Policy Recommendations“Towards an East Asian Community”

by

The 3rd Annual Conferenceof the Network of East Asian Think-Tanks (NEAT)
23 August, 2005
Tokyo, Japan

Policy Recommendations“Towards an East Asian Community”
Table of Contents
1. Guiding Principles of Community Building in East Asia.............................................. 1(1) Peace, Prosperity and Progress ..................................................................................... 1(2) Sharing Universal Values .............................................................................................. 1(3) Openness, Transparency, Inclusiveness and Comprehensiveness................................. 1
2. Architecture of Community Building in East Asia ........................................................ 1(1) Importance of Functional Approach to Cooperation..................................................... 1(2) Key Role of ASEAN and Equal Partnership with Shared Ownership .......................... 2(3) ASEAN+3 Summit and the East Asia Summit (EAS) .................................................. 2(4) Northeast Asian Cooperation ........................................................................................ 2(5) Importance of Institution Building................................................................................ 2
3. Functional Cooperation ................................................................................................... 3(1) Financial and Monetary Cooperation............................................................................ 3(a) Strengthening and Building on Chiang Mai Initiative (CMI).................................... 3(b) Further Development of the Asian Bond Market ...................................................... 3(c) Deepening the Dialogue on Exchange Rate Policy Coordination ............................ 3(2) Investment Cooperation in East Asia ............................................................................ 4(3) Cooperation for Energy Security .................................................................................. 4(a) Institutionalizing Regional Energy Cooperation Framework ................................... 4(i) Respecting and Complying with International Law ......................................... 5(ii) Coordinating Oil Stockpiling in East Asian Countries .................................... 5(iii) Promoting Transnational Energy Projects .................................................... 5(iv) Improving Quality of Energy Data .............................................................. 5(v) Stepping-up Coordinating Efforts on Energy Maritime Security ...................... 5(b) Developing Market for Conventional Energy ........................................................... 5(c) Promoting Energy Conservation and Alternatives.................................................... 5
4. Promoting Regional Identity in East Asia ...................................................................... 6(1) Nurturing a ‘We’ Feeling .............................................................................................. 6(2) Accepting Cultural Diversity as a Foundation .............................................................. 6(3) Narrowing the Development Gaps................................................................................ 6

POLICY RECOMMENDATIONSThe Network of East Asian Think-Tanks (NEAT), which convened its 3rd Annual
Conference in Tokyo, Japan, on 22-23 August 2005, makes the following Policy
Recommendations.
1. Guiding Principles of Community Building in East Asia
(1) Peace, Prosperity and Progress
The goal of community building in East Asia should be the promotion of the welfare
and well-being of the people, and the realization of the East Asian vision of cooperative ‘Peace,
Prosperity and Progress.’ An East Asian Community must promote peace by building trust andconfidence as well as ensuring the mutual security. The community should promote prosperityby increased interdependence of trade, investment and technologies. An East Asian
Community should also promote progress by improving governance, enhancing protection ofbasic human rights and advancing quality of life of people.
(2) Sharing Universal Values
Community building should be based on the foundation of universally recognizedvalues. These include among others, good governance, the rule of law, democracy, humanrights, international law and norms. East Asian countries should work together to deal withthese matters as a common goal of the region.
(3) Openness, Transparency, Inclusiveness and ComprehensivenessEast Asia should promote openness, transparency, inclusiveness and comprehensiveness.
An East Asian Community should include governments as well as all elements of civil society;pursue partnership with other regional organizations and cooperation mechanisms such as
APEC, ARF and ASEM; and interact constructively with other international organizations
such as the UN and IMF. An East Asian Community should also cooperate with othercountries and regions which share its vision and make positive contribution to the process ofcommunity building in the region.
2. Architecture of Community Building in East Asia
(1) Importance of Functional Approach to Cooperation
As the functional cooperation is conducted in the areas of a wide-range of issues such as
Free Trade Agreements (FTAs)/Economic Partnership Arrangements (EPAs), finance,
environment, health, food security, transnational issues, etc., the regional cooperation should
be for the moment centered on the promotion of functional cooperation. This is called a1

