ASEAN SUMMIT VIS-À-VIS INDIA AND USA.

ASEAN SUMMIT VIS-À-VIS INDIA AND USA.
Dr.Debesh Bhowmik

On 18 November 2012: The ASEAN Heads of State/Government and the Secretary-General of ASEAN gathered at the Peace Palace, Phnom Penh, Cambodia, for the 21st ASEAN Summit.They prepared Roadmap for an ASEAN Community,and made Master Plan on ASEAN Connectivity, signed Phnom Penh Statement on the Adoption of ASEAN Human Rights Declaration, Exchange of View on Regional and International Issues, and issued Leaders’ Statement on the Establishment of an ASEAN Regional Mine Action Center (ARMAC).
ASEAN Leaders agreed to sign, following documents :
- Phnom Penh Statement on the Adoption of the ASEAN Human Rights Declaration;
- ASEAN Human Rights Declaration (AHRD);
- ASEAN Leaders’ Joint Statement on the Establishment of an ASEAN Regional Mine Action Centre (ARMAC);
- Concept Paper on the Establishment of an ASEAN Regional Mine Action Centre (ARMAC)

Mr. Le Luong Minh, of Viet Nam, elected Secretary-General of ASEAN for 5 year term, January 2013 – December 2018. Leaders discussed the review and future direction of the ASEAN Plus Three cooperation and also exchanged views on regional and international issues which was 15th Anniversary of the APT Cooperation. Moreover, the Leaders took note of the Report of the East Asia Vision Group II, Memorandum No. 9 of the Network of East Asian Think-Tanks.They announced the joint statement of the APT Cooperation Work Plan, and the APT Plan of Action on Education: 2010-2017.For this,they cited the success stories of APT Cooperation, namely i) the “Workshop on APT Partnership on Connectivity” held on 15 June 2012 in Bangkok, Thailand; ii) the “APT Youth Leaders’ Symposium” held on 18-19 October 2012 in Phnom Penh, Cambodia; iii) the “APT Joint Cultural Performance: Unity in Diversity” held on 2-3 November 2012, in Siem Reap, Cambodia; and iv) the Track II Symposium on the Commemoration of the 15th  Anniversary of the APT Cooperation on 17-18 September 2012 in Beijing, China. The Leaders also welcomed the selection of Siem Reap City of Cambodia as the “Cultural City of East Asia 2012 within the framework of the ASEAN Plus Three” and the designation of the year 2012 as “Visit ASEAN Plus Three Year.”
The Heads of State/Government of the Member States of the Association of Southeast Asian Nations declared by oath are as follows:
REAFFIRMING our adherence to the purposes and principles of ASEAN as enshrined in the ASEAN Charter, in particular the respect for and promotion and protection of human rights and fundamental freedoms, as well as the principles of democracy, the rule of law and good governance;
REAFFIRMING FURTHER our commitment to the Universal Declaration of Human Rights, the Charter of the United Nations, the Vienna Declaration and Programme of Action, and other international human rights instruments to which ASEAN Member States are parties;
REAFFIRMING ALSO the importance of ASEAN’s efforts in promoting human rights, including the Declaration of the Advancement of Women in the ASEAN Region and the Declaration on the Elimination of Violence against Women in the ASEAN Region;

