Commentary: A quixotic dream for a patchwork continent

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Commentary: A quixotic dream for a patchwork continent
By William Pesek Jr. Bloomberg News
WEDNESDAY, FEBRUARY 15, 2006
The next time you think your job is impossible, think of Haruhiko Kuroda. The soft-spoken 61-year-old runs the Asian Development Bank, which may not seem like a huge deal to investors.

After all, it's not the International Monetary Fund or even the World Bank. Based in the Philippines, the lender is known for making loans to countries like Cambodia, Mongolia and Papua New Guinea.

Less known is its role in accelerating development and reducing poverty in China and India. When you consider how many investors and executives are pinning their hopes for prosperity on those two nations, the development bank's importance becomes more apparent.

Kuroda is taking on another task of great significance to investors: bringing Asia's booming, yet disparate, economies together.

It's not that the Oxford-trained economist and former Ministry of Finance official is a glory hound. Rather, he is one of the few policy makers who understand the importance of greater cooperation in Asia and who are in a position to do something about it.

"Countries working together can do much more than they can alone," Kuroda said in Tokyo last week. "They can create more growth, solve more problems, attract more investment, jobs and opportunities and consolidate the significant gains of recent decades."

Asia is already home to many of the world's most vibrant economies. In 2005, Asian stocks rose 22 percent in U.S. dollar terms, according to the Morgan Stanley Capital International Asia-Pacific index. Rallies were far bigger in local currency terms. For example, markets in India, Japan and South Korea gained 40 percent or more.

But such strengths do not lighten the task of integrating East Asia's 13 economies and that of India. The region's biggest economies - Japan, China and South Korea - are barely on speaking terms amid unresolved disputes over World War II. Asian nations also are far more disparate than the 12 euro-area members.

When I asked him about all this, Kuroda put a positive spin on things. "It won't be easy," he said. "But increasing economic integration could affect politics."

The point is valid. While Japan and China have rarely been further apart politically, they've never been closer commercially. Kuroda hopes that economic links will help overcome the legacy of Japan's wartime aggression last century.

Recent comments by Japan's hawkish foreign minister, Taro Aso, have not helped. On Feb. 4, he said Taiwan's high education standards were the result of techniques taught under Japanese colonial rule, which ended in 1945. Aso also achieved something remarkable: He brought Taiwan and China together on an issue. Both governments denounced the statement.

Logistics, too, are an obstacle to integration. Because Asia lacks any equivalent of groupings like the European Union, the Organization for Economic Cooperation and Development or the North Atlantic Treaty Organization, there is no platform to undertake integration seriously. The Asia-Pacific Economic Cooperation forum has become even more toothless in a post-Sept. 11 world; its talks these days focus almost solely on terrorism.

The gulf between the 10 members of the Association of Southeast Asian Nations raises other problems. Within the group are democracies, communist regimes, authoritarian governments and military leaders. Singapore, with per capita income of $23,636, grapples to find common economic ground with Laos, where per capita income is $372. Amid such diversity, the goal of linking Asia's currency, bond and stock markets may seem unreachable.

Yet Kuroda is undeterred. After a year in the job, he is pushing for integration more forcefully than anyone in Asia has done before. While some proposals seem like pipedreams - a shared currency, for example - it's heartening to see someone with his background leading the charge.

One immediate goal is creating an Asian entity resembling the Group of 7 industrialized nations. Such a grouping of finance ministers and central bankers "will be extremely useful and will promote regional currency and financial stability," Kuroda said.

After all, what has the G-7 done for Asia lately? And does the G-7 really matter anymore? While the group - along with Russian policy makers - met in Moscow on Saturday, the event barely registered with markets, for the G-7 holds no sway over economies that influence financial trends most.

Developments in China and India are bolstering commodity prices and affecting global labor costs in unprecedented ways. Asian central banks, which have more than $1 trillion of U.S. Treasuries, also hold the cards when it comes to U.S. interest rates and the dollar. If they dump U.S. debt, the dollar plunges.

The Asian Century will shake up the global economy, keeping the world's richest nations on the defensive. While some may think Asian integration is unlikely, Kuroda hopes to prove them wrong.

"Asia is changing so fast, and that means the needs are changing fast, too," Kuroda said. "It's going to be a long, long process, but we're working on it."