Mahathir renews call for East Asian economic bloc

Mahathir renews call for East Asian economic bloc

Eileen Ng, Agence France-Presse, Kuala Lumpur

Malaysian Prime Minister Mahathir Mohamad on Monday renewed his call for an East Asia Economic Grouping (EAEG) and backed a proposed regional monetary fund independent of the International Monetary Fund (IMF).

The EAEG is the brainchild of the 77-year-old Mahathir, who is Southeast Asia's longest serving leader, but the idea was dropped amid strong opposition from the United States a decade ago.

Mahathir said the region had overcome objections to an East Asian grouping by using the ASEAN Plus Three forum, the name given to ASEAN's annual summit with its dialogue partners China, Japan and South Korea.

"We know what it is. It is an East Asian grouping but we call it ASEAN-plus-Three so as not to ruffle the feathers of some countries," he said at a dialogue session after opening a three- day East Asia congress.

"But now the governments of East Asia must come out openly.

"We must stop hiding behind this spurious title of ASEAN-plus- Three and call ourselves the East Asia Economic Grouping. From then on, the process will be very easy."

In his speech earlier, he told more than 1,000 delegates that East Asian integration was vital to drive growth, give the region more economic clout and to counter growing Western pressure.

"We are not cows to be led by the nose, we are not children to be led by the hands. This is a journey we must make with our own two feet. We must walk together ... in unity, there will be strength," he said.

He also stressed the region must remain outward-looking and not "retreat behind a great East Asian economic barricade."

Asked about the Asian Monetary Fund (AMF) first proposed by Japan in 1997 after the region was thrown into economic turmoil, Mahathir described it as "not only a good thing but a much needed thing.

"We have to have an Asian Monetary Fund simply because the IMF is not as independent as it should be. As we know, there are other hands which are controlling it and those hands have other ideas contrary to the prosperity of East Asia," he said.

"It may fail and it will fail certainly if you subject it to the regulations of the IMF but it can be made to succeed if we are willing to find our own way, to make corrections as we go along."

The AMF idea was also withdrawn after strong US opposition but many regional leaders had supported Japan, which later refined the idea to complementing IMF loans through a regional currency support mechanism.

Former Japanese vice finance minister Eisuke Sakakibara said the AMF was necessary as a "lender of last resort" to provide quick liquidity and prevent a repetition of the 1997/98 Asian currency crisis.

"We need some lender of last resort to forestall a financial crisis. The AMF is a body for such a do-it-yourself lender of last resort," he told the congress.

Contrary to fears that the AMF may be used as an excuse to delay tough economic reforms, Sakakibara said he believed it would instead accelerate domestic reforms.

Nicknamed "Mr. Yen" when he ran Japan's foreign exchange policy in the 1990s, Sakakibara said the AMF might have taken off if Japan had sought China's full backing at the time.

"We could have said to the rest (of the world) that this is Asian business, don't bother us. The situation could have been different," he said.

In the same way, he said China must be "centrally involved" in the creation of an EAEG and not be viewed as a threat.

Sakakibara said Asia was lagging behind other regional groupings, especially the European Union which was becoming more powerful.

East Asian nations, like Japan and South Korea, must not be "overly afraid of the US" and must change their "hub-and-spoke" relationship with the superpower to one that is based on networking, he said.

The region must seek a "coordinated political will" to accelerate its integration, failing which it will "once again be divided and ruled by the rest of the world," he warned.