CONVINCED that this Declaration will help establish a framework for human rights cooperation in the region and contribute to the ASEAN community building process;
The brief of Their declarations can be classified as ,[i] dignity and rights. [ii]rights and freedom irrespective of race, gender, age, language, religion, political or other opinion, national or social origin, economic status, birth, disability or other status.[iii] Every person is equal before the law.,[iv] The rights of women, children, the elderly, persons with disabilities, migrant workers, and vulnerable and marginalised groups are an inalienable,[v] for  violating the rights granted to that person by the constitution or by law.,[vi] The enjoyment of human rights and fundamental freedoms must be balanced with the performance of corresponding duties,[vii] The human rights and fundamental freedoms of every person shall be exercised with due regard to the human rights and fundamental freedoms of others,[viii] objectivity, non-selectivity, non-discrimination, non-confrontation and avoidance of double standards and politicisation, should always be upheld,[ix] Every person has an inherent right to life which shall be protected by law.[x] No person shall be subject to arbitrary arrest, search, detention, abduction or any other form of deprivation of liberty,[xi] No person shall be held in servitude or slavery in any of its forms,[xii] No person shall be subject to torture or to cruel, inhuman or degrading treatment or punishment.,[xiii] Every person has the right to leave any country including his or her own, and to return to his or her country.,[xiv] Every person has the right to seek and receive asylum in another State in accordance with the laws ,[xv] No person shall be arbitrarily deprived of such nationality nor denied the right to change that nationality,[xvi] Men and women of full age have the right to marry on the basis of their free and full consent, to found a family and to dissolve a marriage, as prescribed by law.,[xvii] Every person charged with a criminal offence shall be presumed innocent until proved guilty according to law,[xviii] No person shall be liable to be tried or punished again for an offence for which he or she has already been finally convicted or acquitted in accordance with the law and penal procedure of each ASEAN Member State.,[xix] Every person has the right to the protection of the law against such interference or attacks,[xx] All forms of intolerance, discrimination and incitement of hatred based on religion and beliefs shall be eliminated,[xxi] Every person has the right to freedom of opinion and expression,[xxii] Every person has the right to freedom of peaceful assembly,[xxiii]every person has the right to participate in the government,[xxiii] Every citizen has the right to vote in periodic and genuine elections,[xxiv] ASEAN Member States affirm all the economic, social and cultural rights,[xxv] Every person has the right to work, to the free choice of employment, to enjoy just, decent and favourable conditions of work and to have access to assistance schemes for the unemployed,[xxvi] Every person has the right to form trade unions and join the trade union of his or her choice for the protection of his or her interests, in accordance with national laws and regulations,[xxvii] No child or any young person shall be subjected to economic and social exploitation,[xxviii] Every person has the right to an adequate standard of living for himself or herself and his or her family,[xxix] Every person has the right to the enjoyment of the highest attainable standard of physical, mental and reproductive health, to basic and affordable health-care services, and to have access to medical facilities,[xxx] The ASEAN Member States shall create a positive environment,[xxxi] Every person shall have the right to social security,[xxxii] Special protection should be accorded to mothers during a reasonable period,[xxxiii] Motherhood and childhood are entitled to special care and assistance,[xxxiv] Every person has the right to education,[xxxv]every person freely take part in cultural life, to enjoy the arts and the benefits of scientific progress,[xxxvi] ASEAN Member States should take steps, individually and through regional and international assistance and cooperation,[xxxvii]ASEAN members would guarantee the economic and social rights,[xxxviii] every human person and the peoples of ASEAN are entitled to participate in, contribute to, enjoy and benefit equitably and sustainably from economic, social, cultural and political development,[xxxix] ASEAN Member States should adopt meaningful people-oriented and gender responsive development programmes aimed at poverty alleviation,[xxxx] ASEAN Member States share a common interest in and commitment to the promotion and protection of human rights and fundamental freedoms which shall be achieved through, inter alia, cooperation with one another as well as with relevant national, regional and international institutions/organizations,[xxxxi] Nothing in this Declaration may be interpreted as implying for any State, group or person any right to perform any act aimed at undermining the purposes and principles of ASEAN.

In this context,we can add one important forthcoming programme To mark the 20th anniversary of the ASEAN-India dialogue partnership and the 10th anniversary of ASEAN-India Summit-level partnership, India is hosting the ASEAN-India Commemorative Summit in New Delhi on December 20-21, 2012. The theme of the summit is ‘ASEAN-India Partnership for Peace and Shared Prosperity’. In maintaining the future direction of ASEAN-India relations, the ASEAN-India Commemorative Summit will be the culmination of  several events being organized in celebration of the partnership. These include a number of Ministerial level Meetings, people to people initiatives, B2B activities and cultural programmes both in India and the ASEAN countries.

