Authors: Hadi Soesastro (CSIS, Jakarta) and Peter Drysdale (ANU, Canberra)
The idea that regional architecture in Asia and the Pacific is not up to the tasks it now needs to serve has been around for some time. It has been inspired in part by worries about the untidiness in the competing structures — across the Pacific, of APEC, and within East Asia, of ASEAN +3 and the East Asia Summit (EAS). There has also been a hankering after ‘robust’ regional institutions modelled on the arrangements in Europe or North America, however unsuited they are to Asia Pacific circumstances.
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What is different about the thinking that led to Prime Minister Rudd’s Asia Pacific Community proposal is that these worries are incidental to its main strategic motivation. Read more…
Author: Hadi Soesastro, CSIS, Jakarta
Climate change is perhaps the most controversial international issue today. The scientific debate on the need to limit GHGs (green house gases) that are responsible for global warming has not ended, but it is no longer the main issue at this point in time. The Declarations of both the G8 and the Major Economies Forum (MEF), held in L’Aquila (Italy) in July 2009, stated the leaders’ agreement [pdf] with ‘the scientific view that the increase in global average temperature above pre-industrial levels ought not to exceed 2 degrees celcius’.
The real issue is how this would be achieved. As of today, the planet is already 0.8 degrees celcius warmer than at pre-industrial time, and the rise in the world’s average temperature has continued to accelerate. Establishing an international climate regime is seen as necessary to deal with this global problem. This effort began with the agreement in 1992 of the UN Framework Convention on Climate Change (UNFCCC) that led to the adoption of the Kyoto Protocol in 1997 and its entry into force on 16 February 2005.
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Author: Hadi Soesastro, CSIS, Jakarta
By now a number of Indonesian polling agencies have perfected their method to do quick counts of the election results. The public has accepted their counts as being close to the official final result. In just a few hours after the closing of the voting booths Indonesians have a pretty good idea of the outcome of an election. This happened on 9 April 2009 with the legislative elections and again on 8 July 2009, the day Indonesians cast their vote to elect their President and Vice President for the period 2009-2014. This is a remarkable development.
The final, official count will be known in only about 10 days to two weeks. But at about 4pm on the day of the election, just three hours after the booths were closed in western Indonesia, it was clear that the incumbent, Susilo Bambang Yudhoyono (SBY), was the winner. By about 6.30pm when the quick counts have covered 90 to 99 per cent of the sample, there was no doubt that SBY and his running mate, the economic technocrat Dr. Boediono, won the election in the first round. There is no need to have a second round like in 2004.
It is a landslide victory. Read more…
Author: Hadi Soesastro, CSIS, Jakarta
The Asia Pacific region is fast becoming a core area, if not the core area, in the international system. A new regional architecture is required to help frame the cooperation with the Asia-Pacific core as well as shape regional strategies towards global issues. As a soon to be released PECC report suggests: ‘So long as the multilateral architecture fails to incorporate Asian economies in a manner central to systemic issues, these economies will remain secondary players on global issues and sometimes even regional issues. The world cannot afford this.’
The need to reassess Asia Pacific’s regional institutional architecture has been under discussion at the Pacific Economic Cooperation Council (PECC) since 2006. A PECC Task Force will publish a report on the subject within the next month. The relevance of this exercise was underlined by Australia’s Prime Minister, Kevin Rudd, in his address to the Asia Society AustralAsia Centre in Sydney on 4 June 2008, when he suggested a new vision for an Asia Pacific Community. Has the moment arrived for a significant transformation in Asia Pacific’s institutional architecture?
There are four basic functions that a regional architecture needs to address. Read more…
Authors: Hadi Soesastro and Peter Drysdale
Now that the dust has begun to settle, it’s time to assess British PM, Gordon Brown’s claim that the G20 Summit saw the creation of a new world economic order.
This was a remarkable event. In less than a year the leaders of a representative group of twenty the largest or most important economies in the world met for a second time to address the challenges of global economic crisis. They and their advisers have crafted a coherent set of strategies to turn the international economy around and to deal with the structural frailties that sent world markets into free-fall.
The crisis bears sobering witness to the interconnectedness of the global economy today. Open trade and open capital markets and the break-neck speed of the flow of ideas and technologies have delivered huge benefits through globalisation and lifted millions of people, especially in Asia, from poverty to relative prosperity on a scale of which there is no historical precedent. But, as we now see more clearly, this was also a global economy fraught with system risk, without institutions and structures of governance that gave proper attention to the global impact and repercussion of national policy strategies and market failures.
There are three major achievements out of London.
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Author: Hadi Soesastro
The top priority of the London Summit will have to be placed on cleaning up the global financial system. This has become crystal clear as various other measures taken at the national and global levels have brought about only meager results. But keeping global trade open must be given a prominent place in the Summit’s agenda. And leaders must go beyond airing the right rhetoric, which many did. Concrete actions, which remain wanting, must follow.
Global trade has already shrunk and will continue to do so unless real actions are taken. In fact, trade could become a fundamental part of the solution to the global economic crisis. Concluding the Doha Round could amount to a significant global stimulus package resulting from a trade deal. But most importantly, it could help reverse the growing economic nationalism that is manifested in various forms of trade and financial protectionism.
