ASEAN to form economic surveillance system

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)