Summit as a further step towards raising the ASEAN-US partnership to a strategic level,since ASEAN is the United States'fourth largest export market. At the meeting, the United States and ASEAN welcomed the launch of the US-ASEAN Expanded Economic Engagement (E3) initiative a new framework for economic cooperation designed to expand trade and investment ties between the United States and ASEAN, creating new business opportunities and jobs in all eleven countries and endorsed the cooperation on science and technology in a new dimension. Besides, leaders discussed the importance of building the role and influence of the East Asia Summit so that it can effectively address pressing political and strategic issues in the region and they also discussed the importance of putting mechanisms and processes in place to peacefully manage disputes over competing claims in the South China Sea. "In this context, they expressed support for the ASEAN Foreign Ministers'Statement on "Six-Point Principles on the South China Sea" and called for early conclusion of a Regional Code of Conduct," it said.
At the meeting, the US government announced the creation of the Expanded ASEAN Seafarer's Training (EAST) program to improve counter-piracy training and education in the region.  
The ASEAN region is home to over half of the world's seafaring workers, it said, adding that the program, administered by the Maritime Administration under US Department of Transportation, will be expanded from its current pilot phase working with the Philippines.  
Meanwhile, to further enhance cooperation confronting the shared challenge of piracy, Washington announced its intention to join the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against ships in Asia.

Japanese Prime Minister Yoshihiko Noda, after meeting the ASEAN leaders, warned that a row over the South China Sea and West Philippine Sea could directly influence “peace and stability” in Asia. Other ASEAN members Vietnam, Malaysia and Brunei, as well as Taiwan, have claims to parts of the sea, which is home to some of the world’s most important shipping lanes and believed to be rich in fossil fuels. But China insists it has sovereign rights to virtually all of South China Sea and West Philippine Sea. Tensions have risen steadily over the past two years, with the Philippines and Vietnam accusing China of increasingly aggressive tactics to stake its claims. Tensions could rise further on US President Barack Obama’s arrival to join the East Asia Summit.Obama had previously angered China, and emboldened the Philippines, by calling for the rival claimants to agree on a legally binding code of conduct to govern their actions over the sea.

Lastly,the strategic role of Japan,USA, and China in the ASEAN+3 is quite important in economic dominance as well as political supremacy where India’s role as dialogue partner is becoming fade which leads India less integrated motivation since the concept of ASEAN+3 rejecting the hypothesis of ASEAN+4 turned a painfull solution of Asian integration in which USA’s role is vital and pivotal.

 

EURO CRISIS:AN EFFECT ON THE DEVELOPING COUNTRIES

EURO CRISIS:AN EFFECT ON THE DEVELOPING COUNTRIES
Dr.Debesh Bhowmik
International Journal of Business ,Management and Social Sciences,
Vol-II,Issue-3(I),November,2012,155-158

EURO CRISIS : AN EFFECT ON THE DEVELOPING COUNTRIES.

Dr.Debesh Bhowmik(International Institute for Development Studies,Kolkata)

Key words:Euro crisis , spill over effects,JEL-E62,F13,F33,

Objective

Euro crisis has huge spill over effects on both developed and developing countries through trade ,capital flows, finance , exchange rate adjustment and employment opportunities and these phenomenon would be studied in this paper.

The spill over effects.

As the global economy is rebounding from the crisis, there is widespread belief that the worst of the global crisis is over as output and trade are back to pre-crisis levels in 2010 in most of the emerging and developing world. However, the OECD countries still suffer from low growth and high fiscal deficits. The key issues that the world faces today are unsustainable fiscal expansion, inflationary pressure in some countries, deciding on the appropriate time to exit the extraordinary levels of public intervention in the immediate aftermath of the crisis, global co-operation to check macroeconomic imbalances and the quest for a new global economic regime.

Against this backdrop, ICRIER and Inwent jointly organised a two-day conference on , “Policies for Growth and Financial Stability: Beyond the Crisis – The Scope for Global Co-operation”, which brought together distinguished policy makers, regulators, practitioners and academicians for a dialogue on these issues. The conference focused on two specific issues. First, it took stock of major reports on the reform of the global financial system and the implementation of their recommendations through the G20 process. The second was an assessment of major fiscal, monetary and regulatory initiatives undertaken around the world after the crisis. The consensus was that the G20 had been quite successful in limiting the damage caused when the crisis initially broke out as well as in ironing out medium term issues like IMF and FSB reform.