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Author: Hadi Soesastro, CSIS, Indonesia
East Asian members of the G20 must participate strategically in this emerging global forum. They need to make sure that the G20 can produce policies and actions that will help bring the global economy out of the current crisis as soon as possible. Existing international institutions have been helpless in dealing with the issues the world now confronts and are in dire need of major reforms. There is now no better forum than G20. Essentially, it will act as a ‘steering committee for the world economy’, as Barry Eichengreen aptly said of the G20, and this forum should now replace the G7 or G8 for good.
Yet the G20 is still very fragile. In part, this is due to its ad hoc nature. But it also suffers from problems of legitimacy in respect of how its membership is being determined. The problem has deepened with the inclusion of a few additional participants at the coming London Summit: why they and not others? The European members of the G20 are facing the greatest challenge from fellow Europeans on this issue although the EU already has a seat at the table.
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Special Author: Hadi Soesastro, Centre for Strategic and International Studies, Jakarta
Indonesia entered 2008 on a note of optimism. In the previous year, the economy grew by 6.3 per cent, better than its neighbours (with the exception of Vietnam and China). The government aimed at achieving 6.5 per cent growth in 2008. While, at the end of 2008, there are a great many anxieties about the impact of the global financial crisis on Indonesia and the region, the latest estimates suggest that Indonesia could still grow by 6 per cent in 2008. It could end up being a star performer in the region. This, the minimum growth rate to produce sufficient jobs, may be difficult to maintain in 2009.
Indonesia is an open economy, and must remain open. Although its banking system is much stronger than a decade ago, the economy remains vulnerable to a sudden halt and reversal of external financial flows.
Fortunately, the country faces this economic challenge with a much improved political situation at home. In 2008, Indonesia is entitled to celebrate a decade of democratization. It has undergone a remarkable political transformation. It successfully conducted democratic elections in 1999 and 2004 at the national level and, since 2005, has seen over 450 local elections take place without major incident. The fourth most populous country, home to the world’s largest Muslim community can also pride itself on being the world’s third largest democracy. Read more…
Author: Hadi Soesastro
In East Asia, Korea was the first to be hit by the global crisis. A report by Citibank in early October 2008 showed that the Korean economy was the most vulnerable to external financial shocks in the region, in terms of both the risk of sudden stop and the risk of sudden reversal of financial flows.
Having experienced the 1997-98 financial crisis, the region has established a currency swap arrangement, known as the Chiang Mai Initiative (CMI), to help each other in the eventuality of another such crisis. Eight years have elapsed, and a crisis is looming, but what remains uncertain is how these arrangements can be invoked and what would trigger their use. Korea has not even attempted to make use of the CMI to prevent a crisis from unfolding. Under the CMI, Korea can exchange a mere $17 billion with Japan and China, and perhaps hardly anything significant with the other ASEAN countries. In view of the magnitude of the potential problem, the size of the CMI is too small. The reality is that the CMI is still ‘an initiative’.
Instead, Korea’s President turned directly to Japan and China. In early October, he proposed a trilateral meeting of finance ministers of the three countries to coordinate policies to cope with the global financial crisis. He also proposed the holding of a summit among the three countries on the crisis, suggesting that ‘the three countries can wisely overcome the financial crisis if they join forces’. The most concrete and immediate swap of any significant amount ($30 billion) was provided to Korea by the US Federal Reserve. Read more…
Author: Hadi Soesastro
G20 countries must exercise leadership to wrap-up the Doha Round, fight unemployment with macroeconomic policies and strengthen safety nets to minimize calls for protection. A fund should also be created to assist emerging and developing countries in undertaking counter- cyclical fiscal measures. Regional surveillance processes, as in the 1997 Asian Crisis, could help support politically difficult policy measures.
Protectionist pressures around the world are on the rise. G20 leaders have made a strong commitment to maintaining an open global economy and to resisting the temptation to resort to protection in these difficult times. Yet one participant at the G20 Summit argued for an extensive increase in the common external tariffs of the regional trade arrangement it is a party to.
This sort of protectionism can be contagious. To halt this, world leaders should take three steps.
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Author: Hadi Soesastro
Australian critics of Prime Minister Rudd’s Asia Pacific Community initiative have got it wrong about the idea not being well thought out. Kevin Rudd’s initiative should be seen as an invitation to other leaders, policy makers, and thinkers in the region to join…in a serious discussion about how best the Asia Pacific region could be organized. If Rudd had come up with a fully-baked proposal, the exercise could be self-defeating. Evolving regionalism in Asia Pacific requires that all parties concerned should have an active part in the process, especially in the shaping of a new vision for the region… Indonesia should support Rudd’s initiative and the process of deliberations that will follow from it.
The new architecture can be built two main pillars. The one pillar is that of a revitalized APEC with a strong ASEAN Plus Three (APT) as its core in East Asia. This forms the economic pillar of the regional architecture. The immediate question is how to involve India in this process. The other, political security, pillar is that of a transformed East Asia Summit (EAS) that is supported by the ASEAN Regional Forum (ARF) at the working level. . . The EAS is already proclaimed as a leaders-led forum to discuss strategic issues. Indonesia needs to make sure that the EAS functions as such. My full piece is below
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