The recently-held summit of Asean in Vientiane, Laos would be remembered for pushing the agenda for pan-Asian economic integration. The summit is an annual affair attended by the leaders of 10 Asean member states and their four summit-level dialogue partners viz, Japan, China, South Korea and India. This year, leaders of Australia and New Zealand were also invited as special guests.

Although a sub-regional grouping of southeast Asian countries, Asean has served to bring major Asian countries together as dialogue partners

The signing of China-Asean free trade agreement (FTA) at the summit received much attention worldwide. However, Japan and India are also working on FTAs with Asean having signed framework agreements at the Bali summit in October 2003. Korea also reached an understanding to evolve an FTA with Asean at the Laos summit. Significantly, Japan, Korea and China are studying an FTA linking them. India is studying an FTA with China and has agreed to study such arrangements with Japan and Korea. With this extensive web of FTAs, a virtual free trading arrangement linking Japan, Asean, China, India and Korea (Jacik) is emerging. However, as the experts assembled at a conference of Asian think-tanks organised by RIS in Tokyo on the eve of the Laos summit concluded, these bilateral or sub-regional FTAs don’t allow full exploitation of the potential of regional cooperation and hence are sub-optimal.

The region needs an over-arching regionwide FTA to make most of the synergies or complementarities existing in the region. The Laos summit seems to have taken steps to provide a nucleus of such an institutional infrastructure. Besides consolidation and deepening of economic integration of Asean countries, it was agreed to organise an east Asian summit in 2005 hosted by Malaysia to launch the process of broader pan-Asian integration. As a summit-level partner of Asean and considering bilateral FTAs with China, Japan and Korea, India should participate in the east Asian summit and contribute to the process of building a new Asia. Countries like Singapore did make a case for India’s participation in the process.

India’s interest in playing a role in working towards a broader Asian economic community was amply made clear by Prime Minister Manmohan Singh when he carried forward the proposal made by his predecessor of coming together of Asean 10, Japan, China, Korea and India in a broader Asian economic community. Building on his earlier speech at the Asean-India Business Summit in October 2004 in New Delhi, he argued that such a community would be an anchor of stability and prosperity for Asia and beyond. He also proposed holding of a workshop in India for preparing a concept paper on the subject early next year. To further deepen the Asean-India economic ties, he also signed a partnership document covering several proposals of far-reaching nature based on inputs of Asean-India think-tanks. The Indian connectivity with Asean was also vividly highlighted by the Asean-India car rally.

Recent studies discussed at the meetings of Asian think-tanks organised by RIS in New Delhi in 2003 and Tokyo in November 2004 do find a compelling case for a broader Asian economic community built in a phased manner with an initial nucleus comprising Jacik. The community comprising half of the world’s population would be larger than the EU in terms of output, having trade higher than Nafta and foreign exchange reserves greater than those of EU and Nafta put together. It has been demonstrated that economic integration in Jacik could generate billions of dollars of additional output. It could also facilitate the exploitation of enormous potential of monetary and financial cooperation in the region. It has been shown that even a rather moderate 5% pooling of Asia’s foreign exchange reserves of nearly $2 trillion in an institutional framework such as a Reserve Bank of Asia could facilitate financing of regional public goods and thus become an additional engine of growth besides providing exchange rate stability. Hence, it would help in realising the Asian dream.

India has to play an important role in formation of such a broader community. As a part of the look-east policy, India has consciously integrated its economy with east Asia since the early 1990s. With this, the share of east Asia in India’s trade is approaching nearly a third thus making it a more important trade partner compared to the EU or the US. India is also increasingly getting linked with the east Asian production networks especially in the more knowledge-intensive parts of it such as software development, R&D and designing. Furthermore, these production networks linking the economies of Asean and India not only include those belonging to Japanese or Korean companies but also those being developed by Indian enterprises.

With an economy growing at 7-8% per annum and even faster growing and sizeable middle class, India brings its own dynamism to the emerging Asian regionalism. India’s strengths in software and services fruitfully complement the hardware and manufacturing prowess of east Asia and together could produce a formidable strategic combination. Indeed, east Asian companies have begun to exploit India’s strengths. Several Indian companies have begun to take advantage of cheaper manufacturing costs for hardware in China and other east Asian countries. The trend is likely to be more firmly entrenched as the emerging free trade arrangements between India and east Asian countries come into effect.

Thus, at last Asia seems to be getting ready to exploit the fruits of continent-wide economic integration. India and east Asia need to work together to make it happen.