“functional approach.” Such an approach is appropriate for the creation of a community inEast Asia, where enormous diversity and disparities may continue to exist in levels of
economic development, culture, ethnicity, religion, political principles, security policies, andso on.
(2) Key Role of ASEAN and Equal Partnership with Shared Ownership
ASEAN has played a key role in promoting regional cooperation in East Asia. In
particular, Bali Concord II with three communities (economic, security, and socio-culturalcommunity) proposal will continue to propel region-wide efforts for community building.
On the other hand, an East Asian Community must be based on the equal partnership. No
member should dominate or pursue hegemony in the community. It must be managed
democratically based on consensual and non-hegemonic practices.
(3) ASEAN+3 Summit and the East Asia Summit (EAS)
The ASEAN+3 Summit and all the other ASEAN+3 mechanisms should continue toplay major roles in East Asian Community building. The East Asia Summit (EAS) should bea forum for discussing broad strategic issues of interests of East Asia.
(4) Northeast Asian Cooperation
Closer Northeast Asian cooperation among Japan, China and ROK is an essential
foundation of an East Asian Community. The three countries should tighten Northeast Asian
cooperation by further utilizing the trilateral summit meeting on the occasion of the ASEAN+3
Summit, and consider additional meetings to be regularized.
(5) Importance of Institution Building
Institution building is essential for promotion of community building. For this purpose,
the ASEAN+3 Unit in the ASEAN Secretariat should be strengthened. The strong andeffective ASEAN+3 Unit could serve to promote information sharing leading to effective
policy coordination and to avoid undesirable side-effect of functional cooperation. Also, East
Asian countries should strengthen the networks of researchers and scholars through promoting
Track-II activities to support official processes in East Asia. Engaging all elements of civilsociety in functional cooperation is also necessary. East Asian countries are urged tostrengthen educational, media and youth exchanges.

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3. Functional Cooperation(1) Financial and Monetary Cooperation(a) Strengthening and Building on Chiang Mai Initiative (CMI)
The joint efforts and achievement of ASEAN+3 countries, such as the Chiang Mai
Initiative (CMI) and the Asian Bond Markets Initiative (ABMI), should be acknowledged tostrengthen financial cooperation in East Asia, having learned from the Asian financial crisis
in 1997-1998. Further steps should be taken to promote an advanced regional cooperative
system. Swap Arrangements of CMI is the most important mechanism for monetary andfinancial cooperation in East Asia. From this point of view, the possibility should be
explored of further expanding the function, expanding the size and further multilateralizing
the framework of CMI.
(b) Further Development of the Asian Bond Market
At present, major challenges concerning the development of the Asian Bond Market
include institutional barriers and technical hindrances. Tight exchange control,
underdevelopment of the credit grading system, imperfect settlement mechanisms and lackof attractive investment projects have impeded the healthy development of the Bond Market.
To further develop the Asian Bond Market, there are mainly 3 measures to be taken. They
are as follows: 1) to expand the size of the Bond Market, so as to increase the investment inregional bonds, especially the bonds issued by governments and financial institutions; 2) toincrease the bond supply. The Asian Development Bank should issue more bonds
denominated in the currencies of East Asian countries or an East Asian basket currency, so
as to facilitate the development of the regional bond market and provide technical assistancefor the market; and 3) to enhance information exchange and monitoring. An East Asian
rating agency may be set up for East Asian bond issuance, especially for small issues andsmall countries.
(c) Deepening the Dialogue on Exchange Rate Policy Coordination
The current global imbalances, which arose from the twin-deficits andinvestment-saving balance of the US, could affect sustainable economic growth in Asia. To
avoid negative impacts of these global imbalances some measures should be taken. While
the US could commit adjustment of investment-saving balance, Asian countries could adopt
appropriate macroeconomic and structural policies, especially for Asian emerging market
economies, combined with concerted action to cope with the risk of sudden and precipitous
movements in exchange rates. Dialogue should be strengthened regarding coordination on
exchange rate policy at the ministerial level and other existing processes including
ASEAN+3.
In this context, greater exchange rate flexibility in the context of a multiple currency
basket-based reference rate with a band is appropriate to be adopted on currencies of Asianemerging economies. A concerted action of individual countries to adopt greater flexibility3

