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.