ASEAN economic ministers to have their hands full

ASEAN economic ministers to have their hands full

KUALA LUMPUR (Reuters): ASEAN economic ministers meeting
yesterday in Kuala Lumpur will have their hands full trying on
one hand to liberalize services and on the other to do something
about the crisis in the financial markets.

The currency turmoil of the past few months is expected to be
high on the agenda but ministers have also said the meeting is
expected to rubber-stamp the first package of liberalization of
services, including the financial sector.

This is where problems could occur if some ministers think
given the current turmoil in currency markets, now might not be a
good time for a more liberal stance on financial services.

"Sentiment in some quarters has been that the recent regional
currency turmoil may have been due to the fact that the opening
up of the financial sector had perhaps been too fast," said
Chiang Yao Chye, head of regional economics at CIBC in Singapore
Regional trade has grown enormously in the past few years which
is a good indication of just how open ASEAN economies have
become. Financial markets have grown proportionally.

ASEAN, the Association of South East Asian Nations, groups
Brunei, Myanmar, Indonesia, Laos, Malaysia, the Philippines,
Singapore, Thailand and Vietnam.

"Cutting back on tariffs and greater liberalization has led to
an increase in trade volume. Some may say there is a reason to
step back and see if increased trade and financial markets have
been moving in lock-step with the way things have progressed,"
said CIBC's Chiang.

Given Malaysian Prime Minister Mahathir Mohamad's recent calls
for a total ban on currency trading, some at the meeting may be
more reserved in pushing for more open policy on markets.

Nevertheless, ASEAN Secretary General Ajit Singh was quoted in
Malaysian newspapers on Tuesday as saying ministers are expected
to endorse the first package of services liberalization at
Thursday's meeting.

He said it would cover telecommunications, transport, tourism,
construction, business, maritime, professional services and
financial services.

But he was quoted as saying "no formal notification has been
made" to raise the issue of the currency turmoil in Southeast
Asia.

The issue of the further withdrawal of tariffs will also
surely be raised but here again some countries may have a
problem.

The proposed ASEAN Free Trade Area commits most ASEAN members
to slash most import tariffs to between zero and five percent by
2003.

But with some countries facing acute balance of payments
problems because of the currency crisis there is a possibility
that tariffs may even be raised to slow down imports.

Analysts expect Malaysia's budget this Friday to do exactly
that, and there is already talk of import substitution on
intermediate goods such as tractors and machinery which can be
bought locally.

So plenty of talk about moving to more a liberal services
sector and the cutting of import tariffs can be expected but
given the scale of the crisis in financial markets analysts doubt
that the meeting will come up with concrete measures at this
stage.