ASEAN economic crisis: Blessing in disguise?

ASEAN economic crisis: Blessing in disguise?

The following article is based on a paper presented by Rodolfo
C. Severino, secretary-general of the Association of Southeast
Asian Nations (ASEAN), at the opening of the seventh ASEAN
Editors Conference in Jakarta on April 12, 1999.

JAKARTA: ASEAN members know that for their economies to
recover they have to bring back investment -- to stimulate
economic activity, create jobs and raise people's standards of
living to what they were before the crisis. And to bring back
investment, they have to act as one. They were seen as one when
investors fled or stayed away; they have to be seen as one for
investors to return.

This is one lesson the crisis has taught Southeast Asia --
graphically, painfully. Countries can no longer afford to act in
isolation. Increasingly, the age of globalization has brought
with it the era of regionalism. Nations that are of less than
continental dimension, countries that are less than the United
States, China, India or Russia in size, have to coalesce
regionally if they are to thrive in a globalized economy, if they
are to survive in a globalized economy.

This is certainly true in the world of finance. The financial
crisis which started in Southeast Asia, in ASEAN, caught almost
everyone by surprise, including the majority of the world's most
brilliant economists. And it quickly spread. Because of
inadequate consultation among ASEAN members, no ASEAN country was
sufficiently aware of the problems building up in other ASEAN
countries or of the imminent impact of these problems on
themselves. There was no institutionalized mechanism for ASEAN
members to compare notes on developments in their economies,
particularly in their financial sectors, but in the real economy
as well. There was no formal forum for the finance ministers to
consult on what to do about impending or fundamental problems
they may have seen coming.

Now, since the onset of the crisis, ASEAN's finance ministers,
central bank governors and their deputies have greatly
intensified their consultations. One of the mechanisms and bases
for such consultations is the ASEAN surveillance process the
ministers established last year. Through this process, the
finance ministries and central bank governors look over the
developments in each of their economies and in the region as a
whole. They exchange information on the policies they have
adopted and are carrying out and subject these to peer review. In
this way, they expect to deal with problems before they erupt
into crises and before they spread.

The surveillance mechanism is managed at the ASEAN
Secretariat, with temporary funding and technical support from
the Asian Development Bank. The surveillance process entails the
collection of macroeconomic data and other economic and social
indicators. It involves the collective analysis and reporting of
such data by ASEAN governments. It also includes the training of
officials in how to carry out this process.

The first report from the surveillance process was submitted
by the so-called Select Committee of finance ministry officials
and central bank deputies last month. The report carried a tone
of cautious optimism, forecasting growth in the region would
resume later this year, but warning about potential developments
elsewhere in the world which could obstruct growth.

More importantly, the report carried accounts of what each
ASEAN country was doing to stimulate domestic demand, protect the
poor, revitalize the financial and corporate sectors, improve
transparency and corporate governance and mobilize resources to
finance growth. The finance ministers reviewed these policies and
actions.

ASEAN realizes, of course, that much of the global financial
turmoil arises from weaknesses elsewhere in the world and in the
global financial system itself. The ASEAN finance ministers and
their deputies have started close and frequent consultations with
their counterparts from China, Japan and Korea, countries which
are in ASEAN's immediate vicinity and share many of its problems.
Some ASEAN ministers have been active in the financial forums of
the Asia Pacific Economic Cooperation (APEC), the Asia-Europe
Meeting (ASEM), the Manila Framework group, the Group of 22,
which is reviewing the international financial architecture, and
the Group of 15, comprising developing countries.

As their common contribution to the global debate, and in
ASEAN's interests, the finance ministers have been developing a
common position on the issues arising from attempts to review the
international financial system. They insist that any measures
adopted to deal with the global financial turmoil must be
flexible and take into account the particular situations,
concerns and interests of all countries, not just a few
countries. The poor must be protected. Inasmuch as the private
sector was involved in the problems giving rise to the crisis,
the private sector must be involved in the solutions.
Transparency must apply to the private as well as to the public
sector. Short-term capital flow must be closely monitored. From
now on, the liberalization of the capital account must take into
account the state of development of the domestic financial
sector.

There is now open discussion of what was hitherto unthinkable
-- an exchange-rate system or even a single currency. Studies
have been officially mandated on these subjects.

The quickening pace of regional economic integration and
financial consultations has accompanied ever-closer and wider-
ranging ASEAN cooperation. Such cooperation has brought ASEAN
more firmly together. This cooperation takes many forms -- ASEAN
gas pipeline and road networks, intra-ASEAN transport
arrangements, interconnectivity in telecommunications, disease
surveillance, joint action on the haze arising from land and
forest fires, the fight against and prevention of drug abuse, the
ASEAN University Network and so on.

These developments in ASEAN cooperation and integration could
have implications of enormous historic magnitude for our region,
including political implications. I will not go into these
implications now except to say that they will have a bearing on
the potential for peace and conflict within ASEAN and on
Southeast Asia's capacity to deal with its neighbors and the
world beyond.

This is why ASEAN places such a high premium on Southeast
Asian solidarity and why it resists so firmly any attempt by
others to discriminate among its members whenever the association
itself is involved.

To me, then, the most significant effect of the recent crisis
on ASEAN is the spur it has given to ASEAN cooperation,
integration and solidarity. We have found in this crisis the
quickening of closer ASEAN cooperation, integration and
solidarity is essential for Southeast Asia to survive and
flourish in a world that, in many ways, is fast coming together.

To that extent, the economic crisis may yet prove, for ASEAN
and its peoples, to be a blessing in disguise.