A lecture on “Dealing with the Global Financial Crisis in Developing East and Southeast Asia” was delivered by Mr. C. Lawrence Greenwood at ICRIER on November 4, 2010. According to Mr. Greenwood, of the countries in the developing East and Southeast Asia, the two countries that escaped relatively unscathed from the crisis were India and Vietnam.

Mr. Greenwood pointed out that one of the continuing after effects of the global crisis has been a sharp rise in inflation rates in countries like China, India and Vietnam. This had prompted the adoption of tight money policies, flexible exchange rate management and fiscal measures to ward off a possible falling off in demand. He also pointed out that in countries like China, where the savings level is considered excessive, measures to transfer money to households have been introduced through increased expenditure on health, education and social safety nets. While structural reforms would take time to bear fruit, Mr. Greenwood said these, along with measures to promote regional co-ordination and the opening of intra-regional trade to reduce dependence on western economies, need to be pushed through to ensure sustained recovery.

In Fig-1,it was shown that on the inception of Euro crisis, the exports in intra-EU trade, extra-EU trade, and with USA, Asia and OPEC have tremendously fallen and started to increase since first quarter of 2010.In some trading partners , the index rose above the baseline 2008.It was happened due to depreciation of Euro in nominal terms. The most effected destination is USA and Japan but less affected area is in Asia. 

 

Fig-1,Euro Area export;2008=100

Low-income countries (LICs) are affected by developments in the Euro Area (EA) through several channels. Direct channels include trade, remittances, FDI and aid flows. At the same time, the EA also has indirect spillover effects on LICs, especially through global commodity prices.

·         The EA receives about 20 percent of LIC exports. About 30 percent of exports from LICs in Sub-Saharan Africa (SSA) and 20 percent of exports from Asia and CIS countries go to the EA. Commodity exports, in particular, play an important role in LIC bilateral trade links with Europe where fuel and crude material make up roughly 60 percent of LIC exports to Europe in 2008. Remittances and FDI from the EA are particularly important for LICs in Sub-Sahara Africa. Over 30 percent of SSA’s remittance inflows originate from EA. In other regions, the U.S.’s remittance role is generally larger. In addition, EA FDI dominates flows to CIS and SSA countries.

·         The EA is the largest donor across LICs, particularly for LAC and SSA where EA aid makes up more than 40 percent of total aid to these regions.

Empirical evidence suggest that developments in EA could have significant spillovers on LICs. Estimates from growth regressions suggest that trading partner growth has a significant impact on LIC growth. An empirical study using bilateral FDI data between EA and LICs suggests that EA growth is one driver of FDI flows to LICs, although the effect is much weaker than the size of the recipient economy. In addition, there is evidence that aid flows are pro cyclical with respect to the donors’ business cycle and could be influenced by donors’ fiscal situation, particularly when donors face a large negative shock.( IMF Country Report No. 11/185)

In analyzing data of EU ,we can say that both export shares of EU and Euro zone started to decline from 2005 which were 33.93% and 26.39% of the world respectively in 2010.Besides the import shares of EU and Euro zone reached the peak level in 2007 and then declined to 34.21% and 25.72% in 2010 respectively.(Table-1).

Table-1; Export and import of EU and Euro zone (value in million US$)

	1990	2000	2005	2007	2009	2010
Export/EU	1549094	2447635	4064021	5339902	4576065	5149361
% share	44.52	37.96	38.72	38.15	36.58	33.93
Euro area	1223684	1915380	3176885	4187862	3588796	4004355
% share	35.16	29.71	30.27	29.92	28.68	26.39
Import/EU	1606837	2508665	4131559	5515271	4632700	5253044
% share	44.78	37.65	38.25	38.70	36.56	34.21
Euro area	1250184	1900613	3103428	4123476	3513394	3949383
% share	34.84	28.53	28.74	28.93	27.73	25.72

 Source-UNCTAD-2011

Moreover, it is clear that the intra-trade of EU and Euro area had been fallen marginally with respect to 2000 but slightly improved in 2010 compared with 2009 when crisis began .(Table-2)

Table-2: Intra trade of EU(% of regional total)

