Secretary-General of ASEAN
at the ADB Seminar
“A Borderless Asia: Vision for Regional Integration”
Kyoto, Japan, 5 May 2007

It is a pleasure for me to participate in today’s seminar, "A Borderless Asia: Vision for Regional Integration". 

Allow me to focus my talk on ASEAN and East Asia.

A Borderless ASEAN

You may already be aware that ASEAN is celebrating its 40th Anniversary this year. Coincidentally, this year also marks two important milestones that will chart the course of ASEAN cooperation over the next decade and beyond.

The first milestone is the decision of the ASEAN Leaders to accelerate the realization of the ASEAN Community to 2015, 5 years earlier than originally planned.

Over the past 40 years, ASEAN has made significant progress in its community building efforts, particularly in deepening and broadening its economic integration.

Amidst the dynamic development in East Asia, many of which have been driven by ASEAN, such as the ASEAN Plus Three and East Asian Summit cooperation as well as the ASEAN FTAs with its East Asian counterparts, the ASEAN Leaders realized that a stronger, more united and cohesive ASEAN Community is needed to ensure the benefits from and enhance its role as the driving force in these cooperation frameworks as well as in the evolving regional architecture in Asia.

While the ASEAN Community comprises three pillars, namely security community, economic community and socio-cultural community, I would like to focus on the ASEAN Economic Community (AEC) whose vision is indeed for a Borderless ASEAN through the development of a single market and production base, one that is competitive, equitably developed and well integrated into the global economy.

The vision of the ASEAN’s single market and production base is one in which goods, services, investment, and skilled labour can move freely within the region, supported by greater capital mobility.

Elimination of tariffs and non-tariff barriers, streamlining customs procedure, harmonization of technical regulations and standards and simplification of rules of origin are expected to help ASEAN companies reduce operating costs, improve their economies of scale, and enhance their capacity to participate in the regional production network and global supply chain.

The economic benefits from deeper economic integration were estimated by McKinsey at 10% of ASEAN’s GDP or more. In value terms, it amounts to over USD 100 billion based on estimated ASEAN GDP in 2006.

The other important milestone also announced at the Cebu Summit in January 2007 was the development of an ASEAN Charter.

The Charter will serve as the Constitution of ASEAN, giving it a legal personality and providing the institutional framework under which its members shall work together in a more rules-based environment, with clear privileges and obligations as well as improved decision making, monitoring and compliance mechanisms.

In addition, the ASEAN Charter is expected to spell out the key purposes and principles of ASEAN, put in place a new and more efficient organizational structure in a clear hierarchical system, and provide for the establishment of a simple yet effective dispute settlement system.

To sum up, a borderless ASEAN is about free flow or movement of trade, investment, people, transportation and information.  To have a borderless ASEAN also means we need to narrow the development gap among ASEAN Member Countries.
 
A Borderless East Asia

While ASEAN is building its Economic Community through the deepening of economic integration, it continues to embrace “open regionalism” in engaging its Dialogue Partners. This is often expressed through ASEAN’s economic partnership agreements (EPAs) and free trade agreements (FTAs) with Dialogue Partners as well as ASEAN’s collaboration and cooperation with like-minded countries and groupings in international fora. 

In particular, ASEAN is currently at different stages of FTA and EPA negotiations with regional partners, namely, China, India, Japan, Republic of Korea and Australia/New Zealand. 

Under the ASEAN Plus Three cooperation framework, ASEAN countries, China, Japan and Korea share the vision of an East Asian community of peace, prosperity and progress, and have significantly strengthened and expanded their cooperation activities and initiatives over the past decade.

These areas of cooperation among the ASEAN Plus Three countries span from economic, finance, political and securities, tourism, agriculture, minerals, energy and ICT, to poverty alleviation, disaster management, women, and environment, focusing mainly on sharing of experiences and best practices, as well as capacity building.

These activities have allowed people in East Asia to get to know each other better, building trusts and growing the comfort levels for closer cooperation and integration at a later stage.

And that possibility has recently been explored through a joint study on an East Asian FTA last year. The study estimated the benefits of economic integration among the ASEAN Plus Three countries, to be in the form of an increase in the economic welfare, of around USD 105 billion, and an increase in their overall GDP by 1.2 percent.

