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This paper will try to uncover the question of recent enthusiasm of Asian countries for regional co-operation as well as opportunities and challenges arising from this new wave of integration in the region.

Extracts from this document...

Introduction

In recent years, one of the most significant developments in the Asian economy has been the rapid growth of regional co-operation. Within a few years, a number of regional initiatives have been endorsed and various forms of co-operative ventures have been established. The results of these developments can be seen in the formation of the Asia-Pacific Economic Cooperation (APEC), the ASEAN Free Trade Area (AFTA) and the revival of the South Asian Association for Regional Cooperation (SAARC) as well as various innovative types of subregional co-operative ventures. This is in contrast to Asia's historical record on co-operation. For many years, the swiftness of regional co-operation was very slow compared with other regions of the world. The only exception is probably the Association of Southeast Asian Nations (ASEAN). However, the contribution of ASEAN has been primarily political rather economic. This paper will try to uncover the question of recent enthusiasm of Asian countries for regional co-operation as well as opportunities and challenges arising from this new wave of integration in the region. It will do so by, first discussing the evolution of Asian regional integration. Second, by presenting the reasons for the regional integration in the Asia. Third, by pointing out the opportunities and challenges of this regional co-operation. In order to answer the question about enthusiasm of Asian countries for co-operation it is important to follow the evolution of regional co-operation. Thus, for many years, the pace of regional co-operation in Asia was very slow. There were some fundamental problems with the Asian countries in forming a trading bloc. First, a trading bloc requires a large volume of internal trade so as to maximize the benefits of forming the bloc. However, during the 1960s and the 1970s, North America and Europe were the major markets for Asian exports and the primary sources of their imports (Min Tang, 1994). Consequently, there was little motivation for Asia to form its own trading bloc since the majority of its trade was with countries outside the region. ...read more.

Middle

Fourth, the progress on economic deregulation and liberalization in Asian countries provides a solid foundation for the success of regional co-operation. Asian countries have increasingly recognized that liberalizing trade is in their own interest. During the 1980s, while many industrial countries increased their trade protection measures, the majority of Asian countries undertook unilateral liberalization of their trade and exchange payments. Also, considerable deregulation of financial institutions and markets since the 1980s have improved the efficiently of the financial sector in many Asian countries as an intermediary that mobilizes funds of savers for investor. Among the NIEs, Hong Kong and Singapore have existed as free-trade economies for years. Trade liberalization and financial reforms have also accelerated in the Republic of Korea and Chinese Taipei. In Southeast Asia, Indonesia, Malaysia, the Philippines and Thailand have significantly reduced their tariff across the broad and eased quantitative restrictions on trade. Recently, a new wave of economic liberalization has also appeared in South Asian economies. Both India and Bangladesh have substantially reduced their quantities restrictions on imports. Pakistan, Nepal and Sri Lanka have also taken measures to promote exports and deregulate imports. Finally, the opening up of centrally planned economies in Asia to the outside world provides enormous business opportunities for regional co-operation. An important part of the economic refor5m in the People's Republic of China (PRC) was the "open door" policy and trade reforms. Import barriers have been substantially reduced, and external trade has been largely decentralized. Consequently, during this period, merchandise trade increased more than ninefolt from $21 billion in 1978 to $196 billion in 1994(Min Tang, 1994). Considering that 60 per cent of the PRC's external trade is within the Asian region, there are large opportunities for regional activities for business and co-operation. Economic reforms in Vietnam and the other Indochina economies have also promoted an expansion in trade and investment in the area. It is expected that regional co-operation will create enormous opportunities and challenges for Asian countries. ...read more.

Conclusion

In conclusion, there has been a dramatic change in the attitude towards regional co-operation among Asian countries in recent years. The increasing interdependence in the form of intra-regional trade and investment among Asian economies has become an important driving force for economic arrangements. Another key reason for greater co-operation among Asian countries is the adverse impact on the region of the integration of the European and North-American markets. Moreover, the success of deregulation and liberalization in Asia and the recent opening up of former centrally planned economies provides a solid foundation for regional co-operation. The APEC, AFTA and SAARC type of regional integration has been the major driving force for reducing tariffs trade barriers among Asian countries. In addition, subregional co-operation, which promotes collaboration in areas other than free trade, is one of the most dynamic co-operative arrangements in the region. It entails lower risk and costs. Therefore, it is short-term arrangement prior to the establishment of more comprehensive regional integration arrangements. In particular, it is relevant to countries in transition from a centrally planned economy and other economies, which have changed from a system with inherent bias against exports to a market-oriented and export-led growth strategy. Regional co-operation could also provide enormous opportunities for Asian countries, given the substantial economic complementarities among the Asian economies and considering that business opportunities generated in trade, investment and infrastructure development and other social issues. On the other hand, the formation of Asian economic co-operation poses a number of challenges to the region. Trade liberalization and market integration involve a great amount of sharing of cost and benefits among participating countries. Considerable efforts have to be exerted to design and implement a fair system for the distribution of national policies and costs and benefits. Since co-operation involves modification of national policies and practices, it will also require strong political commitments from the governments concerned. In turn, these governments will also have to provide adequate social infrastructure and strong legal framework to facilitate co-operation. ...read more.

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