Regional Cooperation in Asia: Long-term Progress, Recent Retrogression, and the Way Forward

Agarwala, Ramgopal; Prakash, Brahm Working Paper Regional Cooperation in Asia: Long-term Progress, Recent Retrogression, and the Way Forward ERD Working Paper Series, No. 28 Provided in Cooperation with: Asian Development Bank (ADB), Manila Suggested Citation: Agarwala, Ramgopal; Prakash, Brahm (2002) : Regional Cooperation in Asia: Long-term Progress, Recent Retrogression, and the Way Forward, ERD Working Paper Series, No. 28, Asian Development Bank (ADB), Manila, https://hdl.handle.net/11540/1936 This Version is available at: https://hdl.handle.net/10419/109245 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/3.0/igo ECONOMICS AND RESEARCH DEPARTMENT ERD WORKING PAPER SERIES NO. 28 Ramgopal Agarwala Brahm Prakash October 2002 Asian Development Bank Regional Cooperation in Asia: Long-term Progress, Recent Retrogression, and the Way Forward 37 ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD Ramgopal Agarwala Brahm Prakash October 2002 Ramgopal Agarwala is former Senior Adviser at the World Bank, and Brahm Prakash is Director of the Poverty Reduction and Social Development Division, Asian Development Bank. This paper is an abridged version of a paper prepared under RETA-5957. ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 38 Asian Development Bank P.O. Box 789 0980 Manila Philippines 2002 by Asian Development Bank October 2002 ISSN 1655-5252 The views expressed in this paper are those of the author(s) and do not necessarily reflect the views or policies of the Asian Development Bank. 39 Foreword The ERD Working Paper Series is a forum for ongoing and recently completed research and policy studies undertaken in the Asian Development Bank or on its behalf. The Series is a quick-disseminating, informal publication meant to stimulate discussion and elicit feedback. Papers published under this Series could subsequently be revised for publication as articles in professional journals or chapters in books. ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 42 Contents Acronyms vii Abstract ix I. Introduction and Overview 1 II. Institutional Arrangements for Regional Cooperation 2 A. Formal Cooperation Arrangements 3 B. Informal Cooperation Arrangements 4 III. Long-term Progress and Recent Retrogression on Regional Integration 5 A. Merchandise Trade 6 B. Labor Movements 11 C. Investment and Finance 13 IV. The Great Economic Slump in East Asia 17 A. A Trillion Dollar of Lost Output Every Year 18 V. The Way Forward 19 A. Diminishing Returns from Trade Liberalization Per Se 19 B. Growing Importance of Liberalization in Labor Markets 20 C. Greater Gains from Financial Cooperation 21 D. Promoting Regional Public Investment Activity: Regional Keynesianism 26 E. Mobilizing Regional Savings for Regional Investments 29 VI. Institutional Reforms: Establishment of an Asian Reserve Bank and Strengthening of ADB 30 A. Establishing an Asian Reserve Facility 30 B. Strengthening ADB’s Role in Regional Cooperation 30 VII. Overcoming Impediments to Regional Cooperation 33 References 36 41 Acronyms ACU Asian currency unit ADB Asian Development Bank AFTA ASEAN Free Trade Area AMF Asian Monetary Fund ARB Asian Reserve Bank ASA ASEAN Swap Arrangement ASEAN Association of Southeast Asian Nations ASEAN+3 People’s Republic of China, Japan, and Republic of Korea BSA Bilateral Swap Arrangement CEPT Coomon Effective Preferential Tariff ECU European currency unit GATT General Agreement on Tariffs and Trade IMF International Monetary Fund IT Information technology MFN Most Favored Nation NAFTA North American Free Trade Agreement PRC People’s Republic of China PTA Preferential trading arrangement SAARC South Asian Association for Regional Cooperation SAPTA South Asian Preferential Trade Area WTO World Trade Organization ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 40 Abstract Despite soft and fragmented regionalism, intraregional flows of trade, labor, and capital grew rapidly in Asia over the last few decades. However, in recent years, there has been retrogression in all the three areas basically associated with the slowdown in growth and departure from the East Asian model in these economies. Major Asian economies are now going through a prolonged slump and suffering from a massive misallocation of its resources, both labor and capital. There is now an urgent need for enhanced institutional efforts for regional cooperation in all the three dimensions mentioned above. The process of liberalization in trade, investment, finance, and labor movements needs to continue at the national as well as international level. However, considerable progress has been made in the area of liberalization in merchandise trade in the region and easy gains have already been made. What is urgently needed now is a program for strengthening the regional financial infrastructure, which would involve a vastly increased role for the Asian Development Bank (ADB) in resource transfer within the region and establishment of an “Asian Reserve Bank” (ARB) for greater stability in exchange rates, greater financial security, and greater resource mobilization in the region. 1 I. INTRODUCTION AND OVERVIEW In the wake of progress achieved in Europe and North America, regional cooperation has recently acquired intellectual and political respectability, which it did not have in the 1960s, 1970s, and 1980s. During the 1990s, a plethora of regional cooperation efforts were in fact initiated in the Asian and Pacific region, though the success achieved to date has been modest. Regional cooperation is of course not an end in itself but has to be seen as a means of promoting the fundamental objective of fostering economic development. That objective can in turn be divided into three components: (i) Improving long-term efficiency of resource allocation within the region. The resources here can refer to capital, technology, and labor; while the instruments can refer to removing obstacles to free flow of these resources within the region or to creating special incentives for such flows. Much of the usual discussion of regional integration initiatives (free trade areas etc.) revolves around these issues. (ii) Reducing fluctuations in output around the long-term trend. Due to internal or external shocks, the economies of the region may suffer fluctuations in its longterm output potential as happened during the oil crises in the mid-1970s and early 1980s, and more recently in 1997-1998. Regional cooperation can help minimize the adverse impact of these shocks. This objective has gained particular salience in Asia in the wake of the 1997 financial crisis. (iii) Helping the economies to get out of underemployment equilibrium if they happen to get trapped in one. This happened to the world economy in the 1930s and it may be happening to the region at present with a large amount of resources being underutilized over an extended period. The paper argues that regionalism in Asia has been soft and fragmented over the last few decades. However, in the context of rapid growth achieved in much of the region through pursuit of what may be called the East Asian model, the lack of formal cooperation arrangements was not a major problem and intraregional flows of trade, labor, and capital did in fact grow rapidly. The situation is different now. In all the three areas noted above, there has been retrogression in recent years and that is basically associated with the slowdown in growth and departure from the East Asian model in these economies. Major Asian economies are now going ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 8 (ii) For Korea, the rise in trade with Asia was even more spectacular. The share of its exports going to DMCs rose from 14 percent in 1980 to 39 percent in 1997 with a decline to 35 percent by 2000; the ratio for imports rose from 8 percent in 1980 to 24 percent in 2000. The share of Japan in Korea’s trade declined over the period: that for exports declining from 17 percent in 1980 to 12 percent in 2000 and that for imports from 27 percent in 1980 to 20 percent in 2000. For Asia as a whole, Korea’s trade ratio increased sharply: with the ratio for exports rising from 31 percent in 1980 to 50 percent in 1996, declining to 47 percent in 2000; the corresponding figures for imports were: 34 percent in 1980 and 44 percent in 2000. (iii) For “the PRC Group”1trade, there was also a significant increase in trade with Asia. For exports, “the PRC Group’s” trade ratio with DMCs increased from 12 percent in 1980 to 18 percent in 1997, declining to 15 percent by 2000; and that with Japan from 14 percent in 1980 to 19 percent in 1996, declining to 15 percent by 2000. For Asia as whole, the export ratio rose from 26 percent in 1980 to 37 percent in 1996 with a decline to 30 percent by 2000. For imports, Asia figures even more prominently for “the PRC Group”: 38 percent of its imports came from Asia in 1980 and this ratio rose to 52 percent by 2000, with Japan being the major partner accounting for 28 percent of imports in 1980 and 25 percent in 2000. For all DMCs (with the adjusted “PRC Group”), the general picture, dominated by North Asian trading partners, shows a significant rise in intraregional trade with some decline in recent years. The intraregional share of exports rose from 19 percent in 1980 to 31 percent in 1997 with a decline to 28 percent by 2000; that for imports rose from 14 percent in 1980 to 32 percent in 2000. Japan’s share showed a decline over the period: for exports, from 20 percent in 1980 to 13 percent in 2000; for imports, from 22 percent in 1980 to 21 percent in 2000. For ASEAN+3, the picture is also one of significant rise intraregional trade over the period 1980 to 1995 with some decline since then. The share of intraregional exports for this group rose from 29 percent in 1980 to 41 percent in 1996 with a decline to 36 percent by 2000. The corresponding ratio for imports was 31 percent in 1980 and 50 percent in 2000. Much of the literature regard trade with the US as the most important component of trade of Asia, with the Asian economies rising or falling with the US economy and its power to purchase Asian goods. The data on trade however present a more complicated picture. While the US is the single most important trading partner for most Asian countries, its share is quite small in relation to the combined power of Asian markets (see Figure 2). 1Since a significant part of trade among PRC; Hong Kong, China; and Taipei,China is of entrepot nature it is appropriate to consolidate their trade into one group, excluding trade among these economies. 