Executive Summary

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The Asia Cooperation Dialogue (ACD) was inaugurated in June 2002 in Cha-Am, Thailand, where 18 Asian Foreign Ministers met together for the first time.� The ACD is a continent-wide forum, the first of its kind in Asia.� More specifically, the ACD aims to constitute the missing link in Asia by incorporating every Asian country and building an Asian Community without duplicating other organizations or creating a bloc against others.� A key principle is to consolidate Asian strengths and fortify Asia's competitiveness by maximizing the diversity and rich resources evident in Asia.� The core values of the ACD are positive thinking; informality; voluntarism; non-institutionalization; openness; respect for diversity; the comfort level of member countries; and the evolving nature of the ACD process.

������� ��Since its inception, the ACD has rapidly developed in two dimensions, namely, dialogue and projects.� On the dialogue dimension, ACD Ministers have met annually at the ACD Ministerial Meetings in Cha-Am (2002), Chiang Mai (2003), Qingdao (2004), Islamabad (2005) and Doha (2006) to discuss ACD developments, issues of regional cooperation and ways to enhance and solidify Asian unity.� In between, Foreign Ministers also meet on the sidelines of the UN General Assembly in September to update each other on the progress of ACD project cooperation, to hold constructive discussions on international issues of concern and to strengthen the 'voice of Asia' in the international arena.

������� On the projects dimension, currently, many countries have proposed to be prime movers in 19 areas of cooperation, such as energy, agriculture, biotechnology, tourism, poverty alleviation, IT development, e-education and financial cooperation.

������� At the community level, Thailand hosted the First ACD Think Tanks Symposium in December 2004 and has put together an ACD Think Tank Network composed of academic institutions, development networks and research groups nominated by ACD countries to serve as the academic arm of ACD.� The objectives are to conduct in-depth study and support the development of the ACD as well as facilitate prime mover projects.

������ Currently, the ACD comprises 30 countries: Bahrain, Bangladesh, Brunei Darussalam, Bhutan, Cambodia, China, India, Indonesia, Iran, Japan, Kazakhstan, Republic of Korea, Kuwait, Lao PDR, Malaysia, Mongolia, Myanmar, Pakistan, Philippines, Oman, Qatar, Russia, Saudi Arabia, Singapore, Sri Lanka, Thailand, United Arab Emirates and Vietnam, with Tajikistan and Uzbekistan recently admitted at the Fifth ACD Ministerial Meeting in Doha, Qatar in May 2006.

������ The Fifth ACD Ministerial Meeting took place in Doha, Qatar between 23-24 May 2006. It was preceded by the Prime and Co-Prime Movers� Consultation on 22 May 2006, held for the first time at a high ranking official level to review the progress made in various ACD projects. The Consultation resulted in recommendations to the Ministerial Meeting in ��9 project areas, namely Energy, Finance, Agriculture, Tourism, E-Education, Environmental Education, IT Cooperation, Natural Disasters and Poverty Alleviation. ACD Ministers subsequently agreed on these recommendations.� The Ministerial Meeting had a wide-ranging discussion on cooperation in the areas of Energy and Finance. Ministers endorsed the establishment of the ACD Energy Forum and welcomed the drawing up of an ACD Energy Action Plan. Ministers reiterated the need to make productive use of Asia�s substantive savings, including revenues that accrue from the energy trade, and invest these in the ACD countries, which can be done through the Asian bond market. Pakistan�s proposal to host the 2^nd ACD Energy Forum and Thailand�s proposal to host the 1^st ACD Finance Ministers� Meeting were supported by the Meeting. �Ministers also agreed on the need for private sector participation in the ACD�s activities to ensure that the ACD produces tangible outcomes. �Ministers discussed the issues of membership and future directions and, in this connection, agreed to set up a small group comprising past, present and future hosts as well as Thailand, as the Main Coordinator, to give further study to these issues. �It was also agreed that an appropriate time to convene an ACD Summit in Thailand would be 2008-2009.

������ The Sixth ACD Ministerial Meeting will be held in Korea in 2007. �Kazakhstan will host the Seventh ACD Ministerial Meeting in 2008.