At the same time, the vision of an East Asian community is also being shaped by another new and evolving regional architecture under the East Asian Summit (EAS) cooperation framework.

The EAS, which is now in its third year, expanded on the ASEAN Plus Three cooperation by adding India, Australia and New Zealand.

From the first EAS where a declaration on Avian Influenza Prevention was adopted to the second EAS where four priority areas have been added, including energy, education, finance, and natural disaster mitigation, and where a substantive declaration on East Asian Energy Security was adopted, the EAS process is gaining momentum.

Realizing that the EAS is still in its infancy stage, the EAS Leaders also agreed at their second summit to conduct a track-two study on Comprehensive Economic Partnership in East Asia or CEPEA to explore how the East Asia 16 could deepen its economic integration given the existing ASEAN and ASEAN Plus Three frameworks and building on an earlier study on East Asia FTA.

Another initiative under the EAS framework is the establishment of the Economic Research Institute for ASEAN and East Asia or ERIA for short. This Institute will be dedicated to explore economic integration issues and provide analytical support and policy inputs to facilitate regional integration in ASEAN and East Asia.

At the same time, finance cooperation under the ASEAN Plus Three Finance Ministers process has also intensified with a number of initiatives such as the Chiang Mai Initiative (CMI), the Asian Bond Markets Initiative (ABMI) and the ASEAN Plus Three Research Group.

Responding to the Asian financial crisis a decade ago, the CMI was designed as the regional self-help and support mechanism that could quickly provide short-term liquidity support to Member Countries who may experience balance of payment difficulty.

The ABMI aims to further develop local bond markets in the region in an attempt to address the twin (currency and maturity) mismatches that are believed to contribute to the 1997/98 financial crisis.

Both initiatives are advancing with good progress. The CMI is now in its second phase, after successfully setting up a network of 16 bilateral swap arrangements worth a combined USD 80 billion. Options are currently being explored to create a multilateral swap facility with appropriate contractual and institutional framework to support its effective operation.

The ABMI has led to a number of local currency denominated bonds issued by multinational companies, multilateral organization and international financial institutes in China, Korea, Indonesia, Malaysia, Philippines and Thailand.

Complementing the above two initiatives, the ASEAN Plus Three Research Group has been exploring ways and means to foster closer financial cooperation among the ASEAN Plus Three economies, including the longer term vision for ASEAN Plus Three finance cooperation.

While we cannot claim as yet that an East Asian vision is one of a Borderless East Asia, economic and financial integration is certain to intensify in the years ahead, supported by further development of the ERIA, EAFTA, CEPEA, CMI, ABMI and ASEAN Plus Three Research Group, and, more likely, towards that direction.

Role of ASEAN in East Asia Cooperation

This significant progress in East Asian cooperation has been achieved mainly through ASEAN Plus Three cooperation framework with ASEAN acting as the driving force. This role of ASEAN has also been recognized in the Report of the East Asian Study Group as well as in the growing number of literature on East Asia.
 
This is due to the fact that ASEAN is the most advanced in Asia in terms of regional cooperation and integration. Expanding on existing ASEAN initiatives would minimize duplication of efforts and allow East Asian cooperation to build on the success of ASEAN, thereby enhancing the efficiency and effectiveness of East Asian cooperation activities and initiatives.

Having ASEAN in the driver seat also allows East Asian cooperation to proceed while gradually building up the comfort level between ASEAN and the Plus Three countries as well as among the Plus Three countries themselves.   The same also applies to regional cooperation under the EAS framework.

As ASEAN moves ahead with its community building efforts towards achieving an ASEAN Community by 2015, the sharing of experiences and practices and capacity building in East Asia will continue particularly in the areas of infrastructure (transport, energy and ICT), SME and industrial developments, but perhaps with an additional focus on how these could contribute to closer integration of ASEAN. While helping ASEAN to integrate itself, East Asia will also be nurturing greater trusts and confidence among its members as well as the sense of community among its people that would provide a solid platform on which a higher level of cooperation can build, one that, I hope, will eventually lead to the realization of a Borderless East Asia.

Thank you.