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97. Prospects for Intra- and Extraregional Relations
- ISEAS–Yusof Ishak Institute
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484 Sekiguchi Sueo By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville 97. PROSPECTS FOR INTRA- AND EXTRAREGIONAL RELATIONS SEKIGUCHI SUEO Reprinted in abridged form from Sekiguchi Sueo, “Prospects for Intra- and Extraregional Relations”, in Road to ASEAN-10: Japanese Perspectives on Economic Integration, edited by Sekiguchi Sueo and Noda Makito (Tokyo: Japan Center for International Exchange, and Singapore: Institute of Southeast Asian Studies, 1999), pp. 195–217, by permission of the author and the Japan Center for International Exchange. The ASEAN-10 have the potential to form a unified market with a population of 480 million. Unity takes time, however, because not only the leading members but also the followers face a variety of tasks in constructing sound economies. As of early 1999, Cambodia had managed to establish the Hun Sen government after prolonged political confrontation between two prime ministers and to dissolve the military power of the Pol Pot group. Construction of the economy is just starting. Myanmar needs to democratize its political system and develop its economy. Vietnam, though it has successfully introduced free market mechanisms to revitalize its economy , still has to solve a number of problems. Laos’ economy has been stagnant for many years. For these newcomers, the ASEAN-10 will have to slow its economic integration. Human rights and democracy issues remain serious political controversies among the ASEAN members and Western nations. East Asians and Westerners view these issues differently. South Korea and Taiwan have gradually shifted toward Western-style democracy after decades of military dictatorship. Political factors have sometimes forced leaders to keep militaryled governments, particularly when confronting rivals. Economic development was the top priority among these leaders. Despite the military shadow, South Korea and Taiwan have achieved rapid progress in democratization. Even ASEAN’s leading members have not achieved full democracy by Western standards . Although these countries could encourage more active public participation in policy making in accordance with democratic processes, foreign pressure to do so might spark regionalism. It is important for the ASEAN members to move steadily toward democracy based on human rights. The core members of the ASEAN-10 are in financial difficulty, and the causes differ by country: failure in supply-demand man097 AR Ch 97 22/9/03, 1:01 PM 484 Prospects for Intra- and Extraregional Relations 485 By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville agement, hasty and partial deregulation, and nepotism between political leaders and business circles. Enthusiasm for regional integration has shifted to regional protectionism. Such a trend is evident in Mahathir’s statements. However, regionalism is unlikely to solve the current problems. The East Asian economies are in trouble. Japan has been stagnant for a few years. South Korea suffered a currency crisis. Taiwan has been relatively stable, but its prospects are dimming. China has thus far avoided any balance-of-payments difficulties, partly owing to strict regulations and direct government control over foreign trade and exchange transactions. Thus, in general, the East Asian economies have lost their luster. In contrast, economies in North America, and to a lesser extent in Europe, have revived or have continued to grow in the mid-1990s. Currency crises in many East Asian countries, including some ASEAN economies, have provided good opportunities for Western enterprises to acquire assets in the region. Financial firms throughout the region have become favorite takeover targets. Although self-reliance is important for the ASEAN economies in overcoming recent hardships, a combination of currency devaluation and strict supply-demand management is not enough to strengthen their industrial bases. Regional currency depreciation does not change relative prices among East Asian nations, though it does make East Asian products less expensive than products from other regions. Thus, depreciation does not necessarily promote intraregional trade. Tight supply-demand management will reduce imports as well as demand for domestic products. This, in turn, will decrease intraregional trade as well as imports from outside the region. There are good reasons for East Asian economies to promote regional financial cooperation to facilitate external balance of payments. Stable currency values and credible financial systems are needed. Because Japan and Taiwan have the means to extend financial assistance, they can provide emergency loans to countries trying to overcome short-term difficulties. Japan has already joined an international consortium to provide emergency assistance. In accordance with some ASEAN economies’ requests, Taiwan is participating in such assistance, but China is not. Regional financial cooperation is a test case for...