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1.� Background

The idea of an Asia Cooperation Dialogue - ACD - was initiated by Prime Minister Thaksin Shinawatra and was first raised during the First International Conference of Asian Political Parties held in Manila between �17-20 September 2000 by Dr. Surakiart Sathirathai, then Deputy Leader of the Thai Rak Thai Party, on behalf of his Party Leader, Dr. Thaksin Shinawatra, who suggested that Asia as a continent should have its own forum to discuss Asia-wide cooperation. �Afterwards, the idea of the ACD was formally put forward during the 34th ASEAN Foreign Ministers' Meeting in Hanoi between 23-24 July 2001 and at the ASEAN Foreign Ministers' Retreat in Phuket between 20-21 February 2002. �Both Prime Minister Thaksin Shinawatra and Foreign Minister Surakiart Sathirathai raised the idea of the ACD with various heads of state and government and foreign ministers and made various statements and speeches, receiving broad support and helpful comments and suggestions.

As a result, the First ACD Ministerial Meeting was held between 18-19 June 2002 ���in Cha-Am, Thailand. �This first Meeting was an historic and successful event that brought together countries representing the sub-regions of Asia and provided a venue where Asian countries could freely discuss issues of common interest and put forward measures to enhance mutual cooperation in all areas. �Ministers were enthusiastic in expressing their support for the ACD and in creating a formidable synergy within Asia. �Indeed, they agreed that the ACD represented a forum that could consolidate political will among Asian Governments and offer opportunities for them to develop common approaches to positive issues.

The ACD currently comprises�30 countries from East to West Asia and is the first forum ever that aims to eventually encompass all countries in Asia.

The main objectives of the ACD are as follows:

1)����� To promote interdependence among Asian countries in all areas of cooperation by identifying Asia's common strengths and opportunities which will help reduce poverty and improve the quality of life for Asian people whilst developing a knowledge-based society within Asia and enhancing community and people empowerment;

2)����� To expand the trade and financial market within Asia and increase the bargaining power of Asian countries in lieu of competition and, in turn, enhance Asia's economic competitiveness in the global market;

3)����� To serve as the missing link in Asian cooperation by building upon Asia's potentials and strengths through supplementing and complementing existing cooperative frameworks so as to become a viable partner for other regions;

4)����� To ultimately transform the Asian continent into an Asian Community, capable of interacting with the rest of the world on a more equal footing and contributing more positively towards mutual peace and prosperity.

The core values agreed upon at the Meeting are an important and unique aspect of the ACD. �The ACD is meant to serve as the missing link in Asian cooperation while constituting an informal and non-institutionalized forum for Asian Foreign Ministers to regularly exchange views on issues of mutual interest. �The ACD is an incremental and evolving process.� It is characterized by a top-down nature and emphasizes positive thinking, inclusiveness and the comfort level of all participants.

At the Cha-Am Meeting, Ministers agreed to develop two dimensions of the ACD, namely, dialogue and projects. �The dialogue dimension is aimed at promoting interaction and the participation of ACD Ministers and Government officials. �A continuous dialogue is seen as essential in maintaining a constant rapport, in particular between ACD policy makers. �On the projects dimension, countries are encouraged to volunteer to become 'prime movers' in areas of cooperation of their interest and to develop each project to the advantage of Asian countries.

2.� Dialogue Dimension

Several ACD inter-sessional and follow-up meetings were organized to keep ACD member countries updated and conduct close consultations among the ACD Coordinator and member countries, including the ACD Senior Officials� Trips to�ACD Capitals. Furthermore, ACD Ambassadorial Retreats have been held in Bangkok in July 2002, December 2002, June 2003 and June 2004, chaired by the Permanent Secretary for Foreign�Affairs of Thailand, and in November 2004, February 2005, September 2005, March 2006 and May 2006, chaired by the Deputy Permanent Secretary for Foreign Affairs of Thailand.�

In between the annual Ministerial Meetings, ACD�Breakfast Meetings (in September 2002, 2003 and 2005)�or High Tea Meetings (in September 2004) are held on the sidelines of the UN General Assembly where ACD Foreign Ministers update each other on the progress of ACD project cooperation, hold constructive discussions on international issues of concern and strengthen the 'voice of Asia' in the international arena.��

Thailand hosted the Second ACD Ministerial Meeting in Chiang Mai in June 2003. The Chiang Mai Declaration on Asian Bond Market Development was adopted at this Meeting.

