ASEAN optimistic on 1999 economic outlook

ASEAN optimistic on 1999 economic outlook

HANOI (Reuters): Southeast Asian finance ministers said on Saturday they were confident prospects for the region's embattled economies would improve this year, although they cautioned that challenges lay ahead.

A statement from the finance ministers of the Association of Southeast Asian Nations (ASEAN) welcomed recent developments such as stability in regional foreign exchange markets, healthy current account surpluses and lower interest rates.

"Notwithstanding these encouraging signs... we recognize the pace of recovery will be determined to a large extent by further progress in economic and financial restructuring," said the statement, issued after nearly two days of talks in Hanoi.

Senior officials from the International Monetary Fund and the World Bank attending the meeting have largely shared ASEAN's cautious optimism about recovery, but worry that some governments may be tempted into complacency.

ASEAN, representing a once high-flying region confronting its biggest economic challenge since its inception more than 30 years ago, comprises Brunei, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Ministers said any recovery faced several potential hurdles, including the risk of protectionism, a sharp reversal in the U.S. stock market, further weakness in the Japanese economy and the uncertainty of external financial flows.

"We therefore urge the industrial countries to take the lead in sustaining global demand and to coordinate their macroeconomic policies, particularly to minimize excessive volatility among the major currencies," it added.

The ministers also listed 12 points that comprised ASEAN's views on reform of the world financial architecture. It included calls for a review of the roles of international financial institutions and regulatory bodies, along with less reliance on credit rating agencies.

"Given the important role credit rating agencies play in the international financial markets, there should be greater transparency in the rating process," it said.

Some ASEAN countries have criticized the rating agencies over their country reports, which influenced the decision of many investors to withdraw portfolio funds.

The 12 points included ASEAN's view that each country was entitled to choose its own exchange rate regime and that there needed to be closer and more coordinated monitoring of short-term capital flows.

The final communique also highlighted a one-year-old regional economic surveillance mechanism designed to act as an early warning system for future financial turmoil.

Ministers have said the mechanism, the ASEAN Surveillance Process, would be a key plank in warding off more financial misery.

Economists have welcomed the monitoring body, but ASEAN has yet to finalize details of the system. ASEAN officials have yet to decide what type of macroeconomic and capital flow data would be compiled under the mechanism. At this stage member countries will not be compelled to supply data.