The proliferation of
bilateral free trade agreements in Asia must pave the way to
closer economic and financial integration, Jong-Wha Lee, the
new head of the ADBs Office of Economic Regional
Integration told Emerging Markets in an interview.
Lee, a former academic who took
up his post earlier this year, acknowledged that there had been
some disappointment among Asian member countries on the
slow progress of trade integration in the past. This had
partly provoked the turn to bilateral free trade
His concern is that these could
hinder, rather than encourage, progress in the future.
Bilateral FTAs should be aiming at open regionalism. If
you have too many restrictions in a free trade agreement, it
will not be possible to enlarge it into a regional free trade
area, he warned.
Lee recognises that some
countries see the strength of low-cost competition from China
and India as a threat, but he added: The other side is
that many Asian countries depend on the large markets in China
There has never been a better
opportunity for closer economic and financial integration in
Asia, Lee believes. He observed that even bilateral FTAs have
served a purpose in giving regional policymakers the experience
of free trade negotiations, and in reducing domestic opposition
to the concept. I still believe that they can be a
stepping stone, rather than a stumbling block.
Above all, he expects economic
realities to set the tone for policy decisions. The
proportion of intra-regional trade in Asia is getting closer to
the level among the members of the EU, so there is significant
Lee emphasised that the
ADBs role would be mainly as a facilitator in this
dialogue rather than as the driving force, but also said
that the bank must focus on surveillance of regional trade and
financial integration activities, to ensure the maintenance of
common standards and documentation.
We are the only
organisation that has the comprehensive membership and
competence to play that role in this area, he said.
Lee believes that, ultimately,
responsibility for the success of the Chiang Mai plans for an
Asian Currency Unit lies with national policymakers rather than
I am hopeful that the
Asean+3 will announce a positive development on the Chiang Mai
Initiative and financial integration at this meeting, he
said. We have said that it is time to consider regional
settlement and clearance and pan-regional primary dealers for
the Asian bond markets, and also for foreign exchange