Crisis will accelerate formation of the East Asian Community

When the leaders meet in Pattaya this weekend, they will have two clear goals. One is to increase fiscal stimulus packages that fit local conditions, and the other is to make sure that their peoples will benefit from them quickly. These were two major lessons they learned from the Asian financial crisis of 1997-1998.

In the previous economic meltdown, the Asian countries were considered the evil-doers. They came up with huge economic stimulus packages, protected their banks and bought up toxic assets. They were essentially blamed for everything they did to bolster their economies. This time around, the Asian leaders are wiser. They are doing the same things but faster. They have all acted promptly in response to the US-generated financial quagmire. In the case of China and Japan, their fiscal stimulus packages also aim at regional economic recovery.

At the G-20 Summit in London last week, the Asean chair, Thai Prime Minister Abhisit Vejjajiva, and Indonesian President Susilo Bambang Yudhoyono shared the Asean experience with the leaders from other regions. They both addressed the collective action taken by the Asean + 3 (APT) countries in 1997 to set up regional bilateral swap arrangements, under the framework of the Chiang Mai Initiative. This scheme, which has already increased to US$120 billion (Bt4.2 trillion), can be used to complement the ongoing work by the International Monetary Fund and the World Bank.

Asean + 3 is the regional grouping plus China, Japan and South Korea.

Abhisit suggested at the London summit that if the G-20 leaders could take similar action and make commitments as to how they can move forward - at a wider, or even at a global level - this would help to restore confidence in the global economy and facilitate the difficult adjustments that various countries are facing. The initiative has already become a new benchmark in the closer cooperation of APT.

As the summit's chair, Thailand will urge all members to expedite the "multi-lateralisation" process, to make sure that the Chiang Mai scheme can be put to good use as soon as possible. The APT finance ministers are expected to come up with full recommendations during their upcoming meeting in Bali in May.

In more ways than one, the Pattaya meeting of East Asian leaders will also accelerate the establishment of the much-talked-about East Asian Community (EAC), which has been elusive since the concept was first introduced in the early 1990s. After all, the financial sector used to be the most difficult sector from which to garner support. The severity of the ongoing crisis has been a blessing in disguise, because it has accelerated closer cooperation that otherwise would not have been possible.

It took a decade for the East Asian economies to get together and act collectively under the framework of the APT process after the previous economic crisis hit the region. Doubtless, this current crisis will boost the APT as the mechanism for the building of the EAC. At the Pattaya meeting, this trend will become more visible and will essentially become a template for the future of the EAC.

The improvement of the Asean friendship with China, Japan and South Korea, and their closer economic cooperation, could pave the way for the realisation of the APT free-trade area in the near future. The three Asian economic powerhouses have reaffirmed their commitment to Asean and the APT that the grouping will remain its central regional partner. One of the most noticeable developments has been the betterment of Sino-Japanese relations, which will serve as the bedrock for future economic recovery and growth in the region. Both economies have stood firm against protectionist and trade distorting measures.

Remember the earlier days of Asean endeavour to bring together the East Asian economic powerhouses? At the time, the US was suspicious of the proposed plan to create a new regional economic bloc. Washington used to view any new trading arrangement as hostile to its national interests. Now that is no longer the case. The US under President Barack Obama is accepting pan-Asia regionalism as healthy and as contributing to peace and prosperity in the region.

Equally important is the East Asia Summit, which is known regionally as the Asean + 6 process. With the added participation of Australia, India and New Zealand, the leader-driven forum is a high-powered gathering focusing on global issues that affect the region, such as energy and food security and poverty alleviation. The group also has a good opportunity to address the global economic and financial crisis.

Given the strength and scope of the combined economies of Australia, New Zealand and India, they could do a lot more in developing concrete measures to help ease the crisis. They have more growth potential than the Asean countries. They should take part in trade and investment facilitation to promote sub-region-wide development.

As part of this effort, the East Asian leaders will encourage regional think-tanks, such as the Asian Development Bank, the Economic Research Institute for Asean and East Asia, as well as the Asean Secretariat, to work together to come up with a coherent blueprint that will boost economic growth and development in the region.