The uncoupling of Asia’s economy from the West is a myth, said Ifzal Ali, chief economist of the Asian Development Bank on Wednesday.
The two economies still move in tandem is the conclusion of the Asian Development Outlook 2007 report.
Speaking at the Asia Society, Ali said the myth had been based on the explosion in intraregional trade in East Asia. It was assumed that with growing markets in Asia, there was less need for the Asian economies to be linked to West.
A closer look of East and Southeast Asian trade figures, however, showed that 70% of intra-Asian trade was the export of parts, components and other intermediate goods from other Asian countries to China. China then reexported these in a finished product to the G# countries – the US, Japan and the EU.
In reality, 61.3 per cent of total Asian exports were eventually consumed in the G3.
Ali added that a study of the business cycles of Asia and the G3 showed that a downturn in the G3 was followed, with a year’s delay, by a similar slump in Asia.
The least economically integrated region of Asia, however, was South Asia. The ADB’s study showed that regional integration was almost solely market driven.
The key to such integration, in other words, was less about government fiat or preferential trade arrangements but about building the environment and infrastructure that allowed firms to trade across borders.