Economic Integration in Asia: Trends and Policies1

Unlike in other parts of the world, such as Africa and Latin America, regionalism (or the adoption of regional cooperation policies) is a relatively new phenomenon in Asia. Aside from the establishment of the Association of Southeast Asian Nations in 1967, the South Asian Association for Regional Cooperation in 1985, and several efforts to promote intra-regional trade, few policy actions were taken by the Asian countries to promote regional cooperation with each other until the mid-1990s. The Asian financial crisis of 1997-98 was a watershed as it focused the region’s attention on growing interdependence and shared interests and East Asian policymakers became interested in supporting market-led integration with various regional cooperation efforts. This sentiment has been the strongest in East Asia (ASEAN+3) where the adverse impacts of the crisis and the contagion were the most significant. South Asia also joined the bandwagon in the 1990s when it initiated its economic reform programme and started to implement the “Look East” policy. The major factor that ignited the interest of the East Asian countries towards regional monetary and financial integration was the virulent contagion of the East Asian financial crisis and the policy mistakes made by the International Monetary Fund in managing it. Th