9 Section III Long-term Progress and Recent Retrogression on Regional Integration (i) For all DMCs (with the adjusted “PRC Group”) 20 percent of exports went to the US as against 39 percent to DMCs plus Japan in 1980. By 1996, DMCs plus Japan accounted for 46 percent of this group’s exports, which was more than double the share of the US of 22 percent. By 2000, the US’ share had increased to 26 percent but still it was significantly lower than that of DMCs plus Japan, which was 41 percent. The importance of the US as a source of imports needed by DMCs was even less. In 1980, 17 percent of DMC imports came from the US while 37 percent came from DMCs plus Japan. By 2000, the share of imports from the US had declined All DMCs (adjusted) ASEAN South Asia Japan PRC Group Korea The Pacific Central Asian Republics 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 50.0 40.0 30.0 20.0 10.0 0.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 US Asia Figure 2. Share of US and Asia in Total Exports of Asia and of Selected Subregions and Countries in Asia, 1980-2000 60.0 50.0 40.0 30.0 20.0 10.0 0.0 ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 10 to 14 percent and those from DMCs plus Japan rose to 53 percent, i.e., four times as much. (ii) For Japan, the share of exports to the US rose from 24 percent in 1980 to 30 percent in 2000, those to DMCs rose from 24 percent in 1980 to 41 percent in 2000. Similarly for imports, while the US met 19 percent of Japan’s needs in 2000, DMCs met 42 percent in the same year. (iii) For Korea, dependence on US markets is even less than that of Japan. In 1980, the US accounted for 27 percent of Korea’s exports while DMCs plus Japan, 29 percent. By 1997, DMCs plus Japan accounted for 50 percent of Korea’s exports while the US accounted for only 16 percent. Since then there has been an increase in dependence on the US market but even with this increase, the US market accounted for only 22 percent of Korea’s exports in 2000 while DMCs plus Japan accounted for 47 percent. Similarly, while US met 18 percent of Korea’s import needs in 2000, DMCs plus Japan met 44 percent of its needs. (iv) For “the PRC Group”, the US market is somewhat more important than for Japan and Korea. The US share of this group’s exports rose from 26 percent in 1980 to 33 percent in 2000 while that of DMCs plus Japan rose from 26 percent in 1980 to 30 percent in 2000. However, for meeting its import needs, Asia is far more important for “the PRC Group” than the US. The share of imports from the US was only 14 percent in 2000 while the corresponding figure for DMCs plus Japan was 52 percent. (v) For ASEAN, the share of the US in exports rose from 17 percent in 1980 to 20 percent in 2000, while that of DMCs plus Japan rose from 53 percent in 1980 to 57 percent in 1996, declining marginally to 56 percent in 2000. Similarly for imports, while the US meets only 14 percent of ASEAN’s needs, DMCs plus Japan met 61 percent in 2000. (vi) For South Asia, the importance of the US market has increased steadily while that of DMCs plus Japan has remained stagnant: the share of exports to the US rose from 10 percent in 1980 to 25 percent in 2000, while that of DMCs plus Japan was stagnant at about 24 percent. For meeting its import needs, however, DMCs plus Japan are far more important than the US: in 2000, the US accounted for 7 percent of South Asia’s needs, while DMCs plus Japan accounted for 38 percent. (vii) For the Pacific countries, the US accounts for only about 5 percent of exports and imports, while DMCs plus Japan, 30-35 percent. Similarly for the Central Asian Republics, the US accounts for 5 percent of trade, while DMCs plus Japan, about 26 percent. The above figures on trade may underestimate the importance of the US market for Asia in so far as trade among Asian countries may be, in terms of processing goods at various stages of production with the ultimate destination being the US. To the extent that intraregional trade 11 is in semiprocessed goods with nonregionals as the ultimate destination, the increased intraregional trade is an indicator of shared dependence of the region rather than interdependence. This issue may be particularly important for information technology (IT) trade, which now accounts for a significant part of East Asian trade and where production sharing among various Asian countries is quite common. In an effort to correct for this factor, trade shares were calculated for non-IT trade. While these adjusted numbers show a somewhat greater dependence of Asia on the US market, the broad picture of the importance of Asia for Asia’s trade remains valid. In order to assess the linkage between US imports with Asian exports and the Asian economy, there is clearly a need for more intensive research on the subject. IT trade is now a growing proportion of Asian trade (in 1999, it accounted for 30.3 percent of total trade of ASEAN, PRC, and Korea). Even in non-IT trade, the share of trade in semiprocessed goods meant for nonregional destination could be significant. Thus the exports of regional economies may be more dependent on import capacity of the US and other nonregional economies than suggested by the above numbers. Yet the fact that the major part of Asian trade is with Asia and is several times that with the US is important. For one thing, it suggests that much greater attention needs to be given to improving trade facilitation measures, including payment systems and trade infrastructure relating to intra-Asian trade than trade with the US. In order to reduce the uncertainty of pricing in trade, it may be advisable to denominate pricing of goods traded in Asia by some Asian numeraire than to the US dollar, which has shown a tendency for wide gyrations with respect to most Asian currencies. This leads to the important issue of exchange rate policy in Asia discussed below. B. Labor Movements Labor migration was a crucial component of the economic rise of Europe. Over the last two centuries, millions of European population migrated to other continents, primarily to the Americas. It is noteworthy that at present the population of the major hosts of migration from Europe-Americas, Australia, and New Zealand is about equal to that of Europe, the main source of migration to these continents. In Asia too, outward migration was a prominent feature of the late 19th and half of the 20th century. A large part of the labor movement was from the PRC and Japan to the US and other industrial countries. There were also large movements of labor particularly from the PRC and India to other Asian countries. In the last two decades, with increasing income differences within Asian countries and changing demographic patterns, there has been something of a resurgence of the importance of labor migration in several economies of Asia. The Philippines, where per capita income has been largely stagnant over the last 20 years and where the level of unemployment and underemployment is high, has been the second largest net exporter of labor in Asia in terms of the amount of remittances of its foreign workers. As shown in Figure 3, these receipts rose from $0.6 billion in 1980 to over $6 billion in 2000. By 2000, the income from migrants was 8.3 percent of gross domestic product (GDP) and 16.2 percent of exports. Section III Long-term Progress and Recent Retrogression on Regional Integration ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 12 In 1999, these inflows were more important for the country than all the official and private net resource inflows combined, which was 10.6 percent of GDP. Over the years, North America and the Middle East have been the favored destinations of Filipino workers, but in recent years an increasing number of workers have been going to other Asian countries, including Hong Kong, China; Malaysia; and Singapore. South Asian countries with their low income and high unemployment have also been major suppliers of labor. For Bangladesh, India, Pakistan, and Sri Lanka, rising remittances from overseas workers were a major source of foreign exchange to cushion the shock of oil price rises in the 1970s and 1980s. In the 1990s, these inflows combined with the decline in oil prices contributed to easing of foreign exchange constraints in the South Asian economies. By 2000, these inflows accounted for 13.6 percent of GDP for Bangladesh, 1.9 percent for India, 1.8 percent for Pakistan, and 7.1 percent for Sri Lanka. As a proportion of exports, these inflows were between 12 and 35 percent for these countries. For all of them, these inflows became more important than all net resource flows combined (that is net official flows plus private capital flows); in 1999, the latter was 1.6 percent of GDP of Bangladesh, 1.1 percent for India, 3.6 percent for Pakistan, and 1.8 percent for Sri Lanka. A large proportion of these workers went to the Middle East but more recently, there has been increasing migration to some Asian countries, particularly to Malaysia. Also in the wake of the IT revolution, the export of skilled manpower to developed countries has become a significant source of foreign exchange for South Asia, in particular India. The major importers of labor in Asia are Japan and Malaysia, followed by Hong Kong, China; Korea; Singapore; Taipei,China; and Thailand. Despite severe restrictions on immigration, legal aliens in Japan numbered over 1.3 million in the mid-1990s. Malaysia hosts over 500,000 legal foreign workers and perhaps another 500,000 illegal workers mostly from neighboring Asian 12 10 8 6 4 2 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 Bangladesh India Pakistan Sri Lanka Figure 3. Remittances Plus Employees’ Compensation (in million US$), 1980-2000 Philippines 13 countries, including Bangladesh, Indonesia, Myanmar, and Thailand. Thailand also hosts a large number of migrants, of these some perhaps clandestine from neighboring countries, primarily Myanmar. The other economies with net migration—Hong Kong, China; Korea; Singapore; and Taipei,China—probably host nearly a million workers, a large part of which may perhaps be clandestine workers in one form or another. As in the case of merchandise trade, this trend toward increasing cooperation in Asia seems to have suffered a retrogression in recent years. In the wake of the financial crisis in East Asia, there has been increasing unemployment in several countries in the region and there have been growing pressures for repatriating the immigrant workers and reducing the inflows of such workers. While figures are not available on the reduced flow of labor within the region, anecdotal evidence clearly suggests that there is a decline in the degree of integration of labor markets in the region. C. Investment and Finance A similar picture of progress in regional cooperation until the mid-1990s and retrogression since then obtains for investment and financial flows. In the wake of the Plaza Accord and appreciation of the yen in 1985, there was a surge of intraregional investment and finance. Between 1985 and 1995, foreign direct investment (FDI) in Indonesia, Malaysia, Philippines, and Thailand increased by 26.2 percent per year. The cumulative total by 1996 was $82.2 billion. For the PRC, the boom in FDI started in 1992 and by 1996 the cumulative investment was $168.8 billion. As shown in Figure 4, the major share of these FDI flows in 1995 (51.4 percent) was from within the region. However, since 1996, the share of regional investment has been declining and by 1999, it had fallen to 36.5 percent. The ratio of FDI from within ASEAN+3 countries declined from 78 to 60 percent for the PRC; from 57 to 49 percent for Hong Kong, China; from 15 to 11 percent for Japan; from 25 to 16 percent for Korea; from 65 to 34 percent for Malaysia; from 73 to 40 percent for the Philippines; and from 17 to 9 percent for India, although there were some increases for Indonesia (from 23 to 32 percent) and Thailand (from 50 to 60 percent). For PRC, Japan, Korea, Malaysia, and Philippines, the share of EU registered a major increase. North America was not the largest source of FDI among the three sources (ASEAN+3, North America, and EU) for any of these countries, except India. Thus the somewhat surprising picture of the US being the dominant partner of South Asia but not of East Asia seems to hold in the area of FDI as well as for trade. Similarly, cumulated foreign bank loans to the region (PRC; Indonesia; Korea; Malaysia; Philippines; Singapore [offshore-center]; Taipei,China; and Thailand) increased from $199 billion in 1985 to $650 billion in 1995. Of these, 49 percent came from within the region, mostly Japanese banks, with the ratio varying from 12 percent for the Philippines to 63 percent for Thailand (see Figure 5). However, since the mid-1990s there has been massive withdrawals of Japanese bank loans from the region and by 2000, the share of East Asia in bank loans in the region (defined as above) was reduced to 26 percent, varying from 20 percent for Taipei,China to 47 percent for Thailand. By contrast the share of EU banks increased from 44 percent in 1995 to 62 percent in 2000. Section III Long-term Progress and Recent Retrogression on Regional Integration ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 14 Figure 4. Foreign Direct Investment in East Asia and India (Regional Distribution of FDI as Percent of Total FDI Inflows), 1995 and 2002 East Asia EU North America ASEAN+3 PRC EU North America ASEAN+3 Hong Kong, China EU North Americ a ASEAN+3 Indonesi a EU North America ASEAN+3 Japan EU North America ASEAN+3 Korea, Rep. of EU North America ASEAN+3 Malaysia EU North America ASEAN+3 Philippines EU North America ASEAN+3 Singapore EU North America ASEAN+3 Thailand EU North America ASEAN+3 India EU North America ASEAN+3 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 1995 2000 Sources: National sources and CEIC. 12.46 17.55 14.82 16.06 51.35 34.61 3.46 23.47 10.13 11.45 77.77 59.86 12.97 26.11 7.20 12.17 57.42 48.56 21.44 6.25 6.97 1.28 23.11 31.79 27.59 48.16 49.79 36.18 14.54 11.38 17.29 25.87 33.12 24.76 18.59 16.40 9.42 30.98 22.65 26.25 64.74 33.84 12.94 39.25 6.99 20.18 73.42 39.65 20.32 15.38 16.15 18.53 33.04 29.85 7.57 6.71 12.85 31.13 50.41 60.19 20.76 11.41 13.72 16.75 17.34 9.42 15 Section III Long-term Progress and Recent Retrogression on Regional Integration Sources: Bank for International Settlements. 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 East Asia EU Thailand EU East Asia Taipei,China East Asia EU Singapore EU East Asia Philippines EU East Asia Malaysia EU East Asia Korea, Rep. of East Asia EU Indonesia EU East Asia PRC East Asia EU East Asia Figure 5. Accumulated Foreign Bank Loans to East Asia from East Asia and European Union (as percent of Total Foreign Loans) 1995-2000 62.10 43.80 49.03 25.76 28.5 47.5 63.1 47.2 66.2 62.5 15.5 20.4 52.4 53.9 42.5 39.5 48.2 58.3 12.2 28.1 42.0 55.0 47.4 38.5 45.3 54.4 39.3 27.8 40.1 56.7 52.1 32.1 52.3 66.8 42.4 28.7 1995 2000 ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 16 In the literature on regional integration, a great deal of attention is usually attached to promotion of intraregional trade through PTAs such as customs unions, free trade areas, or preferential trade areas. East Asia has by and large avoided falling for the fashion in such PTAs. The preferred route in Asia has been market-oriented regional trade promotion. Without much activism from the governments for regional trade arrangements, regional trade in Asia has grown rapidly, guided by the private sector and market forces. By and large, public policy has concentrated on reducing trade barriers in a nondiscriminatory fashion and reducing inherited impediments to trade connected with infrastructure of trade, promoting macroeconomic and fiscal stability, supporting FDI, and ensuring industrial production. The region has followed the path of trade liberalization in the framework of multilateral trade rounds and unilateral liberalization encouraged and assisted by international financial institutions (IFIs). The progress has been quite impressive. Nondiscriminatory reforms contributed to trade creation rather than trade diversion. The average tariff rates in most of the region have been lowered from 30-40 percent in 1980-85 to 5-10 percent at present. However, nondiscriminatory trade liberalization affected regional trade both within itself and with the rest of the world. Thus it may not have contributed to the rise in intraregional trade between 1980 and 1995. More importantly, the recent retrogression in the intraregional trade ratio cannot be explained by this factor because there was no reversal of trade liberalization programs during this period. The increased trade within the region has been often explained in the literature within the framework of the “flying geese model.” The flying geese model is not well articulated in the usual analytical terms. However in its poetic and holistic manner, it tries to capture the important elements of trade, investment, finance, technology, and development strategy in an integrated manner. During the 1960s and 1970s, the Japanese development approach along with other components was applied successfully in Korea and Taipei,China. From the early 1970s, the approach spread to Southeast Asian countries such as Indonesia, Malaysia, and Thailand with contributions not only from Japan but also from Korea and Taipei,China. From the 1980s, the approach was passed on to the PRC with contributions from all the forerunners in East Asia. With the rising prosperity of Japan and other newly industrializing countries, technology, investment, and finance spread to others and so did trade. It is this integrated package of development strategy, investment, finance, and technology that promoted regional integration in trade in East Asia. This pattern is significantly different from that in the Americas, where there was no comparable transfer of development strategy, investment, finance, and technology from the US to Latin America. Since the early 1990s, the flying geese formation has been slowing down in Asia. With the weakening of the Japanese economy and in particular the Japanese banking system, the flow of finance from Japan has been slowing down, as has been the power of the Japanese economy to absorb exports from developing Asia. With the financial crisis of 1997, the whole nexus of trade, investment, and finance in East Asia has been weakened and this has contributed to the retrogression in regional cooperation noted above. The high growth in North America during the second half of the 1990s contributed to export growth of the region, but in the absence of the integrated package of trade-investment-finance, the region has not been able to revive its earlier growth momentum. 17 Thus understanding these broader factors behind the earlier economic resurgence of the region and the recent slump is crucial to understanding the ups and downs of regional cooperation. And revitalization of growth in the lead goose (which may in turn depend on restoration of faith in the Asian paradigm) may hold the key to revitalization of regional cooperation in Asia. IV. THE GREAT ECONOMIC SLUMP IN EAST ASIA At present much of Asia is going through an economic slowdown. The problem is particularly severe for East Asia. In view of the economic importance of East Asia for the entire continent, this section concentrates on the East Asian economic situation. The East Asian region is in the grip of the greatest slump in its history since the Great Depression. According to the Asian Development Outlook 2002 (ADB 2002), GDP growth in the ASEAN for 2001 is 1.9 percent. The mighty economy of Japan registered a fall of 0.4 percent in GDP in 2001 and is expected to register a fall of 0.4 percent in 2002. The Korean economy grew by 3 percent in 2001; Taipei,China declined by 1.9 percent in 2001. The PRC economy is the only one that grew at the erstwhile typical East Asian rate of over 7 percent (see Table 1). The poor Asian performance of 2001 comes on top of the mediocre performance ever since the outbreak of the financial crisis in 1997. In Indonesia, per capita income in 2001 is 10 percent lower than in 1996; in Thailand 6 percent lower; and in Japan, stagnant. For Malaysia and the Philippines, annual growth rates in per capita income over the last five years has been less than 0.5 percent. Only the PRC and Korea have been able to register significant growth rates in per capita income. For the region as a whole, annual average growth rate in per capita income over the last five years (1997-2001) has been 4.9 percent in East Asia and –0.1 percent in Southeast Asia, the lowest recorded for these regions for any five-year period over the last 50 years. Experience around the world shows that with growth in per capita income below 1 percent per year, incidence of poverty is likely to increase. Not surprisingly the same has been happening in the region over the last five years. Between 1996 and 2001, the number of the poor (defined as having an income of less than $2-a-day) has increased in Indonesia, Philippines, and Thailand. Similarly, the number of unemployed has increased significantly over this period in Hong Kong, China; Japan; Korea; Singapore; and Taipei,China. In Japan and Korea, the rate of unemployment was highest during the postwar period. Even in the PRC, the problem of unemployment is becoming serious: according to official statistics, the number of unemployed in urban areas in the PRC has risen from 5.53 million in 1996 to 5.75 million in 1999. The potential output lost in the region may be as high as $1 trillion per year. A. A Trillion Dollar of Lost Output Every Year As reported by the International Monetary Fund (IMF 2002), the growth of potential output in Japan during the 1990s has been about 2.6 percent per year (on a production function approach). Section IV The Great Economic Slump in East Asia ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 24 was much lower than what the country had to pay to the foreign investors in portfolio and bank loans. What applies to bank loans