East Asia - Crisis To Cooperation

July 14, 2008

It did not take long for region to re-emerge from 1997 currency debacle

The "14th International Conference on The Future of Asia" was held May 22-23 in Tokyo in the aftermath of the catastrophic earthquake in China's Sichuan Province, the devastating cyclone in Myanmar and other natural disasters as well as in the midst of skyrocketing crude oil and food prices, not to mention the worst international financial crisis since World War II.

National representatives resolved to join hands to tackle challenges and confirmed a spirit of cooperation. The conference declared collective responsibility not just for East Asia but also for Asia throughout the world. East Asian nations are becoming more economically interdependent, and movement toward integration is accelerating.

Interdependence is deepening through trade and investment activities, and crises have been handled with a cooperative spirit nurtured by political will. An example is the Asian currency and financial crisis in 1997. Countries realized they could overcome their difficulties through cooperating.

The Chiang Mai Initiative (a multilateral currency swap scheme) of 2000 is a good example of crisis response. It established a process of cooperation that also fostered mutual trust and community spirit.

Conflict between Japan and China, which other Asian countries worried would prevent Asia from coming together as a community, has dramatically eased. A Japan-China joint statement was announced in May when Chinese President Hu Jintao visited Japan. It is meant to align Japan-China relations with the trends of the international community and allow the two countries to help forge a bright future for the Asia-Pacific region.

The Association of Southeast Asian Nations wholeheartedly welcomed the improvement in Japan-China relations as they will stimulate cooperation within East Asia.

The U.S., the heart of capitalism, meanwhile, is the epicenter of the recent international financial crisis, the effects of which have already been evident in a slowing world economy.

The World Bank released "The East Asian Miracle" report in 1993. The financial crisis that occurred four years later shattered the self-confidence of countries absorbed in the miracle theory. However, Asian countries rode out the crisis faster than expected and have already jumped on a new growth track.

The World Bank released a report last year called "An East Asian Renaissance." The title suggests the bank has changed its view and now believes economic development in East Asia is: 1) not temporary but a long-term phenomenon, and, 2) not simply a quantitative economic expansion but one that has become a multilateral development that involves the exchange of technology and expertise. The report looks at structural strengths in the region.

Different path

The process of building an East Asian community is different from the European Union's integration process, which developed by sharing a fundamental philosophy for an ideal community and limiting or abandoning sovereignty through intergovernmental accords.

This is due to different backgrounds in Europe and East Asia. East Asian countries have a wide range of histories, political systems, religions and cultures. In that sense, Asia is not one. Diversity is Asia's defining characteristic.

East Asia cannot paint a unifying picture to build community. That would result in diversity becoming an obstacle and generate antagonism. However, the flag of community can foster political will to encourage regional cooperation. Collaboration among Asian countries tackling common problems has been developing and spreading in the 11 years since the Asian crisis.

As the Renaissance report points out, East Asia has historically been a driving force but also faces many challenges. The recent conference discussed a range of issues - energy, food safety, economic disparity, free-trade agreements covering all of East Asia. Panelists also talked about how to prevent disasters and epidemics.

Expectations of Japan are increasing. The conference harbored expectations over the establishment of an Asian disaster-relief and epidemic-prevention network proposed by Prime Minister Yasuo Fukuda.

Longterm, the region faces population pressures. A declining birthrate and aging society are not unique to Japan. Indeed, South Korea, Singapore, Thailand and China, with its one-child policy, are also looking at dwindling populations. The Japan Center for Economic Research predicts that the aging of Asia will progress rapidly from 2025 through 2050.

The echelon development model that once described Asian economic development patterns also applies to declining birthrates and aging societies. As the forerunner, Japan will be put to the test as to what model it will establish to tackle these issues.

-Akira Kojima is Trustee & Senior Fellow of the Japan Center for Economic Research.

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.