ASEAN eyes trade ties with NE Asia

ASEAN eyes trade ties with NE Asia

SINGAPORE (Reuters): Southeast Asian leaders, eager to forge closer economic ties with Japan, China and South Korea, agreed on Friday to examine the merits of a free trade and investment zone with their bigger Northern neighbors.

Reviving a still-born Malaysian idea for an East Asian Economic Caucus, the 10 members of the Association of Southeast Asian Nations (ASEAN) also decided to study whether to turn their informal consultations with the trio, dubbed ASEAN+3, into a formal East Asia Summit.

The push for closer cooperation reflects ASEAN's hopes that it can ride on the coattails of Northeast Asia's fast-growing economies. But it is tinged with a fear of being left behind.

"We are all conscious of the gap between Northeast Asia and Southeast Asia and the potential for the gap to widen," Singaporean Prime Minister Goh Chok Tong said.

Speaking to reporters after a meeting of ASEAN+3, Goh said a study group would report back next year on whether to institutionalize the gatherings.

The diplomatic initiative capped a day of talks in which the ASEAN leaders, many of them mired in political and economic crises at home, adopted a blueprint to boost Internet usage and endorsed a plan for a 5,513-km (3,420 mile) railway running from Singapore all the way to Kunming in China's Yunman province.

Goh said the integration drive was born out of a common desire among the 13 leaders to start thinking as "East Asians".

But he said caution was necessary otherwise ASEAN, founded in 1967, risked withering on the vine.

"I see no problem in ASEAN+3 evolving, if that's the desire of the leaders, into some kind of East Asia summit. But there are implications," Goh said. "I myself would not recommend a hasty evolution."

Washington, fearing it would be shoved aside from its central security role in Asia, led the opposition to Malaysian Prime Minister Mahathir Mohamad's proposal several years ago for an East Asian Economic Caucus linking ASEAN, Japan, China and Korea.

But Goh said Washington now had no reason to worry: an East Asian grouping would be open to the world, not inward-looking.

"We need the United States to be in East Asia. This is not an attempt to shut out Washington from Asia," he said.

Mahathir, while welcoming the idea of formalizing ties with Northeast Asia, said any new grouping would have to complement ASEAN. "We have to define what is East Asia," he told reporters.

The emergence of what Goh called the "two big ideas" of a free trade zone and an institutional link with Northeast Asia is the fruit of a cooperation process launched a year ago in Manila.

In May ASEAN+3 finance ministers hatched am ambitious plan for a currency safety net operated by the 13 countries' central banks to head off a repeat of the 1997 financial crisis that plunged Asia into a deep recession.

Experts said Friday's developments on the diplomatic front were, potentially, equally significant.

"Given the political transformations we are seeing in North Asia, especially with North Korea and Taiwan, I think it is very important that they do institutionalize relationships," said Neil Saker, an independent economist based in Sngapore.

"It's easy to be very cynical about these kinds of arrangements as merely talking shops. But I think we are now seeing signs of serious work going forward," Saker added.

ASEAN nations make little secret of their fears of being muscled out of markets by a resurgent China, which is drawing the lion's share of foreign investment into the less-wealthy parts of Asia in anticipation of booming business once it joins the World Trade Organization.

But Goh said he agreed with Premier Zhu Rongji that an economically strong China represented an opportunity for ASEAN, not a threat. The same was true for the rest of Northeast Asia.

"We want Northeast Asia to grow. The more they can grow, the bigger the investment potential in Southeast Asia because of the funds available from them. And the bigger the market in Northeast Asia -- they'll buy from us," Goh said.

The decision to study a link-up with China, Japan and South Korea followed swiftly on the heels of steps by the trio to speed up their own integration.

Zhu, South Korean President Kim Dae-jung and Japanese Prime Minister Yoshiro Mori agreed over breakfast to set up a joint economic research program and to put their hitherto informal meetings on a regular annual footing.

ASEAN comprises founding members Singapore, Malaysia, the Philippines, Thailand, Brunei and Indonesia plus newer entrants Myanmar, Laos, Cambodia and Vietnam.