applies even more forcefully to portfolio investments. The activities of what has been called “Electronic Herd” are not moved by considerations of marginal productivity of capital in different countries but largely by speculative instincts. The large funds moved by this herd have been found to be highly destabilizing for developing countries and it is not clear why ASEAN+3 countries with high savings rate need these destabilizing resource flows. Prime Minister Mahathir’s characterization of these flows as “unproductive, unnecessary and immoral” may have a large grain of truth in it. More generally, in the development literature there is now a growing acceptance of the need for caution on opening up of capital accounts. For most developing countries, the issue now is not whether but how to manage capital flows. The Chilean model of taxing short-term flows and the Malaysian practice of temporary restraints on capital outflows in the face of crisis, as well as a more generalized Tobin tax on capital movements, are becoming more acceptable features of capital account management in all countries, both developed and developing. There is a growing consensus in East Asia on more active management of capital flows, particularly short-term capital and portfolio investments. Policy harmonization on how to manage capital flows is an important potential area for regional cooperation. With some controls on hot money flows, the task of managing exchange rates to maintain some stability in real effective exchange rates would be somewhat easier. However, as the recent experience with commodity prices and trade in IT sector has shown, developing countries in the region have to be prepared for external shocks in the trade account. Similarly even with some controls on hot money flows, sudden fluctuations in capital movements cannot be ruled out. As argued by Kwai (2001, 15), “Intra-regional exchange rate stability cannot be maintained and regional contagion cannot be prevented without co-operative action in the areas of international liquidity support to reduce the likelihood of or respond to, a currency crisis.” Asian cooperation has not been effective in providing financial security to the countries subjected to financial shocks. An inter-ASEAN network of currency swaps and repurchase agreements set up in 1977 was to provide immediate short-term swap facilities to members with temporary international liquidity problems. Initially set at $100 million for five members with a maximum of $40 million receivable per member, it was raised to $200 million or $80 million per member in 1978. The Executives’ Meeting of East Asia and Pacific Central Banks (EMEAP) was set up in 1991 with 11 members (Southeast Asian and Australasian members) and its objectives include enhanced regional surveillance, exchange of views and information, and financial market developments. In 1994, a group was set up for four major Asian financial centers (Australia; Hong Kong, China; Japan; and Singapore) that was to review issues related to the stability of the region’s financial and foreign exchange markets. Also set up in 1994 was the APEC Finance Ministers Group that provided a forum to exchange views and information among members on regional financial developments and to pursue cooperative programs to promote financial sector development and liberalization. In addition there have been longstanding fora in the region for training in central banking and discussion of central banking issues. 25 These arrangements however proved totally inadequate to help the affected countries during the Asian crisis of 1997. The money available ($200 million) was of course woefully inadequate and reportedly was never used. Immediately after the crisis, Japan came forward with a plan for an Asian Monetary Fund (AMF) so as to assist in bringing stability to Asian currencies and financial markets. The AMF planned to raise $50-60 billion in contributions from participating countries and another $50 billion from the Japanese government. It was to be independent of the IMF and function as a substitute for IMF activities such as regional surveillance. The original membership was to be PRC; Hong Kong, China; Japan; Korea; and Taipei,China. With lukewarm support from the PRC and vehement opposition from the US and IMF, the plan was scrapped a few months later. It was argued that the AMF will enhance the moral hazard problem, create a double standard (IMF and AMF), and challenge the IMF leadership. In place of the AMF came the Manila Framework Group (MFG) in November 1997. This framework was totally subsidiary to the IMF and has been largely defunct in practice. At the ASEAN Finance Ministers’ Meeting in October 1998 in Washington D. C., the ASEAN Surveillance Process (ASP) was officially established based on the principles of peer review for all member states. But this too was to be technical assistance and capacity building that were to come primarily from the Asian Development Bank. In October 1998 came the New Miyazawa Initiative (NMI). This arrangement was implemented by Japan as a bilateral support mechanism focused on assisting Asian countries affected by the currency crisis to overcome their economic difficulties and on contributing to the stability of international financial markets. The support package consisted of $30 billion, of which $15 billion was to be available for Asian countries’ medium to long-term financial needs for economic recovery, provided either as Official Development Assistance (ODA) or untied loans. The other $15 billion is for countries’ short-term capital needs during the process of implementing economic reforms. Commitments under this initiative as of February 2000 totaled $21 billion, of which $13.5 billion were for medium and long-term support. These are not grants but loans aiming to support corporate debt restructuring, strengthen the social safety net, stimulate the economy, and facilitate trade finance and assistance to small and medium-size enterprises. There are two short-term swap arrangements ($2.5 billion with Malaysia and $5 billion with Korea) not tied to the IMF and annually renewable. In the “second stage” of the NMI, Japan pledged its readiness to assist in mobilization of up to Y2 trillion of domestic and foreign private sector funds for Asia through assistance for fund raising in international financial and capital markets (via JBIC and ADB credit guarantees and interest subsidies) and through assistance for investment in Asian private sector enterprises via equity funds. Through this initiative Japan hopes to utilize its abundant savings and promote active use of the Tokyo market. Probably the most concrete and currently active regional financial arrangement to come out of the Asian crisis was the Chiang Mai Initiative (CMI). The CMI was established by the ASEAN+3 Finance Ministers at Chiang Mai, Thailand in May 2000 at the time of the Annual Meeting of the ADB. The CMI has two parts: Section V The Way Forward ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 26 (i) ASEAN Swap Arrangement (ASA). This is the swap arrangement originated by ASEAN in 1997 amounting to $200 million. In November 2000 it was increased to $1 billion and expanded to include all ASEAN members. (ii) Bilateral Swap Arrangements (BSA) and Repurchase Agreement. The purpose of BSA is to provide short-term financial assistance in the form of swaps to a country in need of balance of payments support or short-term liquidity support. Up to 10 percent of the maximum amount of drawing can be provided for a short-term period without linkage to the IMF. The interest rate was not disclosed but a rate 1.5 percentage points higher than LIBOR has been mentioned by some. The purpose of repurchase agreements is to provide temporary foreign exchange liquidity to a country in need of foreign exchange liquidity support via the sale and buyback of appropriate securities. Some see the CMI as a natural progression leading to the renewal of the old idea of an Asian Monetary Fund. However for this progression to take place some fundamental rethinking is necessary about the link of Asian programs to the IMF. Under present conditions, only about 10 percent of the resources available under the CMI can be used without IMF programs. Thus with all the initiatives noted above, the total amount of financial support that can be provided to Asian countries that do not want to take the IMF medicine is only about $2 billion—so small as to be inconsequential. On the basis of poor performance of the countries under IMF programs, we argue that so long as regional cooperation is linked to the IMF, it has, under current conditions, no chance of success in reviving growth momentum in the region. D. Promoting Regional Public Investment Activity: Regional Keynesianism Apart from stability in exchange rate mechanism and setting up of balance of payments safety nets, there is an urgent need to help the regional economies out of the current slump. Given the state of the financial system in much of the region and low confidence of the private sector, a private sector-led recovery is not on the cards. The region may well be in a Keynesian situation of underemployment equilibrium. The most promising source of recovery in the region is promotion of public sector-led investment. Domestic pump-priming will have to play the crucial role in revival of growth in the region. Pump-priming efforts are being undertaken in several countries, though reluctance to accept the Keynesian framework in the conditions of a slump is a major hindrance. But in most of the major countries in the region, regional pump-priming can provide a useful supplement to the domestic efforts. For example, in Japan, domestic pump-priming efforts are running into difficulties partly because of the problem of finding worthwhile public works projects and partly because the public debt has already reached high levels and there is a political reluctance to allow public debt to increase much further. However at a regional level there are many viable infrastructure projects that can help to increase capacity utilization in Japanese manufacturing and construction sectors. 