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.