Asean ministers vow to tackle volatility

Reserve pool idea needs more study

Wichit Chantanusornsiri

Chiang Mai - Asean finance ministers agreed that stronger defences were needed to help the region cope with volatility in the financial markets.

"Asean may have to think about building some new highways or bypasses on our roadmap to build the Asean Economic Community (AEC) by 2015 to cope with financial and economic volatilities," said finance minister Chalongphob Sussangkarn.

Dr Chalongphob, the chairman of the 11th Asean Finance Ministers' Meeting, said members remained committed to strengthening economic ties in the region.

The AEC roadmap, first adopted in 2003, envisions the creation of a region-wide free-trade zone using the European Community as a model.

Dr Chalongphob said Asean was now facing challenges in terms of market volatility similar to those which hit the region during the 1997 crisis. He cited reports by International Monetary Fund representatives that said global imbalances are likely to remain in the medium term.

"Thailand and other emerging markets need to take steps to prepare for volatility in capital flows," he said.

Dr Chalongphob said the 10-member Asean bloc also needed to enhance its economic competitiveness to better compete with the much larger economies of China and India, as well as more technologically advanced Asian countries such as Japan and Taiwan.

The two-day meetings, which were also attended by policymakers from Japan, China and South Korea, featured discussions on progress made in strengthening regional bond markets, enhancing economic co-operation and market integration strategies and building stronger multilateral defences to head off any future economic crises.

A move to transform bilateral swap arrangements between the region's central banks into a broader multilateral initiative, however, stalled as ministers believed more study on the operating framework and legal mechanism was required.

Since 1999, members of the so-called Asean+3 group have created 16 separate bilateral agreements involving funds of $80 billion to serve as support if a balance of payments crisis hits.

Somchai Sujjapongse, an adviser to the Fiscal Policy Office, said several ministers were uncertain how a multilateral, self-managed reserve pool would work in practice, and wanted greater study on the issue.

He said ministers discussed a range of issues yesterday, including ways to better utilise the region's high savings for infrastructure investment, strengthen intellectual property protection and facilitate liberalisation of trade and labour mobility.

Ministers also agreed to increase their governments' support for small and medium-sized enterprises, human resource development and research activities to strengthen the region's competitiveness.

Suparut Kawatkul, the Finance Ministry's permanent secretary, said Asean ministers would hold further discussions on the AEC programme ahead of a leaders' summit in Singapore at the end of the year.

"Financial integration means greater integration between the financial systems within the region, both in terms of depth and breadth," he said. "This in turn will help the region cope with volatile capital flows better than now."

Mr Suparut said that financial co-operation and integration could proceed even as each country maintained its own currency, although he agreed that greater co-ordination was necessary in exchange rate management.

Both Singapore and Thailand also agreed to move forward with a bilateral programme to establish electronic bond trading links between the two countries.

Bangkok Post

Friday April 06, 2007