27 And if a regional institutional mechanism could be developed to channel Japanese excess savings into loans for these infrastructure projects, regional pump-priming can proceed without increasing public debt in Japan. Even if some concessional financing becomes necessary to make Japanese bidders for these infrastructure projects to be internationally competitive, the public resources required will be a fraction of what is required in domestic public works projects. Similar logic would apply to pump-priming in economies such as Hong Kong, China; Singapore; and Taipei,China where there is large excess capacity in sectors such as IT for which there is not enough potential domestic demand but there is potential regional demand that can be transformed into effective demand through regional financing mechanisms. In a report entitled Infrastructure Development as Key to Economic Growth and Regional Economic Cooperation (ESCAP 1994), it was estimated that the estimated increment in physical infrastructure facilities required between base period of 1990-1992 and 2000 for ESCAP member countries excluding Australia, Japan, and New Zealand were approximately $1400 billion, of which up to $500 billion was identified as available. The financial resource gap was therefore estimated to be $900 billion. More recent comprehensive estimates are not available. But country studies in many Asian countries clearly show that there are public investment programs in several countries whose viability over the long term is not questionable but which cannot be implemented because of shortage of funds and lack of profitability in the short and medium term. Many of these investments have positive externalities in terms of environment and social stability and some public assistance for such investments would be eminently justified, particularly when the opportunity costs of supplying these investment goods from countries with excess capacity is low. Individual country efforts are not enough, either in the resource-surplus countries (such as Japan) or in resource-deficit countries in developing Asia. There is a mutuality of interest in regional cooperation. One group of such investment needs relate to infrastructure investments for tackling the growing environmental problems in Asia. For the PRC alone additional (to the business as usual scenario) investment needs for environment-friendly development with high pay-offs are estimated to be in the order of about 1 percent of GDP (over $10 billion per year) during the next 20 years. Over the long term, the PRC will have to implement the programs of water transfer from the water-surplus south to the water-deficit north. The programs for such transfers are at an advanced stage of preparation and needs funds for implementation. There are large programs of watershed management and reforestation in the PRC that require huge construction activities. The trend toward urbanization is strong in the PRC and there are mega cities emerging in several parts of the country. Over the long term there is very little doubt that these mega cities will require subway systems for urban transportation. The subways require huge investments upfront for which funds are not currently available. The investments are construction-intensive and can provide a fillip to the moribund construction sector in Japan. There are similar viable programs for environment-friendly investments in several other East Asian countries such as Indonesia, Myanmar, Philippines, Thailand, and Viet Nam. Section V The Way Forward ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 28 For India alone, the infrastructure investment needs over the next decade are estimated to run into nearly $500 billion (Kumar 2002). Some of the main components of these investment requirements are: power generation and transmission ($143 billion), exploration and transportation of oil and gas ($100-150 billion), coal mining ($18 billion), telecommunications ($53 billion), expansion and upgrading of roads and highways ($34 billion), ports ($7 billion), mass rapid transit systems for metros ($20 billion), and improvement in sanitation and water supply ($6 billion). Regional cooperation can play a major role in improving energy security of East and South Asia. Over the long term, countries in this region would need to develop alternative land routes for transportation of oil and gas from Central and Western Asia to the consumption centers in PRC, India, Japan, and Korea. Central Asia has vast potential of oil and gas but at present lacks the means to transport them to Eastern consumption centers. Among the projects identified for facilitating such transportation are the following: (i) expanding rail transport of oil between Kazakhstan and Xinjiang, PRC as an interim solution to meeting the needs of both Kazakhstan and the PRC; (ii) construction of an oil pipeline between western Kazakhstan and Xinjiang; (iii) building electric transmission infrastructure between the Kyrgyz Republic and southern Xinjiang; and (iv) completing and renovating the gas pipeline from Turkmenistan and Uzbekistan through the Kyrgyz Republic to Almaty, and eventually extending this pipeline to Urumqi. These and such other projects are viable and essential for the long-term energy security of Asia. But their implementation is held up due to the huge amount of resources required upfront. They should be priority candidates for funding under a strategy of regional Keynesianism. Then there are Pan Asian infrastructure projects. For many decades there have been intensive discussions in Asia on several major infrastructure projects that connect different Asian countries and Europe. Two among them are: the Pan Asian Highway and the Pan Asian Railway. Under the auspices of the United Nations system, detailed technical work has been done on various components of these projects. ADB has been active in developing infrastructure projects for the Great Mekong Subregion. Due to shortage of finance, the progress on these projects has been inadequate. Project for the Pan Asian information highway may also be given a boost at this time. The funding requirements for these projects run in the tens of billions of dollars and their longterm viability is not questionable. In the context of excess capacity in the construction industry in Japan, Korea, and elsewhere, maybe now is the ideal opportunity to launch a major project for completion of these Pan Asian projects. Another area of investment where the long-term viability is not questionable is IT investments in Asia. Despite some progress, the reach of IT facilities in many Asian countries is quite limited. A publicly supported investment program in IT facilities in these countries could promote IT industries in the region in particular in Japan; Korea; Malaysia; Philippines; and Taipei,China. 29 E. Mobilizing Regional Savings for Regional Investments The region has adequate savings and productive capacity to make these investments a reality without depending on extraregional resources. The important insight of Keynesian economics that in the conditions of underemployment equilibrium, investment creates its own savings is particularly relevant for the region today. With increased utilization of capacity in Japan and other major economies in the region through pump-priming investment, incomes will increase and so will savings. The fear of excess demand due to increased investment is misplaced in the region at present. However, even at the current levels of economic activity, the region has more savings than it is utilizing. During the last five years, annual average of current account surplus (excess of regional savings over regional investments) has been $174 billion per year. At end-2000, the region has foreign exchange reserves of $1 trillion, much in excess of its needs for transactions purposes and much above the reserve ratios maintained by other major regions such as Europe or North America. These excess reserves represent a clear case of misallocation of resources. Several countries in the region have a large part of their savings deposited in nonregional centers where the rate of return is several percentage points below what the regional borrowers have to pay to the lenders from outside the region. If an institutional mechanism can be developed to utilize a greater proportion of the regional savings for regional investment needs, the savings to the region can be in the tens of billions of dollars per year. The development of viable domestic and regional bond markets is one important proposed means of putting the savings of the region to productive uses. Efforts should be made to develop bond markets denominated in local currency where the foreign investors will absorb the exchange risk in return for higher fees but in local currency. A great deal of work has yet to be done for harmonization of cross-border listing, trading, clearing and settlements, securities borrowing and lending, repo markets, etc. More efforts are needed for creating regional bond market infrastructures in Tokyo and other financial centers in the region. One of the key projects in the development of such infrastructures should focus on the creation of a single central securities depository (CSD) to perform safekeeping, clearance, and settlement functions for all securities available in the Asian and Pacific region. Another type of institution that can facilitate effective intermediation is rating agencies. The region is rather fragmented geographically and many of the economies do not have a critical mass of large business enterprises to justify a domestic rating agency capable of establishing the necessary professional reputation for objective analysis and in-depth understanding of the political, economic, and social development of the region. There may be a case for pooling resources of the region together to create an economically viable rating agency in the region. Section V The Way Forward ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 30 VI. INSTITUTIONAL REFORMS: ESTABLISHMENT OF AN ASIAN RESERVE BANK AND STRENGTHENING OF ADB A. Establishing an Asian Reserve Facility For making regional monetary cooperation effective, it seems necessary to initiate some bold institutional reforms. We suggest establishment of a regional reserve facility, which we call Asian Reserve Bank. The ARB will have at least $100 billion of capital contributed by the member governments, of which perhaps only 10 percent need to be paid up. It will accept deposits from central banks of member countries and lend funds to the governments as needed to help the region achieve stability in real effective rates and help the countries in need of short-term and mediumterm balance of payments assistance. Minimum deposit levels and maximum borrowing levels in several tranches will be decided according to the economic weights of the member countries. It would develop its own form of policy dialogue and conditionality (preferably through higher interest charges for higher levels of borrowing) based on regional realities. The ARB will pay interest on deposits close to rates of return currently obtained by Asian central banks on their deposits and will lend at rates linked to LIBOR. It will issue an Asian Currency Unit whose value will be the weighted average of the currencies of selected member countries. ACUs will be increasingly used as the unit of account, as unit for invoicing, and as reserve currency by countries in the region. The ACU will be freely convertible into international currencies. Over time as ACUs become widely used as reserve currency in the region, ARB will be able to issue ACUs in multiples of its primary