What should be the Scope of Asian Economic Community?
Areas of Regional Economic Integration The scope of the proposed AEC should extend to all areas of mutual interest where the complementarities exist. The major areas of cooperation include monetary and financial cooperation, formation of a regional trade bloc, foreign direct investment and transfer of technology and skills, among other sectors. In what follows we outline some issues concerning cooperation in these areas. Monetary Cooperation for Exchange Rate Stability The experience of the past suggests that the region has suffered from severe exchange rate fluctuations. Absence of adequate foreign exchange safety mechanism forced the region to take resort to IMF packages that have cost several countries in the region several percentage points of GDP. Therefore, an important area of regional cooperation would be to create some mechanism for greater stability in real effective exchange rates. It is argued later in this volume that substantial regional funds under a possible Reserve Ban
