ASEAN takes another baby step towards economic integration

ASEAN takes another baby step towards economic integration

Dow Jones, Yangon

Southeast Asia's finance ministers on Saturday signed an
accord to liberalize trade and investment in financial services,
taking another small step towards their goal of closer regional
economic integration.

Many observers say the 10 members of the Association of
Southeast Asian Nations (ASEAN), need to break down trade
barriers and increase cooperation if they are to maintain strong
economic growth. But the very location of the ministers' meeting
- poor, isolated and military-ruled Myanmar - highlights the
difficulty of that project.

"Our overall message is: regional integration as fast as you
can possibly handle it," said Ernest Bower, president of the
U.S.-ASEAN Business Council, a business lobby group that met with
ASEAN finance ministers this week in Yangon.

The deal signed Saturday formalizes the results of
negotiations that ended in December 2001, when ASEAN members
agreed to extend each other slightly more favorable treatment in
financial services than they do to other countries in the World
Trade Organization.

But the concessions granted so far are fairly minor, ASEAN
officials said, and they will have to be built on in another
round of negotiations, whose launch was also announced Saturday.
"It's very difficult, it's kind of sensitive," ASEAN Secretary-
General Rodolfo Severino said of the financial services talks.

Aside from financial services, ASEAN's economic integration is
proceeding on a number of different fronts, including trade in
goods, due to be discussed at an upcoming meeting of ASEAN
economic ministers.

Along with the recent signs of a regional economic recovery,
that's feeding a sense among ASEAN members that they can be
successful economically by relying more on themselves and less on
the U.S., historically their largest export market.

"I think right now ASEAN countries can stand on their own
strength," Thailand's Finance Minister Somkid Jatusripitak said,
while acknowledging that a U.S. recovery would provide a much-
needed boost to his country's economic growth.

Indonesia's Finance Minister Boediono told reporters that
ASEAN's recovery could be maintained "by doing our homework, each
of us, and working to cooperate together as much as possible."

ASEAN has also tried to bolster ties between its members and
the strongest economies in the region: Japan, South Korea and
China. Japan has signed a bilateral free-trade agreement with
ASEAN member Singapore, and talks will start next month on a
China-ASEAN free trade area.

ASEAN finance ministers also said Saturday they would continue
to expand a program of bilateral currency swap agreements among
ASEAN member countries and Japan, South Korea and China. Six
deals involving total commitments of US$14 billion have been
signed over the past year, and another eight are now under
negotiation, they said.

Such deals allow the central bank of one nation to borrow
foreign currency from another, but repay the loan in its own
domestic currency. The added short-term liquidity the swaps
provide is intended to deter speculation in the foreign exchange
market.

ASEAN officials have said the swap agreements could eventually
be expanded to form an Asian Monetary Fund, a local counterpart
to the International Monetary Fund that would support regional
economies in the event of a crisis like the one in 1997-98.

But Philippine Secretary of Finance Jose Isidro Camacho, who
had said earlier this week that he would try to revive interest
among his colleagues in an Asian Monetary Fund, said Saturday the
ministers' hadn't discussed the idea in Yangon.

Nonetheless, expanding financial and monetary cooperation
among ASEAN members, and the larger grouping including Japan,
South Korea and China, is very much on people's minds.

Secretary-General Severino said the idea of an Asian Monetary
Fund is still being considered, and some researchers are working
on even more ambitious schemes to coordinate policy in the
region.

"Some kind of regional collaboration on exchange-rate policy
is the future," said Pradumna Rana, the manager of the Asian
Development Bank's regional economic monitoring unit. He said the
ADB is researching such arrangements and would eventually present
its findings to ASEAN.

The Yangon meetings included finance ministers or deputy
finance ministers from the 10 ASEAN member countries of Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines,
Singapore, Thailand and Vietnam.