ASEAN ministers expect region's growth to slow
ASEAN ministers expect region's growth to slow
KUALA LUMPUR (Reuters): Stung by sagging U.S. demand for their exports and worried by a falling yen, Southeast Asian countries said on Sunday they expect the region's growth to slow to 3 to 5 percent this year from 5.3 percent in 2000.
The 10 members of the Association of Southeast Asian Nations (ASEAN) made the bearish forecast in a communique issued at the end of their finance ministers' two-day meeting in Kuala Lumpur.
"In view of the expected slowdown in the global economy, the outlook for the ASEAN countries will be less favourable," the communique said.
"Export growth in the ASEAN economies has moderated since late last year and foreign direct investment are expected to remain subdued in the near term."
Fast-dropping U.S. demand for goods like computer and electronic equipment have hit the region's export-oriented economies hard.
The benefits of making their products cheaper by weakening their currencies will be offset if the overall market for their goods is shrinking, and southeast Asia will be hoping the American consumer will come to its rescue by the year-end.
Meantime, the yen's recent weakness, which has dragged down their currencies in its wake and dulled Japanese demand for their goods, has added to worries.
"We noted with concern the recent volatility of financial markets and the major currencies, particularly the depreciation of the Japanese yen, which has created uncertainty and instability in regional financial markets and could adversely affect the prospects for continued growth of ASEAN countries," the finance ministers said in their communique.
Thailand is one country which has felt the fallout from the yen's recent falls, as its baht currency has come under pressure.
But Finance Minister Somkid Jatusripitak told reporters here he did not think the baht's volatility would last long.
The main purpose of this meeting had been to knit a safety net, through a web of bilateral currency swap agreements, for member countries' currencies in case they run into balance of payments or liquidity problems.
Unable to agree on a common model for operating an Asian currency support scheme, the ministers decided each country could negotiate terms individually with lender countries.
The currency swap plan envisages linking the international reserves of ASEAN countries -- Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam -- with those of Japan, South Korea and China.
Initiative
The scheme, known as the Chiang Mai initiative after the Thai city where it was first proposed, will be set up as a series of bilateral swap arrangements (BSA).
The ASEAN+3 group hopes to wrap up and sign the BSA on the sidelines of the Asian Development Bank's (ADB) annual meeting in Honolulu next month.
The hope is that speedy support will nip any future problem in the bud and prevent a repetition of the contagion effect that made the Asian crisis of the late 1990s so virulent.
Key issues for the likely borrowers are how much and how fast money would be released, and who would conduct the surveillance of economic reforms tied to the release of funds.
Malaysia, which shunned International Monetary Fund support and advice during the Asian crisis, is keen to keep the Washington-based multilateral agency out of its affairs.
Kuala Lumpur wants any surveillance to be carried out by an Asian agency, more sensitive to local conditions.
Malaysia also wants a larger initial disbursement from the agreed credit line than the 10 percent limit envisaged earlier.
It points out the IMF's emergency loan facility, the Contingent Credit Line, allows for the release of one-third of the total credit line of pre-set credit without conditions, and has argued that the BSA could have similar terms.
Malaysian Finance Minister Daim Zainuddin told reporters it was up to each country to secure its own terms.
The likely creditor nations, China, Japan, Korea and Singapore, can be expected to attach their own conditions.
Representatives of Japan, Korea and China will join discussions later on Sunday.
"I am sure Japan, Korea and China will set their own conditions as part of their (bilateral) agreements," ASEAN Secretary-General Rodolfo Severino told Reuters on Saturday.
The finance ministers also agreed to expand the scope of the regional currency swap arrangement to include all 10 members of ASEAN, and increased the group's total commitment to one billion dollars.