe setback, highlighting
Asia’s impetus for regional
cooperation.
• ‘Asian miracle’ spread from
Northeast to Southeast Asia
suddenly disappeared following the
THE economic crisis that engulfed the
CRISIS region in the late 1990s.
AND ITS
LEGACY • The crisis itself was consequently a
profoundly important event in the
history of the region.
• Indeed, when a second ‘global
financial crisis’ (GFC) hit the
region in the late 2000s, the region
THE proved to be comparatively
CRISIS immune to its impact and it was
AND ITS seen as one of the few bright spots
LEGACY and potential growth engines in
the global economy.
• “The crisis”—put the region’s

interdependence into harsh new focus.
HOW
ADVERSITY • Emerging Asian economies that had opened
BECAME A up their financial markets—Indonesia, the
SILVERLINI Republic of Korea, Malaysia, the Philippines,
NG and Thailand—were worst hit, but nearly all
Asian economies were eventually affected.
• Most then used the crisis as an opportunity to
pursue wide-ranging reforms in finance as
HOW well as in other areas of weakness that the
ADVERSITY crisis exposed.
BECAME A
SILVERLINI • Asia emerged with a greater appreciation of
NG its shared interests and the value of regional
cooperation.
• New mechanisms were formulated to

HOW provide emergency resources for future
ADVERSITY crises, and these initiatives were under the
BECAME A stabilization programs negotiated with the
SILVERLINI International Monetary Fund (IMF).
NG
• 1. Rapid development inevitably

creates structural tensions
KEY
LESSONS • 2. Asian economies have deeper
OF THE connections with each other and a
CRISIS larger stake in their common
macroeconomic stability
• Since the crisis, Asia has reemerged as the

world’s most dynamic region, experiencing
RENAISSANC what a new World Bank study has called the
E East Asian renaissance
• The PRC, India, and Vietnam are now the

region’s—and the world’s—fastest growing
economies.
RENAISSAN
• Growth in the directly affected economies of
CE
the Association of Southeast Asian Nations
(ASEAN), though disappointing compared to
earlier periods, is also gradually
strengthening.
• India’s acceleration, although more recent, is

also impressive. With 1.1 billion people and
RENAISSAN rapid population growth, India appears set to
CE be the world’s most populous country within
two decades.
• To compete with the PRC and India, as well

as the other integrating economies of the EU,
NAFTA, and other regional groups, the
RENAISSAN
governments of smaller Asian economies—
CE
particularly in Southeast Asia—are now
intent on building larger economic zones
with transparent internal borders.
• In announcing ASEAN’s commitment to a

single market, senior officials explicitly noted
RENAISSAN the need to make markets large enough to
CE compete with those of the PRC and India
(The Times of India 2006).
• Asia's outlook is bright, because Asia

is likely to continue outperform over
the next decade with the long term
projections and India and PRC
ASIA IN leading the way for Asia. According
2020 to these projections, Asia's share of
world output and income will expand
from 28% in 2005 to 35% in 2020 in
purchasing power party (PPP) terms.
• By 2020, Asia's GDP (PPP -
terms) is set to be more than
60% larger than the EU's
ASIA and North America's. These
IN 2020 trends also suggest that
regional integration will
become increasingly
important for Asia’s growth.
• On the demand side, Asia will

benefit from its own expanding
spending power.
ASIA IN
2020 • On the supply side, its
productivity will be enhanced
by the advantages of its larger,
more integrated economy
• Asia’s economic scale will offer
exceptional opportunities for
efficient production.
ASIA IN • Trade and financial activities are
2020
of particular interest because
these sectors usually expand
faster than output.
• Their continued development
will increase interdependence.
• Opportunities for cooperation

ASIA IN
2020 should continue to expand
rapidly, not just on regional
issues but also with respect to
the region’s role in the world
economy.
How markets
drive integration
THE RISE OF
REGIONALIS
M
Measuring How policy
interdependence makes are
responding
THE RISE OF REGIONALISM
• The most common measure of

interdependence—the share of a region’s
MEASURING total trade conducted within it.
INTERDEPENDEN
CE
• Asia is now broadly as interdependent in
trade as the EU and North America each is.
• A still broader measure of

interdependence needs to include other
important channels such as:
MEASURING
INTERDEPENDEN • direct investment
CE
• financial flows
• macroeconomic links
• personal contacts
• To this end, data on six indicators

of Asian economic integration
MEASURING
INTERDEPENDEN were collected for each Asian
CE economy before and after the
crisis.
HOW MARKETS ASIAN

DRIVE INTEGRATIO
INTEGRATION N
Approaches
in integration
Supranationalism Intergovernmentalism
SUPRANATIONALISM
■ An alliance involving 3 or more countries for their mutual
benefit such as economic, cultural or political/ military.
■ The breakup of a country into smaller countries due to a
conflict within the country.
SUPRANATIONALISM
■ An alliance involving 3 or more countries for their mutual
benefit such as economic, cultural or political/ military.
■ The breakup of a country into smaller countries due to a
conflict within the country.
INTERGOVERNMENTALISM
■ seeks to understand the reasons why states join together and to
provide a realistic approach to the analysis of regional
integration mechanisms
HOW MARKETS DRIVE INTEGRATION
■ Asian Integration
■ Regional Relationships
■ Technology and Policy
HOW MARKETS DRIVE INTEGRATION
■ The key technological explanation—the development of
production networks, often also described as “production
fragmentation”
PRODUCTION FRAGMENTATION
■ It is the result of advances in information technology, falling
trade barriers, and declining transport costs.
HOW POLICY MAKERS ARE RESPONDING
Market –
Partners
vs driven
outside Asia
integration
REGIONAL ORGANIZATIONS
■ Asia-Pacific Economic Cooperation (APEC)

