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.