China hosted the Third ACD Ministerial Meeting between 21-22 June 2004 in Qingdao, Shandong Province. ACD Ministers unanimously agreed that Pakistan be the next host of the ACD Ministerial Meeting in 2005 and Qatar in 2006. �ACD Ministers adopted the Declaration on Asia Cooperation and the Qingdao Initiative. �The former document provides a guideline for future cooperation in all fields among ACD countries that is aimed at attaining peace and prosperity in Asia. �The latter document focuses on issues of energy security through cooperation in energy-related fields, for instance, infrastructure development, exchange of information, joint exploration, alternative and renewable energies and human resource development.

Pakistan hosted the Fourth ACD Ministerial Meeting between 5-6 April 2005 in Islamabad.� The Meeting endorsed the "Guidelines for Granting the Status of ACD Partner for Development," which is aimed at engaging non-ACD countries and organizations in ACD

cooperation.� Qatar's and the Republic of Korea's offers to host the Fifth and Sixth ACD Ministerial Meetings in 2006 and 2007, respectively, were also accepted by the Meeting. Kazakhstan reiterated its offer to host the Seventh ACD Ministerial Meeting in 2008, as first proposed during the ACD Ambassadorial Retreat in November 2004. �Thailand's offer to host the First ACD Summit was welcomed by the Meeting, the timing of which will be discussed at a later date.

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ACD Ministers also adopted the Islamabad Declaration and the Islamabad Initiative. �The former document reflects the discussion and affirmation of ACD countries towards the future direction of the ACD whilst the latter reflects the proposals on economic cooperation in Asia of the academic experts that attended the High-Level Seminar.

����������� Qatar hosted the Fifth ACD Ministerial Meeting in Doha, Qatar between 23-24 May 2006. It was preceded by the Prime and Co-Prime Movers� Consultation on 22 May 2006, held for the first time under the ACD framework so that member countries can update each other on the progress made in their respective project areas and make recommendations to submit to Ministers for consideration and endorsement. The Consultation was attended by high-level representatives from ACD member countries, who reviewed the progress made in various ACD projects and made recommendations in 9 project areas, namely Energy, Finance, Agriculture, Tourism, E-Education, Environmental Education, IT Cooperation, Natural Disasters and Poverty Alleviation. ACD Ministers subsequently agreed on the recommendations.

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The Ministerial Meeting had a wide-ranging discussion on cooperation in the areas of Energy and Finance. Ministers endorsed the establishment of the ACD Energy Forum and welcomed Indonesia and the Philippines� offer to coordinate work on drawing up an ACD Energy Action Plan, which should put priority on promoting energy security, research and assessment on energy, energy infrastructure development and encouraging member countries to explore the possibility of re-investing revenues that accrue from the energy trade in the ACD countries. The Meeting also supported the convening of the 2^nd ACD Energy Forum in Pakistan in November 2006 and other activities in the area of energy to be hosted by Kazakhstan and the Philippines. Ministers reiterated the need to make productive use of Asia�s substantive savings, including revenues that accrue from the energy trade, and invest these in the ACD countries, which can be done through the Asian bond market. Therefore, Ministers noted the outcomes of the High-Level Seminar on �Enhancing Financial Cooperation Through Development of an Asian Bond Market� held in March 2006 in Thailand, which will serve as useful substantive inputs for the 1^st ACD Finance Ministers� Meeting to be hosted by Thailand later in 2006. ��

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Ministers also agreed on the need for private sector participation in the ACD�s activities to ensure that the ACD produces tangible outcomes.� Ministers discussed the issues of membership and future directions and, in this connection, agreed to set up a small group comprising past, present and future hosts as well as Thailand, as the Main Coordinator, to give further study to these issues.� It was also agreed that an appropriate time to convene an ACD Summit in Thailand would be 2008-2009.� Tajikistan and Uzbekistan were accepted as the 29^th and 30^th members of the ACD.� The Republic of Korea�s and Kazakhstan�s offers to host the Sixth and Seventh ACD Ministerial Meeting in 2007 and 2008, respectively, were accepted by the Meeting.

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�The Doha Declaration was adopted by the Meeting. In it, ACD Ministers reaffirmed their commitment to the ACD�s goals and core values while recognizing the need to promote a more effective and focused cooperation, particularly in areas with the most potential.