	1980	1995	2000	2005	2009	2010
EU	62.2	67.2	67.7	67.4	66.5	67.2
Euro area	51.9	54.2	51.8	51.5	50.2	50.4

Source-UNCTAD-2011

The crisis has an impact on developing countries too in terms of trade shares. The exports from the developing economies to EU sharply fell to 16.2% and 14.7% respectively in 2010 in comparison to 18.2% and 16.5% respectively in 2005. Therefore, huge loss in trade incurred with Euro crisis to the developing countries. The most affected developing region is Asia whose exports to EU declined to 15.1% in 2010 compared to 17.0% in 2005 and Asia’s imports to EU fell to 12.9% in 2010 with respect to 14.8% in 2005.But, only 1% fell of both export and import shares from Eastern, Southern and Southeast Asian nations were observed. But, Western Asia lost too much as a result of Euro crisis. Because the export share from the region to EU declined to 13.5% in 2010 from 19.6% in 2005 and import shares fell to 27.9% in 2010 from 34.6% in 2005 respectively.

The export share from African developing countries to EU dropped sharply to 34.3% in 2010 from 39.9% in 2005 .On the other hand, the import share from African developing countries to EU fell down to 33.7% in 2010 with respect to 36.6% in 2005 respectively. On the contrary, the American developing countries lost only 1% trade share both in export and import shares in 2010 compared with 2005. India, too, confronted with severe effects of Euro crisis. Its export and import shares have drastically fell down to 18.4% and 12.0% respectively in 2010 compared with 22.4% and 17.4% respectively in 2005.(Table-3)

Table-3:EU Trade with developing countries(% of total regional shares)

	Export/Import shares	1995	2005	2010
Developing countries to EU	Export/	18.7	18.2	16.2
	Import	20.0	16.5	14.7
African developing countries to EU	Export/	43.9	39.9	34.3
	Import	43.5	36.6	33.7
American developing countries to EU	Export/	16.9	12.7	12.6
	Import	18.6	14.4	13.5
Asia’s developing countries to EU	Export/	16.4	17.0	15.1
	Import	17.7	14.8	12.9
Eastern,Southern,SouthEastern developing countries to EU	Export/	15.8	16.4	15.4
	Import	15.2	11.6	10.4
Developing countries of Oceania to EU	Export/	18.3	19.2	15.8
	Import	19.9	20.3	16.4
Developing countries of Western Asia to EU	Export/	21.0	19.6	13.5
	Import	37.9	34.6	27.9
India to EU	Export	27.6	22.4	18.4
	Import	26.9	17.4	12.0

Source-UNCTAD-2011

Euro Crisis: Impact on India

It is evident that the crisis in the Euro zone has already impacted emerging markets in general and India in particular. As global investors seek safe havens , liquidity has been removed from emerging markets. Many emerging markets, and especially India are dependent on this liquidity to finance the current account deficit and provide capital for investment. India is particularly vulnerable due to its large current account deficit which is financed to large degree by shorter term portfolio flows. As these have dried up the equity market  have struggled and rupee has depreciated sharply.

 “The Indian Government has introduced focused market schemes to diversify exports. So, the crisis in Europe should be seen as an opportunities for India to break into the market where they export”, says Rammu Deora, chairman, All India Shippers council. If the Euro zone crisis is not averted, India which has about a sixth of its total exports to the EU, will face unemployment in the lower income category, such as textiles, one of the biggest employers in textiles, including readymade garments, accounts for about a fifth of the total exports to Europe. The Euro zone crisis has eliminated the benefits of a weak rupee, which is down 20% in a year, to Indian exporters as the spend-thrift consumers in the continent do something they are not used to three decades-save.Companies that enjoyed cheap money from European Banks, such as Deutsche Bank and BNP Paribus, for expansion and acquisitions are beginning to feel the pinch as battered  lenders in the continent slam the doors on Indian firms.

If the Euro zone collapsed the impact on Indian growth will be severe, said Enrico Atanasio, Fiat India Automobile Ltd.