■ United Nations Economic and Social Commission for Asia and the Pacific
(ESCAP)
■ Mekong River Commission
■ Southeast Asia Treaty Organization (SEATO)
■ ASEAN countries have been at the forefront of Asian

regionalism, individually and collectively.
■ The Central Asia Regional Economic Cooperation
[CAREC] have focused on the special requirements of
geographical subregions.
■ ASEAN seeks to transform their economies into a “single

market”.
■ ASEAN+3 [ASEAN countries plus the PRC, Japan, and the
Republic of Korea] have addressed functional areas of
integration.
■ APEC have been most effective among all.
REGIONAL INTEGRATION IN
ASIA
Macroeconomics
THE
Financial
Markets
EMERGIN Social and
environmenta
l issues
G
REGIONA
L
AGENDA
Production Cooperation
THE EMERGING REGIONAL
AGENDA
PRODUCTION
■ Access to markets, in the region and beyond, is critical to Asia
and thus a high priority on the regional agenda.
■ Institutional arrangements are designed to facilitate the free
flow of goods and services and to coordinate with foreign
economic policies between countries in the same geographic
region.
AGENDA
PRODUCTION
NORTH AMERICA FREE TRADE (NAFTA)
■ The pact effectively created a free-trade bloc among the three largest
countries of North America.
AGENDA
PRODUCTION
ASEAN Free Trade Area (AFTA)
■ The liberalization of trade in the region through elimination of both
intraregional tariffs and non-tariff barriers had contributed towards
making ASEAN's manufacturing sectors more efficient and competitive.
THE EMERGING OF REGIONAL
AGENDA
FINANCIAL MARKETS
■ Financial regionalism has also increasingly gained prominence.
■ Leaders of the group of twenty advanced and developing economies
meeting in Los Cabos, Mexico, underscored “the importance of effective
global and region safety nets”;.
■ The main policy committee of the IMF has regularly stated the
importance for the IMF “to cooperate . . . with regional financial
arrangements.”
AGENDA
FINANCIAL MARKETS
LATIN AMERICAN RESERVE FUND (FLAR)
■ It is very active in providing balance of payments financing to its
members for more than three decades.
AGENDA
FINANCIAL MARKETS
THE CHIANG MAI INITIATIVE
■ It is a multilateral arrangement among the finance ministries and central
banks of the ASEAN+3 member countries and the Hong Kong Monetary
Authority that provides currency swap transactions.
AGENDA
MACROECONOMICS
■ Interdependence generates spillover and enhances the need for
cooperation.
AGENDA
TYPES OF MACROECONOMIC POLICY COOPERATION
■ Information Sharing
■ Regime Setting
Some experts argue that Asia is decoupling from the World Economy.
AGENDA
SOCIAL AND ENVIRONMENTAL ISSUES
■ As well as driving Asian dynamism, regional cooperation could help
ensure that its benefits are sustainable and widely shared.
AGENDA
SOCIAL ISSUES
■ Poverty
■ Inequality
■ Unemployment and Underemployment
AGENDA
ENVIRONMENTAL ISSUES
■ Water Bodies
■ Air Pollution
■ Climate Change
SHORT – TERM MEASURES MEDIUM AND LONG TERM
• Foster an attractive investment environment MEASURES
• Promote investment by small and medium
• Develop resources and infrastructure enterprises
• • Establish a regional financing facility

• Cooperate through technology transfers and joint
technology development • Promote closer regional marine environmental
cooperation
• Establish poverty alleviation programs
• Build a framework for energy policies and strategies,
• Take concerted steps to provide access to primary as well as action plans
health care for the people
• Work closely with nongovernment organizations
AGENDA
COOPERATION
■ Marshaling collective efforts across Asia’s vast, diverse economies is a
huge challenge.
■ The examples of the EU and, to a lesser extent, NAFTA offer insight, but
Asia’s economics, politics, and history are different—and call for new,
distinctive solutions.
AGENDA
COOPERATION
■ Asian institutional development will likely remain pragmatic and
gradual, and the region’s policy architecture will likely feature multitrack
and multispeed solutions.
■ The region is already highly integrated, and its governments are aware of
their common interests and obligations.
AGENDA
COOPERATION
■ Asia has returned to stability and growth, and elimination of systematic
poverty is within reach.
■ To be sure, important problems remain, and regional cooperation will
require complex and delicate decisions.
THANK YOU 

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ASIAN

■ Regionalism is the set of conscious

■ connect the region’s capital markets to enhance financial stability,

■ cooperate in setting exchange rate and macroeconomic policies in

■ exercise leadership in global decision making to sustain the open

■ contribute to the efficiency and stability of global financial markets

■ provide leadership to help sustain open global trade and

■ create regional mechanisms to manage health, safety, and

EXTERNALIST GENERATIVE THE REGION AS AN

• East Asian development instead

• “The crisis”—put the region’s

• New mechanisms were formulated to

• 1. Rapid development inevitably

• Since the crisis, Asia has reemerged as the

• The PRC, India, and Vietnam are now the

• India’s acceleration, although more recent, is

• To compete with the PRC and India, as well

• In announcing ASEAN’s commitment to a

• Asia's outlook is bright, because Asia

• On the demand side, Asia will

• Opportunities for cooperation

• The most common measure of

• A still broader measure of

• To this end, data on six indicators

HOW MARKETS ASIAN

■ Asia-Pacific Economic Cooperation (APEC)

■ ASEAN countries have been at the forefront of Asian

■ ASEAN seeks to transform their economies into a “single

• • Establish a regional financing facility

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