Towards Formation of Close Economic Cooperation among Asian Countries

AbstractThere have been several attempts in the past for the formation of an Asian Economic Community (AEC) with a view to enhance continental welfare within stipulated timeframe. The formation of a Close Economic Relation (CER) among some of the vibrant economies of the region, particularly JACIK Member countries (ASEAN plus three plus one) would be of immense importance in attaining such a goal. Three alternative forms of comprehensive economic liberalisation schemes may be envisaged. In this paper an effort has been made to examine the implication of CER on the region using monopolistic version of Computable General Equilibrium (CGE) for the JACIK countries. The model has been used to examine the implications of complete liberalisation of trade, investment and movement of natural persons. The results show that the proposed CER may enhance global welfare as well as welfare for individual countries in the caucus. Following formation of the proposed CER, the absolute increase in regional welfare may go beyond US$ 210 billion per annum amounting to more than 3 per cent of the region’s GNP. The implications of the CER on the regional economy would be favourable in improving production efficiency, expanding exports apart from increasing returns on capital and labour.