Emerging New Asia

Asia has been a centre of attention due to rapid growth over the past decades. The economic progress achieved by Asia in the fifty years has been the fastest in human history. The Japanese example of rapid growth in the 1960s and 1970s was followed in rapid succession by several other Asian countries such as South Korea, Singapore, Taiwan, Malaysia, Thailand and Indonesia and annual growth rate of around 7 per cent became a routine affair in Asia. China has been registering an average growth rate of about 9 per cent per year since 1980. India, once considered as a laggard in Asia, is now also displaying tremendous growth momentum with growth rate approaching 8 per cent in 2003/04 after growing at an average rate of about 6 per cent over the past two decades. Catching up with the developed world in per capita incomes that seemed as an impossible target earlier has now been achieved by several Asian countries and is achievable by several others. With the rise of China and India, it is now clear that the center of gravity of the world economy will shift to Asia in the 21st century. A recent study by Goldman Sachs shows that China and India would emerge among the top three economies of the world in the next 50 years.

Alongside the rapid growth, a new transformation is taking place in Asia in terms of regional economic integration. The importance of the regional economic cooperation was highlighted by the East Asian Crisis of 1997 that affected some of the best performing economies of the region. As a response to the crisis, the ASEAN countries expedited the programme of formation of ASEAN Free Trade Area (AFTA) and moved on to further deepen the economic integration.

Many schemes of economic integration are currently taking shape in Asia at a regional or bilateral level. For instance, China, Japan and India are working with ASEAN countries on comprehensive economic cooperation pacts covering free trade agreements to be implemented within ten years. At the sub-regional level, South Asian countries are moving towards a free trade agreement, SAFTA. BIMST-EC, a grouping combining most of the South Asian countries and Thailand and Myanmar has also adopted a framework treaty for a free trade agreement.

These broader agreements are complemented by a number of bilateral free trade or comprehensive economic cooperation agreements which are at different levels of evolution such as Japan-Singapore, India-Thailand, India-Singapore, Japan-Malaysia, Japan-The Philippines, Japan-Thailand, among others.

A number of proposals of cooperation in the monetary and financial sectors are also taking shape. Although the proposal to set-up an Asian Monetary Fund did not take off, the Chiang-Mai Initiative involving the linking of reserves between ASEAN+3 countries for achieving exchange rate stability has come up. The Asian Bond Fund floated in 2003 is also taking shape.

It is clear that at last Asian countries have begun to look at the regional economic integration as a strategy for development more seriously than ever before.

A New Asia seems to be emerging from these efforts which is not only dynamic in terms of growth but also in exploiting the synergies between the neighbours for mutual development.

There is also a growing realisation within the region on the relevance of a broad overarching framework to consolidate the various sub-regional and bilateral initiatives into some sort of a pan-Asian grouping or an Asian Economic Community. It has been argued that such a framework is necessary for exploiting the potential of regional economic integration in the continent more fully as the complementarities are more profound between the sub-regions rather than within them. Indeed the Asian Economic Community could be built in a gradual manner to begin with Japan, ASEAN, China, India and Korea (JACIK).

RIS studies have shown that economic integration within Jacik has the potential to create a grouping as large as EU in terms of income, or as large as NAFTA in terms of trade. With roughly half of world’s population and the bulk of foreign exchange reserves, JACIK has the potential to emerge as one of the major regional economic grouping. Simulation studies suggest substantial welfare effects resulting from economic integration. Surveys conducted among the new Asian leaders find support for deeper economic integration between Jacik countries.

The New Asia Forum hopes to contribute to this process of regional economic integration and thus building of a New Asia with dissemination of ideas.

Dr. Nagesh Kumar
Director-General, RIS