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3.� Projects Dimension

A number of ACD countries have expressed interest and volunteered to become prime movers in the area of cooperation that best matches their expertise and interests. �For practical reasons, project cooperation will proceed on a voluntary basis and need not require a consensus from all ACD countries.

3.1� Asian Bond and Financial Cooperation

An important development in the ACD is the efforts to promote the Asian Bond Market Development Initiative. There are currently 5 different frameworks that deal with the issue of Asian Bond, namely, APEC and ASEAN+3 (focusing on supply and cross-country infrastructure development), Executives' Meeting of East Asia-Pacific Central Banks or EMEAP (focusing on the demand side and Asian Bond Fund), ASEM (research on the potential of an Asian Bond market and a Eurobond market) and the ACD.

Under the ACD framework, Thailand has set up a Working Group on Financial Cooperation in June 2003, serving 3 purposes: (1) to render political support for the initiative by resorting to technical work from other forums; (2) to expand geographical coverage of the Asian Bond Market Development Initiative; and (3) to provide additional technical work where appropriate. The Working Group Meeting was held on 12 May 2003 in Bangkok. ������It drafted the Chiang Mai Declaration on Asian Bond Market Development, which was adopted with the political blessing of ACD Ministers at the 2nd ACD Ministerial Retreat on 22 June 2003. �The ACD became a "missing link" in that it was the only forum to announce the political support of Asian countries for the development of an Asian bond market. �Such political impetus will help increase the credibility of the bond and expedite the bond development process in the region.

At the Second ACD Ministerial Retreat, Ministers offered full support for the development of a regional bond market, and approved the essential role of the Working Group as the main forum for experts in this field to interact, discuss and exchange views on Asian Bond Market Development.

To carry forward the momentum of Asian Bond Market Development, Thailand hosted 2 consecutive meetings in order to promote both the demand and supply sides of the Asian bond market. �First, an ACD Special Experts� Group Meeting was held on 27 March 2004 in Bangkok. A mutual view was reached at this Special Experts� Group Meeting that there was a need to seriously undertake relevant work to promote the supply of Asian bonds denominated in Asian currencies.

Subsequently, the �ACD Informal Meeting on Promoting Supply of Asian Bonds� was held by Thailand on 1 May 2004 in Bangkok. �Participants to the Meeting included representatives from the Ministry of Finance and the Central Bank of each ACD member country. �The Meeting recognized the need to create sufficient supply of bonds by regularly issuing investment-grade, local currency denominated bonds at different maturities to create benchmark yield curves.� The Meeting also recognized the need to find ways and means to have these bonds traded actively across countries with ample liquidity in the region and the world.

During the ACD Breakfast Meeting in New York in September 2005, Ministers took note of the progress of the Asian Bond Market Initiative as reported by Thailand and agreed on the importance of financial cooperation in the ACD forum. The Ministers also reaffirmed their commitment to further develop the Asian Bond Market Initiative to enhance the financial infrastructure of member countries as well as give Asia an opportunity to manage

its own wealth. The Meeting thereby supported Thailand�s proposal to host the First ACD Finance Ministers� Meeting to move forward the Asian Bond Market Initiative.

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To lay the substantive groundwork for the First ACD Finance Ministers� Meeting, Thailand organized a High-Level Seminar on �Enhancing Financial Cooperation Through Asian Bond Market Development� between 24-25 March 2006 in Bangkok.� The Seminar brought together more than 150 participants comprising high-level officials from ACD member countries� Ministries of Finance, Central Banks, relevant regulatory agencies as well as representatives from key market institutions, private practitioners and academics.� Participants held policy-related and technical discussions on key issues related to Asian Bond Market development, including promoting the supply of Asian bonds, structuring demand and creating an environment conducive to developing bond markets in Asia.� Representatives of the private sector also shared their views on Asian Bond Market development, which included the practical concerns of investors that have to be considered in order to strengthen investor demand for Asian bonds.� The outcomes of this Seminar will serve as key policy recommendations for the First ACD Finance Ministers� Meeting and have been uploaded onto the ACD website at www.acddialogue.com.

