ISAS Working Papers

Given their historical colonial experiences and recent attainment of independence, unlike European countries, most Asian economies are fiercely independent and nationalistic in their economic and foreign policies. This is most noticeable in the case of services, although a regional approach to the sector has the potential to produce hugely beneficial economic gains in the medium term vis-?á-vis the growth and trade prospects in individual Asian countries. While the proposition for creating a single market in services for the Asian countries as a region may seem premature given that the talks for a comprehensive East Asian free trade agreement (FTA) are still in the future, rapid market-led implementation of an integrated regional services sector merits consideration given the ongoing economic crisis. Stylised facts from past experience seem to indicate that services could easily become an additional engine of growth for the region. However, given the small size of most of the economies in the region, for this engine to generate the necessary efficiency gains, the major countries of the Asia-Pacific region (starting with the 16 players of the East Asia Summit [EAS]) will need to operate as a single market. Dovetailing a strong services industry into the Asian integrated manufacturing economy will boost the efficiency of both sectors, as well as help the region to delink from its excessive dependence on the United States and European markets. Asia should look at a coordinated and cooperative model in developing services as the growth engine for the region and use the tertiary sector as a vehicle for a faster deleveraging of the regionÔÇÖs disproportionate dependence on merchandise exports. A case is made for greater voluntary and market-led rather than institutionalised regionalism in services.