reserves and earn seigniorage, which could be in the tens of billions of dollars. These funds could be allocated to development agencies in the region at concessional rates to help build up regional public goods and help development of the region in general. With concessional funds coming from within the region, the taxpayers of non-Asian countries would be relieved of the burden of financing development in the less developed countries in the region. The operations of ARB will be delinked from IMF conditionalities, as has been the case with EU monetary institutions. The proposed ARB does not require any financial or intellectual assistance from IMF or other nonregionals. In this situation, there is no basis for waiting for approval from IMF or nonregionals for setting up the regional mechanism, in particular since the record of developing countries under IMF programs in terms of growth and stabilization has been so disastrous. It can be argued that the probability of resuming the growth momentum in Asian countries with IMF programs (such as Indonesia) is extremely low, thus the ARB should certainly not be bound by IMF programs. B. Strengthening ADB’s Role in Regional Cooperation The establishment of ADB, as with other regional development banks, was inspired by a desire for collective self-help. As the Meltzer Commission Report (2000) notes, “Beginning at the 31 end of the 1950s, members from each of the world’s key borrowing regions, desiring more control of lending policy, united in three regional banks. Linked by geography, sympathetic by custom and culture, and staffed predominantly by their own citizens, they sought to serve their constituencies better than could a distant institution dominated by industrial countries.” However, in view of the need for more expanded funding than was available in the region at that time, all regional banks acceded to the need for membership of developed countries, while retaining the majority vote in regional hands. The rationale and modalities of ADB’s assistance to regional cooperation was recently elaborated in The Long-term Strategic Framework of the Asian Development Bank (2001-2015). The challenges of regional cooperation were defined to involve three related dimensions: (i) supporting the development of participating countries through cooperation; (ii) providing, protecting, and conserving key regional public goods; and (iii) ensuring regional economic and social stability. ADB supports a number of broad-based regional and subregional cooperation initiatives to accelerate the development of participating countries, of which the Greater Mekong Subregion initiative is the most prominent example. ADB has also led regional cooperation efforts in South Asia. Subregional programs often involve poorer regions of individual countries (e.g., Mindanao in the Philippines, Yunnan in the PRC) and lagging economies (e.g., Cambodia, Lao PDR, Central Asian Republics, and isolated small Pacific Island economies), so they have potentially important implications for poverty reduction; they also contribute to regional stability. Despite the mandate for regional cooperation and some sporadic efforts, ADB, like other regional banks, has in practice become largely a duplicate of the Bretton Woods Institutions. It has generally followed, though with a time lag, the lead given by the Bretton Woods Institutions in its lending policies as well as policy dialogue. During the crises faced by the region (for example the oil crises of 1973 and 1979, exchange rate crisis of 1985 and above all, the financial crisis of 1997), it was unable to formulate its own strategy for assistance to regional members. During the financial crisis of 1997, there were occasions when some ADB staff members and some member countries felt that the policy reform programs pushed by the extra-regional partners were not in the best interests of the member countries, and in hindsight they seem to have been proven right. But even in that situation, ADB was not able to utilize its special regional knowledge and regional sensitivities to help its member countries, and instead largely followed the lead given by the Bretton Woods Institutions. On the issue of fulfilling its mandate for regional cooperation too, the performance of ADB has been lacklustre. The mainstream opinion in Bretton Woods Institutions has been all along in favor of multilateralism and against regionalism. In the 1990s the mainstream economists’ view in Washington turned strongly in favor of regionalism for the Americas but remained against regionalism for other regions, including Asia. In this overall environment of skepticism on regional cooperation, the support given by ADB for regional co-operation was sporadic at best. During the last 35 years of its existence, less than 1 percent of ADB loans were given for regional projects. In the area of technical assistance (TA) the performance was better: over 20 percent of the TAs were in the form of regional TAs (RETAs). However, there was no vision of Section VI Institutional Reforms: Establishment of an Asian Reserve Bank and Strengthening of ADB ERD Working Paper No. 28 REGIONAL COOPERATION IN ASIA: LONG-TERM PROGRESS, RECENT RETROGRESSION, AND THE WAY FORWARD 32 a regional development strategy or regional development assistance guiding these RETAs and the impact of these RETAs on regional policy dialogue was only marginal. ADB was not able to deepen the understanding of the distinctly Asian strategy of development suggested for example by the “flying geese model”, nor did it play a lead role in understanding the factors behind the so-called “Asian miracle” or behind the Asian financial crisis of 1997. The main merit point for ADB was in terms of its cost-effectiveness: among all the development banks, ADB had the lowest staff cost per unit of lending operations. The modest role played by ADB in the past was understandable and perhaps affordable because the region was performing well on its own and the costs imposed by the Bretton Woods institutions were not high. But now the region is in a great slump and the medicines administered by Bretton Woods Institutions have not been working. Also the region is now the main resourcesurplus region in the world, meeting the resource needs not only of developing countries but also the major developed countries such as the US. In this situation, the past rationale for dependence on resources from outside the region no longer applies. The lessons of spectacular development performance of the region are being articulated in a practical manner by policy analysts in the region itself. Among the ideas to draw upon are: Malaysia’s management of foreign capital flows, the PRC’s strategy of gradualist and endogenous reforms, and ADB’s perspectives on promoting “competitive pluralism.” There is now a clear case for greater activism of ADB for Asian development. In fact, there are some influential voices such as those of the Meltzer Commission, which argues that all country and regional programs in Asia should be the primary responsibility of ADB and that such transfer should be accomplished within five years. To quote: “Costly duplication and confusion arise from the overlap of function and resource flows between the World Bank and its regional partners. The comparative advantage of the regional banks resides in strong relationships with borrowing members based upon a mutual understanding, common language, and common culture. Both the Asian Development Bank and the Inter-American Development Bank have reached a level of maturity and professionalism which qualifies them to take responsibility for the tasks of poverty alleviation and structural reform in their respective regions” (Meltzer Commissison 2000). Even if such drastic step is not taken, serious thought should certainly be given to see how ADB’s role can be expanded to help in achieving recovery in the region. It is arguable that the region needs a regional stimulus package of at least $100 billion over the near term (a stimulus similar in magnitude to that being spent in the US (whose GNP in purchasing power terms is similar to that of the region). ADB should play a lead role in a mutually beneficial resource transfer from more developed economies such as Hong Kong, China; Japan; Korea; Singapore; and Taipei,China to the less developed ones for Pan Asian infrastructure projects as well as other viable infrastructure and environment-related projects in the region. Apart from direct loans, ADB could support formation of a regional investment company (drawing on for example, the experience of the corporation setup to manage the tunnel linking the UK and France) to mobilize construction funds from countries in the region with surplus funds. Among the new instruments could be assistance through guarantees for infrastructure bond floats by member countries or by Pan Asian 33 institutions for, say, a Pan-Asian Railway or Pan-Asian Highway, securitization of infrastructure facilities of member countries, and assistance in promoting build-operate-transfer, build-operateown, etc. projects for infrastructure. Loans for ARB on concessional and nonconcessional terms can provide a basis for such expanded operations of ADB. VII. OVERCOMING IMPEDIMENTS TO REGIONAL COOPERATION If enhanced regional cooperation in Asia helps to restore the Asians’ faith in the Asian model of development (with adaptations) and financial support is mobilized from within Asia to finance projects as discussed above, there is a high probability that the Asian economies will resume rapid growth and within the next two decades will make substantial progress toward eliminating poverty and becoming the new center of gravity of the world economy. The reward from regional cooperation, and the costs of noncooperation, are indeed high. The mechanics of proposed cooperation are also particularly demanding. In fact, the vision of regional economic cooperation presented here is not more (perhaps less) than what was actually achieved by EU. Most countries in EU have a model of economic management that combines market with social responsibility through state intervention. None of the EU countries have accepted IMF conditionally or IMF programs of reform in the last 20 years. The exchange rate regimes have been gradually harmonized with the eventual switch to Euro. Adjustment mechanisms have been set up to help countries reallocate labor and capital as integration proceeds. Over time national boundaries have been virtually eliminated in economic matters. And despite images of fortress Europe, the Union is well integrated with the rest of the world. Despite this precedent, the road to enhanced regional cooperation in East Asia is not likely to be easy. The level of trust among the major players—PRC, India, Japan, Korea, ASEAN—has not always been high. The fears of domination by one country or another are commonly expressed. In factual terms