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Is EAEC a Reality?
By
Narongchai Akrasanee, Ph.D.
Chairman, MFC Asset Management Plc.
Former Minister of Commerce of Thailand
Speech prepared for AJBM Meeting
The Luncheon Talk
23 November 2005
Plaza Athenee Hotel
Bangkok
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Is EAEC a Reality?
By
Narongchai Akrasanee, Ph.D.
In just three weeks from today there will be the first Summit on East Asia
Economic Cooperation in Kuala Lumpur, Malaysia.
This Summit was first proposed by Dr. Mahathir Mohammad, former Prime
Minister of Malaysia, way back in the very early 1990s, but was not endorsed
by some East Asian countries.
I remember when I accompanied Mr. Anand Panyarachun, former PM of
Thailand to visit Mr. Miyazawa, former PM of Japan in Tokyo in September
1991, PM Miyazawa told PM Anand, in response to PM Anand’s enquiry that
Japan could not support the idea of EAEC.
Why is the Summit on EAEC possible now?
What could we expect to be the outcome of the Summit?
What should we do to help steer the outcome to be favorable to the business
and economic development in East Asia?
I would like to share my thought on these questions with you.
We all know that regional economic cooperation is a recent phenomenon in
East Asia. In fact, up to the present ASEAN is the only real form of economic
cooperation in East Asia.
After the second world war in 1945, China soon adopted socialism, followed
by the Indochinese states and North Korea. Other East Asian countries
adopted market capitalism.
Obviously states with socialism and states with capitalism were prone to
conflict rather than cooperation.
And while the capitalist states were friendly to the West, particularly the US
and Western Europe, the socialist states were friendly to the then Soviet
Union, thus adding fuel to the rivalry between the US and the then Soviet
Union.
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In 1967 border conflicts among some Southeast Asian countries led to the
formation of ASEAN, but nothing much happened apart from the peaceful
resolution of conflicts, which was already good enough.
The ASEAN process was given a big push in 1975 when the socialist North
Vietnam won over the capitalist South Vietnam, leading to the first ASEAN
Summit in 1976.
ASEAN was doing a lot of business with Japan, Taiwan, Hong Kong and
South Korea, but not with other socialist East and Southeast Asian States.
A breakthrough was in the 1980s when China under the leadership of Deng
Tsio Ping started to invest and trade with the capitalist world.
And another breakthrough was in November 1989, when the Cold War was
practically considered to be over, after which all socialist states in Southeast
Asia adopted some degree of capitalism and market economy.
Then, trade and investment among East Asian countries started to flow, and to
accelerate.
That was when PM Mahathir proposed the EAEC. Obviously it was too
premature. However, ASEAN obliquely began the process of EAEC by
having the ASEAN + 1 meeting, the 1 being Japan, China and South Korea.
Also in the meantime by 1999 the ASEAN 6 expanded to become ASEAN 10,
incorporating all mainland and maritime Southeast Asian states.
In retrospect it can be said that ASEAN has all along been the prime mover to
create some form of EAEC.
But while ASEAN was trying to take the lead on EAEC, other countries
particularly the US, Australia and Japan would rather have an Asia Pacificwide cooperation, thus the setting up of APEC in 1989-1993.
These two opposing forces led to the strengthening of APEC and ASEAN,
and the weakening of EAEC proposal.
In the meantime on the business front China became a major exporter of the
world, accounting for about 5% of world exports by the year 2002, out of the
total trade of goods and services of about US$ 2 trillion.
On the official front, ASEAN continued to move along towards EAEC.
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ASEAN declared at its Bali Summit on 7 October 2003, that it would
transform itself into ASEAN Economic Community (AEC) by 2020.
At the same meeting, it decided to hold summit meeting with China, Japan
and South Korea, thus the EAEC.
But ASEAN’s words in recent years were not usually followed by actions,
partly because for any major move that ASEAN would make, most ASEAN
states would want an endorsement or a leadership from Indonesia.
I have often said that ASEAN could only go as far as Indonesia allows it to
go.
Now a good sign is that Indonesia, with General SBY being the new
President, may be ready to take the leading role in ASEAN again.
So, ASEAN is more ready for EAEC.
What about other countries, the ones in Northeast Asia?
I think everyone knows the economic imperatives of East Asia, thus the
support for the East Asia Summit at this time.
But interestingly while economic integration among Northeast Asian
economies is very strong, the political rivalry is also very strong.
Each Northeast Asian state seems to be trying to position itself on the
international arena, but doing so without having other Northeast Asian states
playing a role in it.
I think there is historical reason for each Northeast Asian state to treat each
other that way.
And unfortunately the famous Lee Kwan Yue’s dictum of being able to
“forgive but not forget” is not being applied to the relationship among the
Northeast Asian states.
So, what could we expect from the East Asia Summit?
On this question my view is that while the economic imperatives are pointing
towards a major pronouncement and undertaking on economic cooperation,
the political reality seems to imply the status quo of having no formal
arrangement.
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My view is being reinforced by my observation that as of this very day, I have
not seen any leader who is performing the role of a champion for EAEC,
unlike in the early 1990s when Dr.Mahathir was trying to play that role.
My observation has been that for any major regional cooperation arrangement
to make a big move, there must be a champion to do so.
In 1993 APEC had a big move in the form of the Leadership Summit because
President Clinton of the US wanted to play the APEC champion.
And prior to that in 1989 when APEC was officially started it was PM Bob
Hawk of Australia who wanted to be the champion on regional cooperation.
Now it is November 2005, I have not seen any East Asia champion. Nor have
I seen any prearranged KL Declaration establishing an East Asia community,
or the process for establishing one such organization.
So I have to regrettably conclude that there will be nothing of substance
coming out of this very historical East Asia Summit.
It is regrettable because economically we have every reason to cooperate
among ourselves for the sake of our own people.
It is regrettable because we are experiencing major economic imbalances
between Western Pacific (East Asia) and Eastern Pacific economics, which
need to be addressed as groups. Having an EAEC would certainly facilitate
the process of consultation and adjustment with the US on the current account
surplus / deficit, and the exchange rate.
And it is regrettable because the politics of the “neighborhood syndrome”
which suggest that “thou shall never love thy neighbor” is often in the way of
economic cooperation.
Perhaps we, as a business community representing ASEAN and Japan should
make our view on the economic imperatives for EAEC heard by our leaders
attending the Summit.
But, as of now I can only hope that my conclusion is wrong, and that it will be
a rare occasion when politics is a part of the solution and not a part of the
problem, as it has usually been the case, regional cooperation not
excluded.
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