Business leaders in Baltimore and Washington have selected former Time Inc. executive Barry Zorthian to be initial president of the Baltimore-Washington Regional Association, an organization in the formative stages since 1975 that is designed to promote the two metropolitan areas as a single "common market."

Zorthian, who was the chief spokesman at the U.S. Embassy in Saigon for four years during the Vietnam war, will head what is expected to be a small staff to promote the entire region nationally and overseas, seeking to attract new employers.

"Combing the two metropolitan areas for marketing-purposes more accurately reflects the real nature of our economy," Zorthian commented yesterday. He noted that the federal government and Baltimore's international port already are the two dominant economic forces in the region, providing a rationale for broader efforts.

Business executives who have formed the new regional association said it isn't designed to supplant the various economic development agencies in the two cities and suburban counties, but rather to complement existing activities by drawing attention to what would be the nation's fourth-largest metropolitan market if the Baltimore and Washington areas were combined.

Knox Banner, head of the D.C. government's office of business and economic development, praised the new venture yesterday and revealed that Mayor Marion Barry Jr. will ask the City Council to approve spending $50,000 in the fiscal 1981 budget for a membership in the common market for the District.

"By joining together, we are not the 7th- or 11th-largest markets but have become 4th," Banner said. "Various jurisdictions will continue to vie for new businesses, but meanwhile we have become a more viable market, nationally and internationally."

Banner said Mayor Barry "has indicated his strong support for it, too."

Initial funds for the regional marketing program have come from businesses in the two metropolitan area -- $150,000 from Washington and the same amount from Baltimore. The common market also is seeking a share of Maryland economic development funds because a large part of the region involved is in the state.

Specifically, the common market's domain stretches from the Washington suburbs of Northern Virginia to the Maryland counties of Frederick, Carroll, Baltimore and Harford, which border Pennsylvania. A population of about 5 million lives in 18 counties or cities in the region, with more than $30 billion of spendable income a year -- ranked behind only greater New York Los Angeles and Chicago.

A formal announcement of Zorthian's appointment is scheduled to be made later this week by Riggs National Bank Chairman Vincent Burke, Jr., chairman of the regional association, and his co-chairman, W. Wallace Lanahan Jr., former president of the Greater Baltimore Committee.

The Baltimore-Washington group will open temporary offices here shortly, but Zorthian said no decision has been made on a permanent location. A "neutral site" for the association in Columbia or at Baltimore-Washington International Airport is considered possible. A key member of the Baltimore business group has been James Rouse, whose company helped develop the new city of Columbia.

Zorthian 59 was vice president for government affairs of Time Inc. here from 1975 until he took early retirement in June and was replaced by John Steele, a former Time-Life bureau chief in Washington. Previously, Zorthian was a Time vice president for Broadcasting; a U.S. public affairs officer at embassies in Saigon and New Delhi; and from 1948 to 1962, a member of the staff of the Voice of America including program manager."

In addition to Burke and Lanahan, other leaders of the Baltimore-Washington Regional Association include vice chairman for three sectors -- former Metropolitan Washington Board of Trade president Robert Linowes for D.C. and federal affairs; W. Burton Guy Co. president William Guy Jr., of Baltimore, for Maryland affairs, and Fairfax lawyer John T. Hazel for Virginia affairs.

Washington area firms and national companies that have contributed to the common market approach include the law firms of Hazel and Linowes as well as Acacia Mutual Life Insurance, American Security Bank, Boeing, Camden Station Associates, Chesapeake & Potomac Telephone Co. (a unit of American Telephone & Telegraph), Doggett Enterprises, Drug Fair, Financial General Bankshares and Garfinckel, Brooks Brothers, Miller & Rhoads.

Also, Geico Corpo., Giant Food, Hecht Co., International Business Machines, International Bank, Marriott, MCD Enterprises, National Bank of Washington, National Permanent Federal Savings & Loan Savings & Trust, Perpetual Federal S&L and Potomac Electric Power Co.

Also, Riggs, Sears, Roebuck & Co., Charles E. Smith Management, Steuart Investment, Suburban Trust, Washington Gas Light, Washington Post, Washington Star, Westgate and Woodward & Lothrop.