the tensions in Europe among the major players in the early 1950s were perhaps no less than they are in Asia today and the gains from better utilization of resources in Asia for all Asian countries are no less than what was the case in Europe. But it is an open question whether the political leadership in the region will be able to overcome the emotional impediments to cooperation and forge a consensus in favor of accelerating the pace of cooperation in the region.2 The biggest problem in regional cooperation arises when the cooperation framework impinges on sovereignty of nations. The proposals made in this report, though ambitious, are very light in terms of infringement of national sovereignty. The call for implementation of current trade agreements rather than initiating new PTAs should reduce the burden of administration of customs in all countries concerned. Liberalization of labor movements does not require any supranational authority. These programs are to be designed and implemented at national levels. Coordination on exchange rate becomes difficult when stability of nominal exchange rates requires harmonization of domestic monetary policies. However, if the aim is to manage stability in real effective exchange rate terms, it does not infringe on independence of monetary policies. Different countries can have Section VII Overcoming Impediments to Regional Cooperation 40 No. 1 International Reserves: Factors Determining Needs and Adequacy —Evelyn Go, May 1981 No. 2 Domestic Savings in Selected Developing Asian Countries —Basil Moore, assisted by A.H.M. Nuruddin Chowdhury, September 1981 No. 3 Changes in Consumption, Imports and Exports of Oil Since 1973: A Preliminary Survey of the Developing Member Countries of the Asian Development Bank —Dal Hyun Kim and Graham Abbott, September 1981 No. 4 By-Passed Areas, Regional Inequalities, and Development Policies in Selected Southeast Asian Countries —William James, October 1981 No. 5 Asian Agriculture and Economic Development —William James, March 1982 No. 6 Inflation in Developing Member Countries: An Analysis of Recent Trends —A.H.M. Nuruddin Chowdhury and J. Malcolm Dowling, March 1982 No. 7 Industrial Growth and Employment in Developing Asian Countries: Issues and Perspectives for the Coming Decade —Ulrich Hiemenz, March 1982 No. 8 Petrodollar Recycling 1973-1980. Part 1: Regional Adjustments and the World Economy —Burnham Campbell, April 1982 No. 9 Developing Asia: The Importance of Domestic Policies —Economics Office Staff under the direction of Seiji Naya, May 1982 No. 10 Financial Development and Household Savings: Issues in Domestic Resource Mobilization in Asian Developing Countries —Wan-Soon Kim, July 1982 No. 11 Industrial Development: Role of Specialized Financial Institutions —Kedar N. Kohli, August 1982 No. 12 Petrodollar Recycling 1973-1980. Part II: Debt Problems and an Evaluation of Suggested Remedies —Burnham Campbell, September 1982 No. 13 Credit Rationing, Rural Savings, and Financial Policy in Developing Countries —William James, September 1982 No. 14 Small and Medium-Scale Manufacturing Establishments in ASEAN Countries: Perspectives and Policy Issues —Mathias Bruch and Ulrich Hiemenz, March 1983 No. 15 Income Distribution and Economic Growth in Developing Asian Countries ECONOMIC STAFF PAPERS (ES) —J. Malcolm Dowling and David Soo, March 1983 No. 16 Long-Run Debt-Servicing Capacity of Asian Developing Countries: An Application of Critical Interest Rate Approach —Jungsoo Lee, June 1983 No. 17 External Shocks, Energy Policy, and Macroeconomic Performance of Asian Developing Countries: A Policy Analysis —William James, July 1983 No. 18 The Impact of the Current Exchange Rate System on Trade and Inflation of Selected Developing Member Countries —Pradumna Rana, September 1983 No. 19 Asian Agriculture in Transition: Key Policy Issues —William James, September 1983 No. 20 The Transition to an Industrial Economy in Monsoon Asia —Harry T. Oshima, October 1983 No. 21 The Significance of Off-Farm Employment and Incomes in Post-War East Asian Growth —Harry T. Oshima, January 1984 No. 22 Income Distribution and Poverty in Selected Asian Countries —John Malcolm Dowling, Jr., November 1984 No. 23 ASEAN Economies and ASEAN Economic Cooperation —Narongchai Akrasanee, November 1984 No. 24 Economic Analysis of Power Projects —Nitin Desai, January 1985 No. 25 Exports and Economic Growth in the Asian Region —Pradumna Rana, February 1985 No. 26 Patterns of External Financing of DMCs —E. Go, May 1985 No. 27 Industrial Technology Development the Republic of Korea —S.Y. Lo, July 1985 No. 28 Risk Analysis and Project Selection: A Review of Practical Issues —J.K. Johnson, August 1985 No. 29 Rice in Indonesia: Price Policy and Comparative Advantage —I. Ali, January 1986 No. 30 Effects of Foreign Capital Inflows on Developing Countries of Asia —Jungsoo Lee, Pradumna B. Rana, and Yoshihiro Iwasaki, April 1986 No. 31 Economic Analysis of the Environmental Impacts of Development Projects —John A. Dixon et al., EAPI, East-West Center, August 1986 No. 32 Science and Technology for Development: Role of the Bank —Kedar N. Kohli and Ifzal Ali, November 1986 No. 33 Satellite Remote Sensing in the Asian and Pacific Region No. 60 A Computable General Equilibrium Model of Nepal —Timothy Buehrer and Filippo di Mauro, October 1993 No. 61 The Role of Government in Export Expansion in the Republic of Korea: A Revisit —Yun-Hwan Kim, February 1994 No. 62 Rural Reforms, Structural Change, and Agricultural Growth in the People’s Republic of China —Bo Lin, August 1994 No. 63 Incentives and Regulation for Pollution Abatement with an Application to Waste Water Treatment —Sudipto Mundle, U. Shankar, and Shekhar Mehta, October 1995 No. 64 Saving Transitions in Southeast Asia —Frank Harrigan, February 1996 No. 65 Total Factor Productivity Growth in East Asia: A Critical Survey —Jesus Felipe, September 1997 No. 66 Foreign Direct Investment in Pakistan: Policy Issues and Operational Implications —Ashfaque H. Khan and Yun-Hwan Kim, July 1999 No. 67 Fiscal Policy, Income Distribution and Growth —Sailesh K. Jha, November 1999 41 —Mohan Sundara Rajan, December 1986 No. 34 Changes in the Export Patterns of Asian and Pacific Developing Countries: An Empirical Overview —Pradumna B. Rana, January 1987 No. 35 Agricultural Price Policy in Nepal —Gerald C. Nelson, March 1987 No. 36 Implications of Falling Primary Commodity Prices for Agricultural Strategy in the Philippines —Ifzal Ali, September 1987 No. 37 Determining Irrigation Charges: A Framework —Prabhakar B. Ghate, October 1987 No. 38 The Role of Fertilizer Subsidies in Agricultural Production: A Review of Select Issues —M.G. Quibria, October 1987 No. 39 Domestic Adjustment to External Shocks in Developing Asia —Jungsoo Lee, October 1987 No. 40 Improving Domestic Resource Mobilization through Financial Development: Indonesia —Philip Erquiaga, November 1987 No. 41 Recent Trends and Issues on Foreign Direct Investment in Asian and Pacific Developing Countries —P.B. Rana, March 1988 No. 42 Manufactured Exports from the Philippines: A Sector Profile and an Agenda for Reform —I. Ali, September 1988 No. 43 A Framework for Evaluating the Economic Benefits of Power Projects —I. Ali, August 1989 No. 44 Promotion of Manufactured Exports in Pakistan —Jungsoo Lee and Yoshihiro Iwasaki, September 1989 No. 45 Education and Labor Markets in Indonesia: A Sector Survey —Ernesto M. Pernia and David N. Wilson, September 1989 No. 46 Industrial Technology Capabilities and Policies in Selected ADCs —Hiroshi Kakazu, June 1990 No. 47 Designing Strategies and Policies for Managing Structural Change in Asia —Ifzal Ali, June 1990 No. 48 The Completion of the Single European Community Market in 1992: A Tentative Assessment of its Impact on Asian Developing Countries —J.P. Verbiest and Min Tang, June 1991 No. 49 Economic Analysis of Investment in Power Systems —Ifzal Ali, June 1991 No. 50 External Finance and the Role of Multilateral Financial Institutions in South Asia: Changing Patterns, Prospects, and Challenges —Jungsoo Lee, November 1991 No. 51 The Gender and Poverty Nexus: Issues and Policies —M.G. Quibria, November 1993 No. 52 The Role of the State in Economic Development: Theory, the East Asian Experience, and the Malaysian Case —Jason Brown, December 1993 No. 53 The Economic Benefits of Potable Water Supply Projects to Households in Developing Countries —Dale Whittington and Venkateswarlu Swarna, January 1994 No. 54 Growth Triangles: Conceptual Issues and Operational Problems —Min Tang and Myo Thant, February 1994 No. 55 The Emerging Global Trading Environment and Developing Asia —Arvind Panagariya, M.G. Quibria, and Narhari Rao, July 1996 No. 56 Aspects of Urban Water and Sanitation in the Context of Rapid Urbanization in Developing Asia —Ernesto M. Pernia and Stella LF. Alabastro, September 1997 No. 57 Challenges for Asia’s Trade and Environment —Douglas H. Brooks, January 1998 No. 58 Economic Analysis of Health Sector ProjectsA Review of Issues, Methods, and Approaches —Ramesh Adhikari, Paul Gertler, and Anneli Lagman, March 1999 No. 59 The Asian Crisis: An Alternate View —Rajiv Kumar and Bibek Debroy, July 1999 No. 60 Social Consequences of the Financial Crisis in Asia —James C. Knowles, Ernesto M. Pernia, and Mary Racelis, November 1999 No. 1 Poverty in the People’s Republic of China: Recent Developments and Scope for Bank Assistance —K.H. Moinuddin, November 1992 No. 2 The Eastern Islands of Indonesia: An Overview of Development Needs and Potential —Brien K. Parkinson, January 1993 No. 3 Rural Institutional Finance in Bangladesh and Nepal: Review and Agenda for Reforms —A.H.M.N. Chowdhury and Marcelia C. Garcia, November 1993 No. 4 Fiscal Deficits and Current Account Imbalances of the South Pacific Countries: A Case Study of Vanuatu —T.K. Jayaraman, December 1993 No. 5 Reforms in the Transitional Economies of Asia —Pradumna B. Rana, December 1993 No. 6 Environmental Challenges in the People’s Republic of China and Scope for Bank Assistance —Elisabetta Capannelli and Omkar L. Shrestha, December 1993 No. 7 Sustainable Development Environment and Poverty Nexus —K.F. Jalal, December 1993 No. 8 Intermediate Services and Economic Development: The Malaysian Example —Sutanu Behuria and Rahul Khullar, May 1994 No. 9 Interest Rate Deregulation: A Brief Survey of the Policy Issues and the Asian Experience —Carlos J. Glower, July 1994 No. 10 Some Aspects of Land Administration in Indonesia: Implications for Bank Operations —Sutanu Behuria, July 1994 No. 11 Demographic and Socioeconomic Determinants of Contraceptive Use among Urban Women in the Melanesian Countries in the South Pacific: A Case Study of Port Vila Town in Vanuatu —T.K. Jayaraman, February 1995 No. 12 Managing Development through Institution Building — Hilton L. Root, October 1995 No. 13 Growth, Structural Change, and Optimal OCCASIONAL PAPERS (OP) 42 No. 1 Estimates of the