����������� Thailand plans to host the First ACD Finance Ministers� Meeting later this year in Phuket to accelerate the development of the Asian Bond Market Initiative in the ACD framework. �The main objectives of the Meeting are to expand the geographical coverage of this Initiative beyond that of other forums currently carrying out technical work on this Inititative, to propose ways of drawing savings in Asia to invest in projects beneficial to Asian countries and to enhance political support for the Initiative.

3.2� Prime Movers and Areas of Cooperation

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At present, many countries have proposed to be prime movers in 19 areas of cooperation as follows

Some highlighted activities that have been organized include the following:

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�Japan hosted the Workshop on Strengthening Legal Infrastructure on 21 May 2004 in Tokyo.� The Meeting agreed to have small experts� meetings in selective legal areas in order to move forward this project.� Japan also hosted the Workshop on Environmental Education on�� 7-8 June 2004 in Tokyo. A second meeting on Environmental Education, with an emphasis on green production and green life, was held between 20-21 September 2005 in Tokyo. The Third Dialogue on Environmental Education for Sustainable Development will be held between 14-15 June 2006 in Sendai.

China hosted the ACD Agricultural Policies Forum in Beijing, attended by 18 member countries, on 10-12 January 2005.��The Meeting exchanged views and experiences on agricultural policies�as practiced by each country and it was agreed that each country will become an agricultural mover for a specialized product based on their advantages and that future policies will promote trade of agricultural products amongst member countries.

Indonesia hosted the First ACD Energy Forum between 26-28 September 2005 in Bali. The Meeting emphasized the importance of energy in supporting economic development and industrialization in Asia and agreed that the ACD, composed of some of the world�s major oil producers and consumers, has great potential to cooperate in this area. The Meeting, therefore, agreed to draw up an ACD Energy Action Plan.� Pakistan has volunteered to host the Second ACD Energy Forum in November 2006.��

Cambodia hosted the 3^rd ACD Tourism Business Forum between 24-25 April 2006 in Siem Riep.� Member countries agreed to step up cooperation in the area of tourism and considered the Road Map for ACD Tourism Cooperation, drafted by Thailand, which covers such areas as tourism for poverty alleviation, human resource development and sustainable tourism. The Meeting also agreed to focus on priority areas where integrated efforts would not only be desirable, but also possible and can produce concrete results within the agreed timeframes.

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5.� Future Geographical Coverage

On the issue of ACD geographical coverage, a number of countries have indicated their interest in participating in the ACD. As Coordinator, Thailand has been in close consultations with existing ACD participants so as to ensure that the inclusion of new members will increase a certain level of equal representation of each sub-region of the Asian continent in ACD, while preserving the comfort level of current ACD member countries.

At the Second ACD Meeting in Chiang Mai on 22 June 2003, ACD Ministers accepted the admission of Kazakhstan, Sri Lanka, Oman and Kuwait into the ACD process. �Likewise, ACD Ministers approved the applications to the ACD of Iran, Mongolia and the United Arab Emirates at the Third ACD Meeting in Qingdao on 22 June 2004. �New member countries can participate in ACD activities organized after the ACD Ministerial Meeting at which they were admitted and their Foreign Ministers will be invited to attend the ACD Ministerial Meeting in the following year.� In addition, a positive decision was also made at the Third ACD Ministerial Meeting on the application to the ACD of Bhutan.� However, at the request of Bhutan for its need to complete domestic formalities, the inclusion of Bhutan was deferred until the ACD Breakfast Meeting on 27 September 2004, during which Bhutan�s status as a full member of the ACD was confirmed.� Bhutan formally participated in the ACD process at the Fourth ACD Ministerial Meeting in Islamabad. At the Fourth ACD Ministerial Meeting, ACD Ministers approved the applications of Russia and Saudi Arabia to join the ACD.

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At the Fifth ACD Ministerial Meeting, Tajikistan and Uzbekistan were accepted as new ACD members, making for a total of 30 current members.� Both countries will formally participate in the Sixth ACD Ministerial Meeting to be held in the Republic of Korea in 2007.� The Meeting also discussed the �Guidelines for ACD Membership� and agreed to set up a small group to give further study to this issue, as well as to the issue of future directions for the ACD and make recommendations for Ministers� consideration at the next Ministerial Meeting in Korea.

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Updated June�2006

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