ASEM process gaining momentum

By Hau Boon Lai

KOBE CITY: The Asia-Europe Meeting (ASEM) process is gaining in momentum as well as importance.

This is in part reflected by the increasing level of participation from the International Monetary Fund (IMF) at the grouping's Finance Ministers Meeting, the latest beginning in this earthquake-recovered city on Saturday.

In 1997, when the first meeting was held in Bangkok, the IMF was not even involved.

The second one, held two years ago in Germany, was attended by Hubert Neiss, point man of the IMF's Asia operations.

This year, none other than the managing director, Horst Kohler, is making the trip.

According to Japanese officials, 70 percent of the 15 European and 10 Asian participants are sending their top men to the two- day meeting, affirming the commitment on both sides to making it a forum for significant discussions.

This is the minimum required level of commitment needed for the issues that the two regional groups are aiming to tackle.

These range from inter-regional cooperation, the pros and cons of the various possible exchange-rate regimes, to the strengthening of the international financial system.

A brainchild of Prime Minister Goh Chok Tong, ASEM is a grouping formed at the right time, when interest between the two regions was high but linkages had plenty of room for growth.

The 1997 Asian financial meltdown also showed the importance of a concerted regional response in helping a member economy in trouble to prevent a crisis from forming or spreading.

The region's economies had failed to unite in mitigating the effects of the Thai baht crisis of July 1997, which eventually spread and caused financial and political devastation, from which some countries are still recovering.

However, good progress has been made on the efforts towards regional cooperation, from ASEAN's setting up of an early warning system through sharing of economic data to the Chiang Mai Initiative forged in Bangkok last year by ASEAN nations, China, Japan and South Korea to arrange a network of bilateral currency swaps.

For Asia, this meeting is a chance to forge an important ally, an opportunity to hear first-hand accounts of the increasingly successful monetary union of Europe.

It is also a direct channel to the ears of five of the nations in the G7, which groups the richest and most powerful industrialized nations of the world.

"Intra-regional cooperation is weak in Asia, so EU nations' experiences, including the pitfalls and difficulties as well as the advantages, will be useful to us," said a Japanese official.

Japan has recently endorsed the idea of bilateral free-trade agreements (FTAs) as a way of increasing regional cooperation, a concept shared keenly by Singapore, with which it is expected to sign an FTA by the end of the year.

"The ASEAN Free Trade Area will be something Japan, and I believe China and South Korea as well, greatly look forward to," said the Japanese official.

Among the "meat" of the Kobe meeting is a Japanese initiative for a new joint ASEM project which would see research institutes from the two regions engage in studies focusing on currency stabilization and anti-crisis measures.

The Kobe Research Project is seen as something dedicated to the mid-to long-term relationship between the two regions.

In the short term, European nations have played a quiet but significant role in aiding Asian economies hit badly by the crisis.

At the current meeting, EU countries and China are expected to renew monetary commitments to the US$40 million (S$69 million) ASEM Trust Fund established in 1998.

The fund, administered by the World Bank, awards grants in support of technical assistance programs in Asian countries recovering from the crisis.

European nations have also joined their Asian counterparts in acknowledging that forcing crisis-hit countries to follow strictly US dollar pegs made the situation worse.

The two regions have cooperated in pushing organizations like the IMF to pursue reforms to recognize the different situation in individual economies.

Asian nations, like the residents of Kobe who have risen from the ashes of the 1995 quake, are on the path to recovery after three years.

But the effects of the crisis are still being felt across the world, and this is one of the factors giving the ASEM process the impetus it needs.

Said a European diplomat from a G7 nation: "The Asian crisis was a lesson for European nations as well, who saw in it the importance of cooperation when it comes to the economy today, which is interlocked increasingly across nations, regions and the world."

"I would say it helped some of the EU members to respond more keenly to economic union than would otherwise be the case."

-- The Straits Times/Asia News Network