Total External Debt of the Developing Member Countries of ADB: 1981-1983 —I.P. David, September 1984 No. 2 Multivariate Statistical and Graphical Classification Techniques Applied to the Problem of Grouping Countries —I.P. David and D.S. Maligalig, March 1985 No. 3 Gross National Product (GNP) Measurement Issues in South Pacific Developing Member Countries of ADB —S.G. Tiwari, September 1985 No. 4 Estimates of Comparable Savings in Selected DMCs —Hananto Sigit, December 1985 No. 5 Keeping Sample Survey Design and Analysis Simple —I.P. David, December 1985 No. 6 External Debt Situation in Asian Developing Countries —I.P. David and Jungsoo Lee, March 1986 No. 7 Study of GNP Measurement Issues in the South Pacific Developing Member Countries. Part I: Existing National Accounts of SPDMCs–Analysis of Methodology and Application of SNA Concepts —P. Hodgkinson, October 1986 No. 8 Study of GNP Measurement Issues in the South Pacific Developing Member Countries. Part II: Factors Affecting Intercountry Comparability of Per Capita GNP —P. Hodgkinson, October 1986 No. 9 Survey of the External Debt Situation in Asian Developing Countries, 1985 —Jungsoo Lee and I.P. David, April 1987 No. 10 A Survey of the External Debt Situation in Asian Developing Countries, 1986 —Jungsoo Lee and I.P. David, April 1988 No. 11 Changing Pattern of Financial Flows to Asian and Pacific Developing Countries —Jungsoo Lee and I.P. David, March 1989 No. 12 The State of Agricultural Statistics in Southeast Asia —I.P. David, March 1989 No. 13 A Survey of the External Debt Situation in Asian and Pacific Developing Countries: 1987-1988 —Jungsoo Lee and I.P. David, July 1989 No. 14 A Survey of the External Debt Situation in Asian and Pacific Developing Countries: 1988-1989 —Jungsoo Lee, May 1990 No. 15 A Survey of the External Debt Situation in Asian and Pacific Developing Countrie s: 1989-1992 —Min Tang, June 1991 No. 16 Recent Trends and Prospects of External Debt Situation and Financial Flows to Asian and Pacific Developing Countries —Min Tang and Aludia Pardo, June 1992 No. 17 Purchasing Power Parity in Asian Developing Countries: A Co-Integration Test —Min Tang and Ronald Q. Butiong, April 1994 No. 18 Capital Flows to Asian and Pacific Developing Countries: Recent Trends and Future Prospects —Min Tang and James Villafuerte, October 1995 STATISTICAL REPORT SERIES (SR) Poverty Interventions —Shiladitya Chatterjee, November 1995 No. 14 Private Investment and Macroeconomic Environment in the South Pacific Island Countries: A Cross-Country Analysis —T.K. Jayaraman, October 1996 No. 15 The Rural-Urban Transition in Viet Nam: Some Selected Issues —Sudipto Mundle and Brian Van Arkadie, October 1997 No. 16 A New Approach to Setting the Future Transport Agenda —Roger Allport, Geoff Key, and Charles Melhuish June 1998 No. 17 Adjustment and Distribution: The Indian Experience —Sudipto Mundle and V.B. Tulasidhar, June 1998 No. 18 Tax Reforms in Viet Nam: A Selective Analysis —Sudipto Mundle, December 1998 No. 19 Surges and Volatility of Private Capital Flows to Asian Developing Countries: Implications for Multilateral Development Banks —Pradumna B. Rana, December 1998 No. 20 The Millennium Round and the Asian Economies: An Introduction —Dilip K. Das, October 1999 No. 21 Occupational Segregation and the Gender Earnings Gap —Joseph E. Zveglich, Jr. and Yana van der Meulen Rodgers, December 1999 No. 22 Information Technology: Next Locomotive of Growth? —Dilip K. Das, June 2000 43 Edited by S.Ghon Rhee & Yutaka Shimomoto, 1999 $35.00 (paperback) 9. Corporate Governance and Finance in East Asia: A Study of Indonesia, Republic of Korea, Malaysia, Philippines and Thailand J. Zhuang, David Edwards, D. Webb, & Ma. Virginita Capulong Vol. 1, 2000 $10.00 (paperback) Vol. 2, 2001 $15.00 (paperback) 10. Financial Management and Governance Issues Asian Development Bank, 2000 Cambodia $10.00 (paperback) People’s Republic of China $10.00 (paperback) Mongolia $10.00 (paperback) Pakistan $10.00 (paperback) Papua New Guinea $10.00 (paperback) Uzbekistan $10.00 (paperback) Viet Nam $10.00 (paperback) Selected Developing Member Countries $10.00 (paperback) 11. Guidelines for the Economic Analysis of Projects Asian Development Bank, 1997 $10.00 (paperback) 12. Handbook for the Economic Analysis of Water Supply Projects Asian Development Bank, 1999 $15.00 (hardbound) 13. Handbook for the Economic Analysis of Health Sector Projects Asian Development Bank, 2000 $10.00 (paperback) 1. Rural Poverty in Developing Asia Edited by M.G. Quibria Vol. 1: Bangladesh, India, and Sri Lanka, 1994 $35.00 (paperback) Vol. 2: Indonesia, Republic of Korea, Philippines, and Thailand, 1996 $35.00 (paperback) 2. External Shocks and Policy Adjustments: Lessons from the Gulf Crisis Edited by Naved Hamid and Shahid N. Zahid, 1995 $15.00 (paperback) 3. Gender Indicators of Developing Asian and Pacific Countries Asian Development Bank, 1993 $25.00 (paperback) 4. Urban Poverty in Asia: A Survey of Critical Issues Edited by Ernesto Pernia, 1994 $20.00 (paperback) 5. Indonesia-Malaysia-Thailand Growth Triangle: Theory to Practice Edited by Myo Thant and Min Tang, 1996 $15.00 (paperback) 6. Emerging Asia: Changes and Challenges Asian Development Bank, 1997 $30.00 (paperback) 7. Asian Exports Edited by Dilip Das, 1999 $35.00 (paperback) $55.00 (hardbound) 8. Mortgage-Backed Securities Markets in Asia SPECIAL STUDIES, ADB (SS, ADB) (Published in-house; Available commercially through ADB Office of External Relations) 1. Improving Domestic Resource Mobilization Through Financial Development: Overview September 1985 2. Improving Domestic Resource Mobilization Through Financial Development: Bangladesh July 1986 3. Improving Domestic Resource Mobilization Through Financial Development: Sri Lanka April 1987 4. Improving Domestic Resource Mobilization Through Financial Development: India December 1987 5. Financing Public Sector Development Expenditure in Selected Countries: Overview January 1988 6. Study of Selected Industries: A Brief Report April 1988 7. Financing Public Sector Development Expenditure in Selected Countries: Bangladesh June 1988 8. Financing Public Sector Development Expenditure in Selected Countries: India June 1988 9. Financing Public Sector Development Expenditure in Selected Countries: Indonesia June 1988 10. Financing Public Sector Development Expenditure in Selected Countries: Nepal June 1988 11. Financing Public Sector Development Expenditure in Selected Countries: Pakistan June 1988 12. Financing Public Sector Development Expenditure in Selected Countries: Philippines June 1988 13. Financing Public Sector Development Expenditure in Selected Countries: Thailand June 1988 14. Towards Regional Cooperation in South Asia: ADB/EWC Symposium on Regional Cooperation in South Asia February 1988 15. Evaluating Rice Market Intervention Policies: Some Asian Examples April 1988 16. Improving Domestic Resource Mobilization Through Financial Development: Nepal November 1988 17. Foreign Trade Barriers and Export Growth September 1988 18. The Role of Small and Medium-Scale Industries in the Industrial Development of the Philippines April 1989 19. The Role of Small and Medium-Scale Manufacturing Industries in Industrial Development: The Experience of Selected Asian Countries January 1990 20. National Accounts of Vanuatu, 1983-1987 January 1990 21. National Accounts of Western Samoa, 1984-1986 February 1990 22. Human Resource Policy and Economic Development: Selected Country Studies July 1990 23. Export Finance: Some Asian Examples September 1990 24. National Accounts of the Cook Islands, 1982-1986 September 1990 25. Framework for the Economic and Financial Appraisal of Urban Development Sector Projects January 1994 26. Framework and Criteria for the Appraisal and Socioeconomic Justification of Education Projects January 1994 27. Guidelines for the Economic Analysis of Projects February 1997 28. Investing in Asia 1997 29. Guidelines for the Economic Analysis of Telecommunication Projects 1998 30. Guidelines for the Economic Analysis of Water Supply Projects 1999 SPECIAL STUDIES, COMPLIMENTARY (SSC) (Published in-house; Available through ADB Office of External Relations; Free of Charge) 44 SERIALS (Co-published with Oxford University Press; Available commercially through Oxford University Press Offices, Associated Companies, and Agents) 1. Asian Development Outlook (ADO; annual) $36.00 (paperback) 2. Key Indicators of Developing Asian and Pacific Countries (KI; annual) $35.00 (paperback) JOURNAL (Published in-house; Available commercially through ADB Office of External Relations) 1. Asian Development Review (ADR; semiannual) $5.00 per issue; $8.00 per year (2 issues) 1. Informal Finance: Some Findings from Asia Prabhu Ghate et. al., 1992 $15.00 (paperback) 2. Mongolia: A Centrally Planned Economy in Transition Asian Development Bank, 1992 $15.00 (paperback) 3. Rural Poverty in Asia, Priority Issues and Policy Options Edited by M.G. Quibria, 1994 $25.00 (paperback) 4. Growth Triangles in Asia: A New Approach to Regional Economic Cooperation Edited by Myo Thant, Min Tang, and Hiroshi Kakazu 1st ed., 1994 $36.00 (hardbound) Revised ed., 1998 $55.00 (hardbound) 5. Urban Poverty in Asia: A Survey of Critical Issues Edited by Ernesto Pernia, 1994 $18.00 (paperback) 6. Critical Issues in Asian Development: Theories, Experiences, and Policies Edited by M.G. Quibria, 1995 $15.00 (paperback) $36.00 (hardbound) 7. From Centrally Planned to Market Economies: The Asian Approach Edited by Pradumna B. Rana and Naved Hamid, 1995 Vol. 1: Overview $36.00 (hardbound) Vol. 2: People’s Republic of China and Mongolia $50.00 (hardbound) Vol. 3: Lao PDR, Myanmar, and Viet Nam $50.00 (hardbound) 8. Financial Sector Development in Asia Edited by Shahid N. Zahid, 1995 $50.00 (hardbound) 9. Financial Sector Development in Asia: Country Studies Edited by Shahid N. Zahid, 1995 $55.00 (hardbound) 10. Fiscal Management and Economic Reform in the People’s Republic of China Christine P.W. Wong, Christopher Heady, and Wing T. Woo, 1995 $15.00 (paperback) 11. Current Issues in Economic Development: An Asian Perspective Edited by M.G. Quibria and J. Malcolm Dowling, 1996 $50.00 (hardbound) 12. The Bangladesh Economy in Transition Edited by M.G. Quibria, 1997 $20.00 (hardbound) 13. The Global Trading System and Developing Asia Edited by Arvind Panagariya, M.G. Quibria, and Narhari Rao, 1997 $55.00 (hardbound) 14. Social Sector Issues in Transitional Economies of Asia Edited by Douglas H. Brooks and Myo Thant, 1998 $25.00 (paperback) $55.00 (hardbound) 15. Rising to the Challenge in Asia: A Study of Financial Markets Asian Development Bank, 1999 Vol. 1 $20.00 (paperback) Vol. 2 $15.00 (paperback) Vol. 3 $25.00 (paperback) Vols. 4-12 $20.00 (paperback) SPECIAL STUDIES, OUP (SS,OUP) (Co-published with Oxford University Press; Available commercially through Oxford University Press Offices, Associated Companies, and Agents)