in this way would provide several advantages. First, their independence ofeconomic/financial policy and capability to cope with economic shock outside the region
will be improved. Second, mutual effective exchange rates among Asian currencies will
be kept relatively stable. Third, exchange rate stability would further facilitate thefunctioning of the well established production and distribution networks in the region,
which has provided an important basis for regional integration.
(2) Investment Cooperation in East Asia
Investment cooperation is an important part of, and a great facilitator for, East Asian
community building. To promote investment cooperation, East Asian nations need to show
vision, commitment, and political will in the following points: 1) to improve domestic
investment environment including legal systems, transparency of information, approval
procedures, intellectual property rights protection, and mechanisms for dispute settlement; 2)
to implement the existing bilateral agreements on investment protection. Discussions on
FTAs/International Investment Agreements (IIAs) and intra-regional negotiations should beheld in order to construct an investment framework that will not only promote the regional
economic development but also fully reflect the interests of all economies concerned; 3) to set
up a system of networks for investment in East Asia. This system may consist of a network offlow of goods, a network of investment information, and a network of industrial parks forinvestment cooperation; 4) to establish a training center for investment cooperation in East
Asia. It is meant to improve the efficiency of investment administrations, the management ofenterprises in handling transnational businesses, and the competency of human resources in
the region; 5) to upgrade the financial and insurance service systems for investment
cooperation, and make full use of diplomatic resources to facilitate the overseas investment
and transnational operation of enterprises; and 6) to organize big projects for investment
cooperation. Big projects are crucial for successful investment cooperation. Governments
should play a coordinating role and jointly organize and promote big projects, especially for
infrastructure construction. At present, the priority project can be a pan-Asian transportation
network, including a pan-Asian railway, pan-Asian highway, and pan-Asian waterway.
Measures should be taken to coordinate the policies of transportation management so as toform a network of efficient and convenient transportation systems in East Asia.
(3) Cooperation for Energy Security(a) Institutionalizing Regional Energy Cooperation Framework
Energy security is the process to secure energy supply at reasonable cost in asustainable manner. East Asian countries should institutionalize energy policy cooperation
within a regional framework after the model of the International Energy Agency (IEA). This
would provide a platform for accommodating different policy objectives, creating a more
conducive environment for free exchange of ideas, seeking common grounds for4coordination and cooperation. Five major components are identified as integral torealizing this regional energy cooperation framework.
(i) Respecting and Complying with International Law
East Asian countries are urged 1) to comply fully with international law,particularly the 1982 United Nations Convention on the Law of the Sea, 2) to harmonize
their respective domestic laws and regulations with contemporary international law as far
as possible, and 3) [for Asian coastal states which have yet to participate] to join the 1988
Convention on the Suppression of Unlawful Acts against the Safety of Maritime
Navigation.
(ii) Coordinating Oil Stockpiling in East Asian Countries
East Asian countries should consider 1) coordinating their efforts in building up
sizeable oil stockpiles that are consistent with the needs of individual countries, 2)
sharing experiences and know-how in building up oil stockpiles, and 3) expanding
regional swap mechanism to meet sudden and temporary energy supply shortfalls.
(iii) Promoting Transnational Energy Projects
East Asian countries are encouraged to actively work out modalities of joint oil
exploration for mutual benefit. Other cross-border cooperation such as pipelines foroil/natural gas should also be explored.
(iv) Improving Quality of Energy Data
East Asian countries are urged to establish an effective regional energy information
system and statistical clearing house.
(v) Stepping-up Coordinating Efforts on Energy Maritime Security
East Asian countries are urged 1) to develop a regional sea-lane security scheme toensure smooth shipment of oil in the region, 2) to assist littoral states in ensuring
maritime safety in the Straits of Malacca, and 3) to engage in contingency planning tomultilaterally address potential environmental disaster in the scenario of oil spillage fromtankers.
(b) Developing Market for Conventional Energy
East Asia should promote more transparent market practices and make the Asianenergy market more responsive to market forces. East Asian countries are recommended 1)
to develop Asian oil markets to ease speculative oil price fluctuation and remove
impediments to trade and investment for energy sectors, 2) to develop Asian natural gas
markets to reduce their energy dependence on oil and oil-fired subsidiaries, and 3) toestablish East Asian Energy Consortium to explore cooperation in energy development in
the region and beyond and to conduct energy-related dialogues with extra-regionalgroupings for promoting understanding and building rapport for future cooperation.
(c) Promoting Energy Conservation and Alternatives
Besides securing and diversifying energy supply, East Asian countries shouldcollaborate to improve existing energy use, and explore alternative forms of energy,
5especially renewable resources. East Asian countries should share freely their expertise andcountry experiences in energy conservation. In this context, East Asian countries are urged1) to improve energy efficiency and conservation by promoting effective policies on energy
efficiency
andconservation,
sharingexperiencesandknow-howwithtechnologically-advanced countries, 2) to promote cleaner use of coal, and 3) to promoterenewable energy by engaging in feasibility studies of renewable sources of energy
including solar, wind, hydro, geothermal and biomass.
4. Promoting Regional Identity in East Asia
(1) Nurturing a ‘We’ Feeling
A regional community cannot exist without a shared regional identity. Fostering feelingsof empathy and identity should be encouraged by the members of the community to shareproblems, prospects and destinies of each other. Identity building belongs to the actors who
can care for each other and prosper each other. It is an evolutionary project of all East Asians
to develop ‘we’ feelings out of increasing mutual exchanges and understanding. East Asianpeople should learn from ASEAN’s historical undertaking for its community building.
(2) Accepting Cultural Diversity as a Foundation
Culturally, the region is extremely diverse. The region has inherited various world great
civilizations ranging from Confucian, Buddhist, Islamic, Hindu and Christian traditions. Suchdiversity in culture and religions should not be regarded as an obstacle but a rich foundation
for identity building. East Asian countries should promote mutual understanding of history andculture. Joint research activities on history and culture should be accelerated. Efforts to create
academic curriculums for East Asian studies from elementary to college levels should be
encouraged. East Asian countries should expand the role of communication. Increased
coverage of East Asian affairs in TV, radio, Internet, newspapers and magazines should bepromoted. Narrowing the digital divide among countries in East Asia is essential to share thebenefit of such communications.
(3) Narrowing the Development Gaps
Narrowing the development gaps between the developed East Asian countries anddeveloping countries such as Cambodia, Laos, Myanmar and Vietnam (CLMV) is crucial for
promoting regional identity in East Asia. The Initiative for ASEAN Integration (IAI) should be
expanded to an Initiative for East Asian Integration (IEAI).

(End)
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