Regional Cooperation

I can best illustrate these points discussing several specific examples of problems with markets across the region and indicating how regional cooperation could help. I will focus my comments on three main areas:

1. Monetary and financial cooperation
2. Labor markets
3. Trade issues and competition policy

Monetary and financial cooperation

One area where there is already considerable regional cooperation in East and Southeast Asia is in the field of monetary and financial integration (Fabella 2002. Naya 2004). Awareness of the need for policy reform grew quickly following the Asian financial crisis in 1997. The multiple shocks following the crisis in such countries as Korea, Thailand, and especially Indonesia, did much economic harm. In the view of many observers, one of the reasons that the crisis was so severe was because of serious failures in key regional monetary and financial markets.

In response to the crisis, a number of important initiatives for regional financial and monetary cooperation have been announced. In October 1998 the ASEAN finance ministers established the ASEAN Surveillance Process. In May 2000 the ASEAN + 3 finance ministers announced the Chiang Mai Initiative to strengthen the network of bilateral currency swap arrangements. The total amount of bilateral swap arrangements agreed to has already reached nearly $40 billion so the Initiative is making good progress towards becoming a valuable regional safety net. And more recently, in August 2003 the ASEAN + 3 finance ministers embarked on the Asian Bond Markets Initiative to develop regional bond markets.

In addition to these steps, there is much interest in East and Southeast Asia in measures that might be taken to strengthen the resilience of the region to future financial shocks. Strategies for further reform are frequently discussed in numerous conferences and meetings across the region and numerous official and private sector agencies, including the Asian Development Bank, are involved in various ways in supporting reform proposals (ADB. 2004b Rana 2004). Just a few weeks ago, for example, the ADB launched the Asian Bond Monitor, a new publication that reviews the development of East Asian local currency bond markets. This publication, and much other data, is available at the AsianBondsOnline web site on the ADB web site.

Labor markets

A second area where useful regional cooperation has already occurred but where there is scope for rather more is in the field of labor markets, particularly regarding arrangements for temporary migrant workers and associated mechanisms for remittances (Agarwala and Prakash 2002).

There are now millions of temporary migrant workers on the move across East and Southeast Asia, both within the region and to other parts of the world. The various implications of this movement -- social, economic, and financial -- are very considerable indeed, both for nations and for many millions of poor people.

On a global basis, workers' remittances are estimated to have reached $93 billion in 2003. This was about 60% greater than total foreign aid (ODA) flows of $58 billion. Overall flows to Asia (South Asia, and Southeast Asia, East Asia and the Pacific) totaled around $36 billion, and for some countries workers' remittances represented a major source of foreign exchange earnings. In the Philippines, remittances sent home by the roughly 8 million Filipinos migrant workers abroad are currently estimated to be around $8 billion per year, or 4.5% of GDP. Similarly, countries such as Pakistan, Bangladesh, Sri Lanka, and Indonesia are important source countries for temporary guest workers and receive significant amounts of foreign exchange in the form of remittances.

As is the case with other aspects of globalization, this large movement of labor provides opportunities but also gives rise to new risks and problems. The workers themselves are often exposed to personal risks of various kinds, including exploitation and mistreatment, but there are national risks as well. A significant part of the movement of people is illegal, and illegal and unregulated financial transactions are of special concern in view of the need to monitor financial transactions that may have security implications.

Because of the growing importance of these issues, during the last few years the international community has given increasing attention to the various implications of the trend towards globalization of labor markets (Sorensen. 2004). Within the Asian region, for example, with the support of APEC finance ministers a number of activities have been initiated with the aim of improving remittance systems. Earlier this year, a regional APEC symposium on alternative remittance systems was held in the ADB Institute in Tokyo with the support of regional governments, the World Bank, the Japanese Ministry of Finance and the U.S. Treasury Department.

These activities represent some initial steps towards strengthening institutions that can support the better functioning of regional labor markets and international remittance flows. But there is still much that can be done to improve regional arrangements in this field in a way that will provide very substantial benefits for millions of poor people in Asia.

Trade issues and competition policy.

A third area where there has been considerable regional cooperation in recent years concerns issues of trade and competition policy. Indeed, just last week ASEAN leaders signed a number of new trade agreements to promote further liberalization at their meeting in Vietiane in Laos.

The importance of the interaction between trade and competition policy has attracted attention within the Doha Round of international negotiations but there is still room for much progress at the regional level because there are many local barriers within Southeast Asia that restrict trade and commerce. In fact, although trade and competition issues are closely linked, at the present time in Southeast Asia competition issues should perhaps be of higher priority than trade discussions. For one thing, trade issues have received much attention during the past decade or so while competition issues have been relatively neglected. For another, many of the restraints on overall trade across the region are of the nature of restraints on competition and markets rather than restraints on international trade.

In fact, the region is still riddled with all sorts of restraints on competition. To be sure, some of these restraints reflect justified concerns about such things as the social or environmental impact of dysfunctional markets. However, in many cases arrangements such as local cartels, price controls, entry and exit regulations, exclusive licensing, and state-owned or state-controlled monopolies restrict competition and overall economic efficiency for no good reason.

Some issues of competition policy receive attention within the context of regional and international trade negotiations but many do not. And many issues of competition policy relate mainly to domestic markets. In view of the central importance of competition policy in improving the functioning of markets of all kinds, there is scope for greater regional attention to this issue.