ASEAN to form economic surveillance system

JAKARTA (JP): Finance ministers of the Association of Southeast Asians Nations (ASEAN) agreed here yesterday to form immediately a surveillance mechanism to improve financial transparency and prevent future economic crises.

The ministers also agreed to expand trade activities among the nine member countries, including through the use of ASEAN currencies based on bilateral agreements.

"The surveillance mechanism will be established immediately," Indonesia's Minister of Finance Mar'ie Muhammad told reporters after ending the second ASEAN finance ministers meeting.

Philippine Finance Minister Salvador Enriquez said that under the surveillance mechanism, each member country would have to provide transparent information for practically all important economic indicators. This has been perceived to be one of the causes of the Southeast Asian currency turmoil.

He said it would cover things like inflation, exchange rates, and banks' lending policies.

The monitoring mechanism would force ASEAN countries to be more transparent, he said, and would provide early signals to help prevent future financial crises.

Enriquez added the monitoring arrangement would help rebuild confidence in the crisis-hit region. "That is precisely the objective," he told The Jakarta Post after the closed-door meeting.

The Asian Development Bank (ADB) has agreed to play a major role in helping to establish the mechanism and its first two years of implementation.

Enriquez explained that although the bank would provide the secretariat for the surveillance mechanism for the first two years, a select committee of ASEAN central bank and finance ministry officials would supervise the ADB.

Enriquez said that all the ASEAN members agreed to provide transparent economic indicators, stressing that "nobody made negative comments about it."

He, however, admitted that the items agreed to be monitored might be refined later as some countries might not want to reveal particular information.

"I wouldn't be surprised if there will be requests for avoidance to submit particular information on particular items," he said.

The monitoring mechanism is to work on a step-by-step process, and the items to be monitored will be broadened later. "You have to start with something. For me (what we have at the moment) is good enough," he said.

Regional currencies

The finance ministers also supported the use of regional currencies for promoting intra-ASEAN trade.

Mar'ie said that the mechanism would be based on bilateral agreements, in which trade between any two countries would be settled by each central bank acting as clearing houses for trade payments and offset by each other's receivables with the difference paid in dollars.

This mechanism is expected to reduce the use of hard currencies like the U.S. dollar.

The finance ministers also noted that regional financial markets had begun to stabilize in the last few weeks. They agreed that while the financial crisis had affected the short-term economic and business conditions in ASEAN, the long-term prospects remained attractive and sustainable.

The ministers expressed confidence that the region would overcome the crisis quickly as the economic fundamentals remained strong.

They pointed out the savings rate of the region remained one of the highest in the world and while the rates of inflation had increased recently, they were within manageable levels.

ASEAN groups Indonesia, Malaysia, Thailand, the Philippines, Singapore, Brunei, Laos, Vietnam and Myanmar.

The currency crisis started in Thailand in July when Bangkok floated the baht, and went on to savage the currencies of Malaysia, Indonesia and the Philippines. The turmoil then turned into an unprecedented economic crisis, especially in Indonesia.

Indonesia and Thailand have agreed to International Monetary Fund economic reform programs in exchange for bailouts arranged by the institution.

The finance ministers also urged the G-7 developed countries to open their markets further to products from ASEAN and to adopt a more proactive approach in helping the crisis-hit countries, especially through providing credit facilities to import raw materials.

The two-day meeting, which was preceded by a senior officials meeting Friday, was chaired by Mar'ie, who yesterday formally ended his five-year term as Indonesia's finance minister.

Shortly after attending the opening, Malaysia's Finance Minister Anwar Ibrahim, who is also deputy prime minister, left in a hurry to see President Soeharto at his Jl. Cendana residence, then returned to the meeting a couple of hours latter. He refused to comment on his meeting with the President. (08)