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.