South Korea Could Lead the Way
BIMSTEC Countries Sign FTA Framework
Philippines, Thailand to Push for Regional Petroleum Hub
Thailand to Contribute $1 Billion to Asian Bond Fund
East Asia Exposed to Speculative Fund









South Korea Could Lead the Way

Relations between China and Japan have always provided the cynics with reasons to write off the Asian integration efforts. The history of relations between the two countries has been a record of sweet and sour developments. While, China drags the relations back to the Second World War and expects to deal with Japan as a guilty party, Japan is equally uncomfortable with China competing with it on the economical front. Under such circumstances efforts for regional integration do get a setback. However, South Korea might bridge this rival gap between the two leading economies of the region, thus providing the optimists a glimmer of hope.

The idea suggested by Bae Soon Hoon of the North East Asian Hub Committee at the annual international forum of the North East Asian Network, could well work as the key to resolve the deadlock, that Asian integration efforts confront.

As reported by The Korean Herald, (February 6, 2005) which was the one of cosponsors of the "The Northeast Asian Network 2004", organized by Yonsei Leadership Center at the Yonsei University, Seoul from February 3 to February 8, 2004, Mr Bae suggested that South Korea could become the fuel that drives Northeast Asia toward greater political and economic cooperation. He further added, "Between China, the manufacturing powerhouse, and Japan, which takes the lead in technology, Korea can play a coordinating role as a trade and logistics hub," Not only this he further advised that South Korea could be the exchange point for trade as well as political issues between China and Japan, he explained. China and Japan do not have diplomatic relations and suffer the aftermath of historical conflicts.

This modus operandi, if taken up by the governments can work well to tackle the important political issues that prevent them from any fruitful economic cooperation. There are of course obstacles to this approach, for example the recent issues between China and South Korea themselves., such as the mounting concerns in Seoul that low-cost China will further erode this country's manufacturing base and will even pose a competitive threat to its high-tech industry.

However, in absence of serious political conflicts, like the ones existing between Japan and China, it can be argued that such issues could be easily resolved through negotiations as they do not involve such high stakes as the political ones. Instead, the three could all benefit from cooperation by developing their respective strengths.

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BIMSTEC Countries Sign FTA Framework

The Joint Statement, Sixth BIMSTEC Ministerial Meeting
February 8, 2004

The 6th BIMST-EC (Bangladesh, India, Myanmar, Sri Lanka, Thailand-Economic Cooperation) Ministerial Meeting held in Phuket, Thailand, on February 8, 2004, marked the signing of Framework Agreement for the BIMST-EC Free Trade Area. Other prominent aspect of the meeting was the attendance of Nepal and Bhutan as full members for the first time.

In setting the course for BIMST-EC and preparing for the First Summit, the ministers reviewed the progress in the 6 priority areas of BIMST-EC. To begin with, they encouraged continued cooperation and implementation of projects in the six priority sectors, namely: 1) Trade and Investment; 2) Technology; 3) Energy; 4) Transportation and Communications; 5) Tourism and 6) Fisheries, and agreed that in addition to the areas of cooperation, special emphasis should also be placed on the development of hydrocarbon and hydropower potential and people-to-people contact in the region.

 Further on in the meeting, the ministers recommended working towards greater air transport liberalization, short-sea shipping, trilateral highway linkages among India, Myanmar and Thailand and among Bangladesh, Myanmar and Thailand, including linkages with other BIMST-EC countries. India’s offer to undertake a feasibility study on Dawei Deep Sea Port, transportation linkages between the Port and Thailand was also noted. The Ministers further recommended working together for Trans-BIMST-EC natural gas pipeline, technical cooperation/ human resources development, management and sustainable utilization of fisheries resources in the Bay of Bengal, and facilitation of business travel.

The group commended the “Visit BIMST-EC 2004” initiative and encouraged more activities, such as joint marketing for tourism and combining of destinations, to support this endeavour. They also decided upon yearlong activities in member countries by rotation to focus on “Visit BIMST-EC 2004” to enhance general public awareness and to extend this project to 2005.

Focussing on the future directions of BIMSTEC, the ministers endorsed the setting up of a Technical Support Facility (TSF) to serve the BIMST-EC Working Group (BWG) and to coordinate BIMST-EC activities, including those of the BIMST-EC Chamber of Commerce, for a trial period of two years. Thailand’s offer to establish and provide full funding for the TSF in Bangkok for two years as a pilot project was also welcomed. It was also recommended during the meeting that each member country also establishes appropriate facilities at its headquarters to facilitate better coordination and implementation of BIMST-EC projects.

The first BIMST-EC Summit has been scheduled for July 30-31, 2004 in Bangkok, Thailand.

