by Sadakazu Tanigaki, Minister of Finance, Japan
is a great pleasure for me to speak at this Governors' Seminar "A
Road Map for Asia's Economic Cooperation and Integration."
I would like to talk about the merits of regional integration, and
the steps and strategies for successful integration. Then, I will
outline regional cooperation in East Asia, which is being promoted
jointly by the Association of Southeast Asian Nations (ASEAN), China,
Japan, and Korea, the so-called ASEAN+3 framework. Finally, I would
like to touch on my expectations for the ADB in promoting regional
is a region of great diversity. It is also a region blessed with
diligent and capable human resources as well as with a vast pool
of savings. It is essential to maximize these advantages in strengthening
regional cooperation. To date, policy efforts on regional cooperation
have been active in East Asia. I see a similar momentum for regional
cooperation starting in South Asia, and recognize the potential
for regional cooperation in Central Asia and Afghanistan.
has been actively promoting monetary and financial cooperation in
East Asia under the framework of ASEAN+3 Finance Ministers' Meeting
and hopes that such regional cooperation will expand all over Asia
in the future. Regional cooperation and integration should contribute
to the growth of the global economy and should not be exclusive
of other regions.
economic integration in Asia, I would like to draw your attention
to three key merits for its economic growth.
first is the economy of scale driven by the expansion of the market.
Since the Asian region contains more than half the world's population,
it could make up a truly mega-market beyond national boundaries.
Notably, the ratio of intra-regional trade in East Asia has dramatically
increased in recent years. This is a sign that the potential of
a regional integrated market has turned into reality.
second is complementarity. In Asia, comparative advantages vary
from country to country. Some are industrial, while others are agricultural.
Some excel in sophisticated manufactured goods, others in versatile
products. Some have knowledge-intensive industries, others a labor
force that is inexpensive and plentiful. Thus, regional integration
in Asia can generate an even greater synergy effect than by simply
adding up the strength of each country.
third is the stabilization of the regional economy. Based on the
lessons from the Asian currency crisis, there are a number of policy
initiatives to build a regional framework for monetary crisis prevention.
There have also been initiatives to strengthen linkages of policy-making
in the region in order to create a regional economic structure that
is resilient to global economic changes.
and Strategies for Integration
then should we promote regional integration in Asia? While referring
to the case of EU integration, I want to emphasize that, a step
towards economic integration has already been taken in Asia.
must be made on all fronts-money, goods, and labor. In the case
of the EU, the process began with the coordination of production.
With regard to the monetary aspect, various efforts, such as the
introduction of the ECU as a common calculation unit, were made
for the stability of each currency in the region.
Asia, on the other hand, monetary and financial cooperation under
the ASEAN+3 framework, such as the Chiang Mai Initiative and the
Asian Bond Markets Initiative, have taken precedence as a policy
response to the Asian financial crisis. Japan has been actively
involved in these initiatives. However, recently, initial progress
has been witnessed on the policy front such as free trade agreements
and economic partnership agreements (EPAs), thus expanding intra-regional
trade in Asia considerably. As for labor mobility, liberalization
measures have been progressively implemented in the U. In Asia,
EPAs include provisions for labor mobility.
the level of economic integration advances, policy coordination
on macroeconomic and structural issues will become increasingly
important. In the EU, policy coordination has played a significant
role in the operation of the European Monetary System. Also under
the ASEAN+3 framework, regional surveillance has been strengthened
and active policy dialogue is being conducted.
and Financial Initiatives by ASEAN+3
I would like to outline the monetary and financial cooperation under
the ASEAN+3 framework to which Japan and other member countries
have been actively contributing.
first area of our regional cooperation is to build a regional framework
to prevent and resolve currency and financial crises in Asia. Since
2000, the ASEAN+3 countries have been actively promoting the Chiang
Mai Initiative (CMI), focusing primarily on building a network of
bilateral swap arrangements. The network has expanded to a total
of US$39.5 billion worth. At the ASEAN+3 Finance Ministers' Meeting
tomorrow, several measures to enhance the CMI will be discussed.
The second area is the strengthening of regional economic surveillance.
Adequate monitoring of regional economic situations is essential
for crisis prevention through the early detection of irregularities
and swift remedial policy actions. This monitoring is also indispensable
in providing immediate assistance in the event of a crisis. Since
2002, through the ASEAN+3 Finance Ministers' process, we have been
regularly conducting policy dialogue on country-level economic situations
and policy issues three times a year.
third area is the development of bond markets in Asia. One of the
fundamental causes of the Asian currency crisis was the pattern
of capital flow, which allowed for outflows of domestic savings
and inflows of short-term capital. To constantly channel the domestic
savings for investments in the region and to eliminate mismatches
of currency and maturity in regional financing, the development
of bond markets in the region is an extremely important task.
this purpose, Japan has been vigorously promoting the Asian Bond
Markets Initiative (ABMI). Concrete outcomes have already been achieved
in this Initiative. One example is the issuance of collateralized
bond obligation, or the so-called Pan-Asian Bond, in collaboration
with the Korean Ministry of Finance and Economy. Another example
is the flotation of local currency-denominated bonds issued by Japanese
companies abroad, with a credit guarantee by the Japan Bank for
the ASEAN+3 Finance Ministers' Meeting tomorrow, it is expected
that a new mechanism to continue the ABMI's momentum will be discussed.
for the Asian Development Bank
promote economic cooperation and integration in Asia is a unique
mandate for the ADB as a regional development bank. In this context,
there are five points, in particular, that I expect from the ADB.
first point is support for cross border infrastructure development.
To capitalize on the scale benefit of regional integration, it is
essential to improve key infrastructure such as cross-border transport,
telecommunications and power transmission. It is also important
to unify the rules for power interchange to ensure its effective
use. The ADB is making significant contribution in this regard,
as is the case with the Greater Mekong Subregion Program, and I
hope that the similar assistance will be strengthened in South Asia
and Central Asia. The second point is assistance for strengthening
regional financial markets. In order to channel regional savings
for regional infrastructure, the ADB's regional departments can
facilitate financial sector reform. The Private Sector Operations
Department provides supports to catalyze private capital flows and
to strengthen private financial institutions. The Treasury Department
is expected to contribute to the development of regional bond markets
by issuing local currency bonds. It is essential for the ADB to
establish systematic linkage between the roles of these departments,
so that the ADB can increase its effectiveness as a whole.
third point is promotion of intra-regional cooperation on trade.
The ADB has played a key role in promoting dialogue among countries
of the Greater Mekong Subregion (GMS) and Central Asia to facilitate
intra-regional trade, for example, by harmonizing customs procedures.
It is also important for the ADB to supplement private financial
institutions by trade finance facilitation.
fourth point is the facilitation of immigrants' remittance to their
home country. Globalization enhances labor mobility, thus increasing
the number of immigrants. In this respect, the ADB is expected to
expedite its study on remittance. The final point is the encouragement
of policy dialogues on regional economy to help exchanges of views
on economic policies of each country. While the ADB already plays
a significant role in regional surveillance, I hope the newly expanded
Office of Regional conomic Integration will intensify and strengthen
its role in this field.
my observations and the following comments of the honorable speakers
will be helpful in exploring the possibility of future regional
integration in Asia. I would like to close by underlining that Japan
is committed to promoting economic cooperation and integration for
the further prosperity of the region.
ADB Press Release, May 3, 2005)