Four months into the Covid-19 pandemic, the world is still facing a health crisis and the prospect of lasting economic stagnation. International economic cooperation will be vital to managing the crisis and supporting recovery through trade, stabilising markets, rapid reopening of business supply chains and resumption of international travel. Countries in Asia are struggling to reconcile health imperatives with economic revival. Failure to navigate judiciously between these two will cause avoidable deaths, intensify economic hardship (highly regressive within countries and across the globe) and deepen social disruption.
The task of defining a sustainable way forward is urgent. Strategic competition between the United States and China makes a coordinated global response more difficult than in previous crises. On account of their interconnectedness, their current weight in global production and their growth potential, Asian economies could be central to global recovery. Struck first by the virus, they are positioned to restart their economies sooner. A compact for regional cooperation between major Asian nations can therefore be globally significant.
An Asian expert group, of which we three are members, was convened by the Asian Bureau of Economic Research. Its Asian Covid-19 recovery strategy, released on June 3, calls for ASEAN+6 nations (ASEAN’s 10 members plus China, Japan, South Korea, India, Australia and New Zealand) rapidly to coordinate financial, trade, public health and food security
action, and, through this leadership, encourage the United States and Europe to join their initiative.
The paper identifies six important objectives for this initiative:
Persuade global central banks and finance ministries to expand bilateral currency swap arrangements and agree on a sizeable new issuance of the IMF’s special drawing rights (SDRs) to create a stronger regional financial safety net. This would expand macroeconomic policy space for developing countries (within the region and globally) thereby serving a central Indian interest.
Support the development, production and equitable distribution in Asia of diagnostic tests, a vaccine, and treatments through collective commitment of funds to the WHO’s Covid-19 Tools (ACT) Accelerator and the expansion of the Covid-19 ASEAN Response Fund to include ASEAN+6 nations.
Keep regional medical and food markets open. It is essential to avoid restrictions on trade in medical equipment and supplies after critical domestic needs have been met. With its important role in pharmaceutical goods trade, India is seen as a central player in this regime and has led by example. Similarly, regional food security will depend on access to international markets and the removal of any export restrictions that have been imposed. Current bilateral initiatives to keep food trade open can be consolidated into a regional agreement.
Speed up the development of protocols for health certification for international travel. This will fast-track the resumption of international commerce as well as travel for study, scientific exchange, temporary labour movement, and tourism. Getting experts together to work through the issues is the first step.
Embrace digital transformation that Covid has brought to health management. Asia can initiate a proactive agenda for collective governance of digital infrastructure that includes regulatory coherence, privacy standards and data sharing. This is now essential to new work practices, production innovation, supply chain management and delivery of goods and services, including government services.
Conclude the Regional Comprehensive Economic Partnership (RCEP) agreement immediately to ensure regional trade solidarity. Early conclusion of the RCEP with 15 members is on the slipway and will send a global signal on Asia’s willingness to maintain open markets for trade and investment, and to ensure food security. The RCEP-15 countries are committed to economic cooperation with India; keep open a path for eventual Indian membership; and to promote broader economic cooperation with South Asia.
By design the report is ASEAN-centred, as this helps to circumvent well known strategic tensions in the region. Despite this India has reasons to engage wholeheartedly. One is India’s economic, political and intellectual leadership in South Asia, a region with strong growth potential but dependent on stable regional and global rules. Prime Minister Modi’s initiative in convening a summit meeting of leaders of the South Asian Association for Regional Cooperation (Saarc) countries as early as March 15 was a landmark in this regard.
Second, India’s economic heft and growth potential; its balanced economic and political relations with the US, China, Europe and Japan; and its powerful voice in regional financial institutions, including the Asian Development Bank, the New Development Bank (Brics Bank) and the Asian Infrastructure Investment Bank (AIIB), all make its presence indispensable. To these more formal links one should add PM Modi’s energetic personal diplomacy and India’s links to other impacted large emerging markets such as Russia, Brazil and South Africa through the Brics grouping.
A third reason is India’s presence and standing in the G20, where it is a standing co-chair of the Framework Working Group (under the Finance track) and will hold the rotating presidency in 2022. One might also mention its close ties with countries in sub-Saharan Africa, which are at an early stage in the pandemic. Like ASEAN, these countries welcome India’s constructive human and financial engagement in their region.
The political foundations for accelerated regional policy action in East Asia were laid at a summit of ASEAN+3 (10 ASEAN leaders together with China, Japan and Korea) on April 14. That meeting committed to health and economic policy coordination across the participating countries. Indonesia played a crucial role in that initiative, which provides an example of how strategic tensions need not militate against constructive cooperation. Indonesia’s heft in ASEAN (as well as its G20
membership) permits it, and ASEAN as a collective, to work with key neighbours in meeting the emerging challenges of dealing with the virus.
Asia can act to implement this agenda through its ASEAN, ASEAN+3 and ASEAN+6 arrangements, engaging the East Asian Summit countries including the United States and Russia, and APEC and G20
forums, while stepping up to lead WTO and IMF reforms. Coordination through regional and multilateral frameworks will increase the capacity of all Asian nations to contribute constructively to regional and global recovery.
Bery was director-general, National Council of Applied Economic Research, New Delhi. He is currently Non-resident Fellow at the Brussels think-tank Bruegel; Basri is Professor at the University of Indonesia and former Indonesian finance minister; Peter Drysdale is Emeritus Professor of economics and Head of the Asian Bureau of Economic Research in the Crawford School of Public Policy at The Australian National University. They were among the contributing experts to the paper An Asian Strategy for Recovery and Reconstruction after Covid-19 (available here: eaber.org/covid19)