ASEAN to work closely to avoid future crises

ASEAN to work closely to avoid future crises

HANOI (AFP): ASEAN member-states have pledged to boost
cooperation to ward off financial contagions that may be lurking
in the future, but face the task of overcoming a reluctance to
share sensitive data.

Asian Development Bank vice president Peter Sullivan said the
Association of Southeast Asian Nations (ASEAN) needed to balance
confidentiality with disclosure in moving the scheme along.

"Confidentiality is needed to soothe concerns that might
otherwise inhibit the needed exchange of information," Sullivan
said at a meeting with ASEAN finance ministers who ended two days
of talks here Saturday.

"But disclosure can also have a useful role to play in helping
to discipline markets, and making them work more effectively," he
said.

"Striking a balance between the confidentiality needed to
build support for and credibility in the process, and the
disclosure required to nurture market confidence, will not be
easy," he conceded.

The Manila-based ADB is providing technical support for the
ASEAN Surveillance Process which member-states agreed to
establish last year to minimize future financial risks.

The surveillance scheme was proposed after the Thai baht's
July 1997 de facto devaluation plunged the entire region into
crisis, as short-term capital fled in panic.

But the process is voluntary and it is not binding on member-
states to disclose any particular data, diluting its
effectiveness, analysts say. The disparity between the
institutional structures of more and less developed economies is
also a deterrent.

Strengthening the system would require the exchange of
information such as private capital flows, which would be closely
monitored for any signs of financial problems with potential
cross-border impact.

"Everybody agrees it is a very important issue but everybody
also agrees that it can only be beneficial if disclosures are not
only limited to public sector disclosures but also private sector
disclosures," said Miranda Goeltom, a director of the central
Bank Indonesia.

ASEAN secretary-general Rodolfo Severino said the ministers
were "fully supportive of the idea of strengthening the
structure" of the surveillance system.

"The early warning system could evolve into something that not
only includes macroeconomic indicators," Severino added, and data
on private capital flows was "one of the things that we hope it
will include as it evolves."

Severino said strengthening the surveillance system would
involve reinforcing "people, hardware and software" but added
that the grouping had yet to decide on such aspects.

How to deal with volatile short-term capital flows figured
high at the finance ministers' meeting.

World Bank vice president Jean Michel Severino said any
proposal for joint measures to deal with capital flows, which may
include putting a limit on short-term money, was potentially
contentious.

"My sense is they wouldn't probably agree on that. There are
very different feelings in the region (on how to deal with
capital flows)," he said.

Singapore Finance Minister Richard Hu said that while ASEAN
was proposing that capital flows such as hedge funds "should be
subject to regular and timely transparency and disclosure
requirements" this did not mean the grouping sought to regulate
them.

Philippine Finance Minister Edgardo Espiritu said the
ministers would discuss further how hedge fund managers could
share in bearing the burden of their "imprudent decisions."

It was "partly accepted that certain emerging economies have
made mistakes" that exacerbated the crisis, "but what about the
responsibility of imprudent decisions made by hedge funds
managers as well as portfolio investors," he asked.

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