Table-4, Indo-EU Trade

	Exports($million)	Growth rate	Imports($million)	Growth rate
2006-07	26831	15.51	29856	14.84
2007-08	34535	28.71	38450	28.78
2008-09	39351	13.95	42733	11.14
2009-10	36028	-8.45	38433	-10.06
2010-11	46819	29.95	44540	15.89
2011-12	26421		24473

ET-15/6/2012

The European Union is a major trade partner accounting for as much as 20.2 per cent of India’s exports (in 2009-10) and 13.3 per cent of India’s imports. European Union countries imported roughly € 33.1 billion worth of Agriculture products, Fuel and mining products, machinery and transport equipment, chemicals, semi manufactured products textile and clothing products in 2010 from India. The EU exports to India amounted to €34.8bl, majority of which was machinery, chemical products and semi manufactured items which was almost 2.6 percent of EU exports. Bilateral trade between the two has been growing on an average of 9.6 per cent during 2006-10. EU services exports to India during 2010 was €9.8 billion and EU imports from India was €8.1 billion. That apart, the total FDI from EU during 2010 amounted to €3.0 billion while India also invested about €0.6 billion in the EU. In other words, a slowdown in the euro zone and the EU is likely to have a major adverse impact on India’s exports.

Moreover, Indian exports fell 4.2% to $25.7 billion in May from a year ago, pilling on more bad news for the economy struggling with the nine year low growth and facing rating downward to junk status. The outlook for exports for the coming months is uncertain as the Euro zone teeters on the brink of serious crisis, prompting the government to announce sops last week to push up exports. Imports also dropped 7.4% in May from a year ago to $41.9billion leaving a trade deficit of $16.3 billion ,a higher than the $13.9 billion in April but less than $18.5 billion in May last year. To note that 51% fall in Gold and Silver imports in May because of price rise.

The data suggest that sharp rupee depreciation has not helped exports as it has coincided with decelerated in global growth, particularly Europe. All the key exports sectors engineering goods(-15.67%),petroleum products(-26.07%), gems and jewellery (-9%) and readymade garments(-15.82%) reported negative growth.(ET-15/6/2012).The top three exports to the EU are Mineral fuels and products, electrical machinery and parts and apparel & clothing accessories amounting to 8646.81 million dollar,3770.30 million dollars and 3147.17 million dollars respectively in 2010-11.On the other hand ,the top three imports from EU are pearls & semi precious stones, nuclear  reactors, boilers etc and electrical machinery & equipments amounting to 9417.56 million dollar,8844.84 million dollar, and 5252.34 million dollar respectively in 2010-11.On the liquidity issue, India’s external debt denominated in Euros was found as 3.8% and FDI from EU is 3.0 billion Euro  in 2010.Moreover,about 26% of India’s reserves are held in Euro. So, India would face massive inverse effects due to break down of Euro in the offing.(ET-18/6/12)  

Apart from trade, the euro zone experience has some lessons for India. Whole sale debt funding has been the unmaking for banks in the Euro zone. While it is difficult to argue that banks should only raise debt resources through retail deposits, at the same time, the current episode shows that large scale reliance on whole sale debt, especially, from across borders may not be in the interest of financial stability. In this context, the Indian banking system has traditionally relied on retail deposits which despite higher cost; serve as a stable source of funding. Without necessarily shunning the option, any substantial shift towards whole sale debt funding may not be a desirable.

Conclusion

Euro debt crisis turned into financial crisis in EU which spill over into the international economies in which the developing countries had been suffering too much through imbalance in BOPs between EU and developing countries including in employment opportunities and exchange rate market which fell short of international liquidity in terms of Euro.ECB-IMFs bail out package,Draghi’s bond buying plan, banking union,restructuring convergence criteria might be likely to control debt crisis and fiscal deficit which must have impact on debt financing in developing countries too.

References

Bhowmik,Debesh.,2012,The Euro crisis:An Overview.,Paper selected for presentation in World Finance and Banking Symposium, Shanghai, China, Dec 19-20,2012

Eichengreen,Barry.,2011,The Euro’s Never-ending Crisis.,Current History,March,91-96

ECB,2012,Eurostat, and European Balance of Payments Statistics,March 2011AND

Economic Times,15/6/2012 and 18/6/12 ,

IMF,2011,IMF Country Report-11/185,World Economic Outlook-2011

UNCTAD,2011,UNCTAD Report-2011