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Philippines, Thailand to Push for Regional Petroleum Hub

Office of the Press Secretary, Philippines

February 18, 2004

The Philippines and Thailand have agreed to push for the creation of a regional petroleum hub that will serve as strategic location for stockpiling and distribution points in Asia in a bid to counter continual increase in world oil prices.

In a joint statement, Philippine Energy Secretary Vince Perez and Thai Energy Minister Prommin Lertsuridej said the bilateral talks they held was one of the concrete steps being undertaken in maximizing the use of existing infrastructures to bolster the energy security of the ASEAN along with China, Japan and Korea.

"The Philippines has offered the use of its premier petroleum storage facility in Subic as a potential strategic and commercial site for stockpiling in this regard, while Thailand has recently opened its first petroleum trading center in Sriracha, Chon Buri," the statement said.

Perez and Prommin also expressed concerns about the continuing increase in oil prices in the world market, and urged oil producing countries to consider not implementing more cuts in their production.

Both countries also agreed to give importance to improving fuel quality in response to calls for supply security in the region.

A memorandum of understanding (MOU) forged between the Philippine National Oil Co. (PNOC) and the PTT Public Co. of Thailand called for the conduct of a study and exploration of areas of bilateral cooperation in the utilization of existing oil storage facilities as a concrete step towards the realization of their objective.

The MOU stipulated that the two countries have expressed their intention to create a Southeast Asia Petroleum Hub using Subic Bay in the Philippines and Sriracha terminals in Thailand.

The document was signed by PNOC president Thelmo Cunanan and PTT president Prasert Bunsumpun.

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Thailand to Contribute $1 Billion to Asian Bond Fund

While Asia prepares for talks on Second Asian Bond Fund in the Asian Cooperation Dialogue’s Meeting in April, Thailand has announced its willingness to contribute as much as US$1 billion (Bt39 billion) to a third Asia Bond Fund that will invest in regional currency bonds.

According to the Thai Newspaper, The Nation (February 19, 2004), Prime Minister of Thailand Dr Thaksin Shinawatra said, “We are ready to put $1 billion into the fund, whenever it’s set up,”, adding, “We have a lot of foreign reserves.” As of February 7, the Bank of Thailand’s (BOT) foreign reserves stood at $42.6 billion. However it has to be noted that Thailand had committed $ 200 million to the Asian Bond Fund, which was set up last year. Of this amount, Thailand committed $200 million, but it has actually only put in $120 million.

The third Asia Bond Fund would be contributed to by the ASEAN-plus-three group of countries (members of the Association of Southeast Asian Nations plus South Korea, China and Japan) along with members of the Asia Cooperation Dialogue (ACD) forum, India, Pakistan and Arab countries. The bonds would be denominated in local currencies

The current update of the Asian Bond Initiative is that the second Asia Bond Fund would be discussed at a meeting of the ACD, a Thailand-initiated regional forum of 18 countries, set to take place in April. The second fund would be contributed to by the ASEAN Plus 3 group. Bonds would be denominated in local currencies, as per the Executives' Meeting of East Asia and Pacific Central Banks.

The Asia Bond Fund was initiated by Thailand to help develop the regional capital market and ensure that Asia’s savings are used rather than outside funds to finance regional development.

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East Asia Exposed to Speculative Fund

Regional Cooperation is the best medicine to insulate Asia from Western speculative funds. Thus, calling for urgent and more financial cooperation, top banker Governor Park Seung of the Bank of Korea suggests immediate financial integration.

Talking in an International Forum as reported by The Korea Times (February 20, 2004) he pointed that the ``East Asian financial markets are relatively narrow, so that they are vulnerable to attacks from large flows of speculative capital,''

With the progress of financial liberalization and openness, financial instability in one country spreads instantaneously to other neighboring countries,'' he added. ``Consequently, close financial cooperation is more urgent than ever.''

Governor Seung’s prescription for protecting Asia from speculative finds not only comes relevant in times of increasing efforts for Asian economic Integration but also provides with immense rationale for increasing the pace of current negotiations.

Truly, the pace at which efforts are taking place is slow and still very regional. Pan Asian efforts are yet to be taken up by the governments, which are being fiercely advocated by various forums.

According to The Korea Times report, Governoer Seung pointed out that the Association of Southeast Asian Nations (ASEAN) member states and the three northeast nations Korea, Japan and China work toward the Chiang Mai Initiative is an encouraging step to strengthen regional financial cooperation. The Chiang Mai Initiative is based on the provision of bilateral liquidity support through the arrangement of currency swaps between the central banks involved, thereby pointing at the linkage between the two processes of regional cooperation and strengthening of regional financial stability. He further added that the ongoing competition among Korea, Japan and China to build a Northeast Asian financial hub in their own countries will be beneficial for regional cooperation.

``Such competition does not mean the exclusion of others,'' he said. ``Rather competition in good faith can provide opportunities for the financial markets of each country to overcome structural fragility and develop together.''

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