Growing Together: Economic Integration for an Inclusive and - escap
Growing Together: Economic Integration for an Inclusive and - escap
Growing Together: Economic Integration for an Inclusive and - escap
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CHAPTER ONE<br />
9<br />
The case <strong>for</strong> regional economic integration in Asia <strong>an</strong>d the Pacific<br />
Giving a voice to the region in international<br />
<strong>for</strong>ums<br />
Finally, regional cooperation <strong>an</strong>d integration<br />
would enable Asia <strong>an</strong>d the Pacific to exercise<br />
influence in global economic govern<strong>an</strong>ce<br />
commensurately with its growing economic<br />
weight. The region would thus be in a stronger<br />
position to shape the emerging global<br />
economic order in tune with its development<br />
requirements.<br />
Conditions <strong>for</strong> fruitful integration<br />
Regional economic integration is more likely<br />
to be successful when the process c<strong>an</strong> be<br />
grounded in a shared history <strong>an</strong>d culture.<br />
Exch<strong>an</strong>ges are facilitated when countries have<br />
complementarities in factor endowments<br />
that c<strong>an</strong> be shared to mutual benefit. And<br />
integration based on trade would be more<br />
fruitful if it opens up large <strong>an</strong>d growing<br />
markets.<br />
Shared history, culture <strong>an</strong>d values<br />
M<strong>an</strong>y areas of the Asia-Pacific region have<br />
distinct identities shaped by centuries of<br />
history <strong>an</strong>d cultural exch<strong>an</strong>ges. In Asia, much<br />
of this has been rooted in trade – starting with<br />
the famed Silk Routes of two thous<strong>an</strong>d years<br />
ago. Trade in goods has been accomp<strong>an</strong>ied by<br />
a vibr<strong>an</strong>t exch<strong>an</strong>ge of ideas. Another notable<br />
unifying factor has been shared religious<br />
beliefs. The impressive cultural sites of Bag<strong>an</strong><br />
in My<strong>an</strong>mar, Borobudur in Indonesia, <strong>an</strong>d<br />
Angkor Wat in Cambodia are a testimony to<br />
the vast trading <strong>an</strong>d cultural networks that<br />
Asia had in <strong>an</strong>cient times.<br />
This long history of interaction is also notable<br />
in that it has been accomp<strong>an</strong>ied by few major<br />
conflicts between countries. India <strong>an</strong>d China<br />
have, <strong>for</strong> example, over the centuries been<br />
highly developed nations – economically,<br />
militarily, ideologically <strong>an</strong>d culturally. They<br />
could have been competitors <strong>for</strong> domin<strong>an</strong>ce.<br />
Yet that has not happened. Indeed, the history<br />
of their relationship has been one of mutual<br />
respect <strong>an</strong>d coexistence. Recent perceptions<br />
of Asia as a conflict-ridden region should<br />
not hide centuries of cooperation between<br />
India, China, Jap<strong>an</strong> <strong>an</strong>d what is now the<br />
ASEAN region. These historical roots provide<br />
a strong basis <strong>for</strong> establishing <strong>an</strong> Asia-Pacific<br />
community. 28<br />
Synergies <strong>for</strong> mutually beneficial<br />
cooperation<br />
Fruitful integration requires synergies or<br />
complementarities based, <strong>for</strong> example, on<br />
diverse factor endowments or specializations.<br />
Some of these will be the result of differing<br />
levels of development. Asia <strong>an</strong>d the Pacific<br />
includes high-income countries such as<br />
Jap<strong>an</strong>, Australia, New Zeal<strong>an</strong>d, <strong>an</strong>d the<br />
Republic of Korea, which are members of the<br />
Org<strong>an</strong>isation <strong>for</strong> <strong>Economic</strong> Co-operation <strong>an</strong>d<br />
Development (OECD), <strong>an</strong>d at the other end of<br />
the scale a number of low-income <strong>an</strong>d least<br />
developed economies. This diversity opens<br />
up opportunities <strong>for</strong> mutually beneficial<br />
exch<strong>an</strong>ges of development experiences.<br />
There are also complementary factor<br />
endowments. Some economies in East<br />
Asia have abund<strong>an</strong>t capital but rapidly<br />
ageing work<strong>for</strong>ces. Others, particularly in<br />
South <strong>an</strong>d South-East Asia, may have less<br />
capital but should <strong>for</strong> the next few decades<br />
benefit from a demographic dividend of<br />
a young <strong>an</strong>d growing work<strong>for</strong>ce. Regional<br />
economic integration should thus enable<br />
labour-intensive industries to gravitate to<br />
labour-abund<strong>an</strong>t countries where they c<strong>an</strong><br />
help build productive capacity. Me<strong>an</strong>while,<br />
labour-scarce economies c<strong>an</strong> specialize in<br />
the production of capital- <strong>an</strong>d knowledgeintensive<br />
goods.<br />
Another area of complementarity is<br />
fin<strong>an</strong>ce. China <strong>an</strong>d Jap<strong>an</strong>, <strong>for</strong> example, have<br />
accumulated sizeable <strong>for</strong>eign exch<strong>an</strong>ge<br />
reserves which they are investing in the United<br />
States <strong>an</strong>d Europe, often at relatively low<br />
rates of return. Countries concerned about<br />
the future value of these assets could instead<br />
invest more productively closer to home –<br />
in infrastructure development projects that<br />
currently remain underfunded despite high<br />
long-term payoffs.<br />
There are also complementarities in energy<br />
production <strong>an</strong>d consumption. On the one<br />
h<strong>an</strong>d, economies such as Indonesia, the