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By Eric Teo Chu Cheow When the world's central bank governors and finance ministers gathered in Singapore for their annual meeting, Europeans underscored the mutually beneficial and growth-strengthening roles of Asia and Europe/Euro zone, as the twin engines of the world economy over the next 12 to 18 months. Europe may have gone through a bad economic patch over the past few years, however the major economies of the Euro zone seem to be recovering well lately. The Euro zone remains a hub of technological innovation and expertise in various fields. In fact, the original members of the Euro zone are also probably experiencing a spurt of competitiveness from this potential "injection" of new members into the zone, as indicated by their bullish stock markets. On the other hand, the UK's growth seems to be slowing down thanks to the British economic cycle being more closely tied to the US. German, French, Spanish, Dutch and Italian growths all appear to be steaming ahead, thus leading the Euro zone forward in one of its best economic performances in recent years. European expatriation towards Asia has also risen. For example, the French have increased their expatriation to Singapore by almost 19 percent in the past year, as more French seek opportunities and business deals in Asia today. This conducive business climate in Europe is partially attributed to the favorable cost reduction in European businesses, thanks to painful adjustments despite huge social fall-outs, such as France's "failed" employment reforms last spring. Even the French are today slowly becoming more amenable to restructure, as they realize the impending socio-economic costs, which will dawn upon them, given their huge social security burdens coupled with a declining population. Productivity has actually gone up in both Germany and France, and this trend should continue, leading the Euro zone to a healthier and more sustainable growth in the coming months. It was in this context of Europe's recent "recovery" and Asia's spectacular economic "rise" that the Sixth Asia-Europe Meeting or ASEM took place on 10-11 September in Helsinki, Finland. Asia appears keen to learn from Europe's experiences in establishing an economic and financial union. Voices at the IMF/World Bank meeting in Singapore were calling for an economic and monetary union along the lines of the European Union, especially with the Euro zone flourishing today and more and more "new" European economies wishing to join the Euro zone. Based on market trade forces at play, East Asia is becoming more and more integrated, as goods, services and human resources flow across the region, warranting due consideration for a true trading entity. Following this argument further, with ever-increasing trade volumes, services and human resources flowing across the region, there may come a need for a common Asian monetary unit or currency to facilitate and enhance these flows, just as the Euro zone has amply shown. Taking a leaf from the European experience, economic integration would necessarily bring about financial integration of the region; but the debate today is on when this "threshold" would be eventually reached for financial integration to come about "naturally", setting the stage for an Asian economic union. Moreover, the Euro zone's financial integration could perhaps be credited for the recent sound performances of France and Germany, another factor that weighs in favor of Asia to seriously ponder a future economic and monetary union. Asia may be at the cross roads of its own economic and financial destiny. The author is a council member of the Singapore Institute for International Affairs. (China Daily November 6, 2006) |
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