ASEAN told to step up financial reforms

ASEAN told to step up financial reforms

SINGAPORE (AFP): Asian governments were told Thursday to step up the pace of reform, to strengthen financial regulatory frameworks and align monetary policies with fiscal measures.

Substantial progress has been made but "much more needs to be done," Singapore's Second Minister for Finance Lim Hng Kiang told the opening of the (ASEAN) Economic Associations annual conference here.

"We need to press on and prepare our financial systems for the challenges of the future," Lim said.

In the so-called new economy, "the role of financial intermediaries will be greatly amplified," he said, after the 1997 regional meltdown highlighted the inability of Asian monetary authorities to adjust to changes in global financial markets.

"Central banks can no longer think of monetary policy as merely the adjustment of monetary policy instruments or intermediate targets," he said.

"Monetary policy needs to operate within a framework of consistent macroeconomic policies, and be supported by strong economic institutions."

Governments needed to be aware that monetary policies will only be successful in creating economic stability if they are complemented by a sound fiscal policy.

"Monetary policy cannot bear the burden of macro stability alone," Lim said.

"Investors worldwide are getting more sophisticated.

"If they judge that a country has chosen the wrong policies, that fiscal and monetary policy are at odds with each other, their judgment will be swiftly reflected in the markets."

Lim told delegates from the Association of Southeast Asian Nations (ASEAN) Economic Associations that Asian central banks needed to devote more resources to monitoring their economies so a "pre-emptive monetary policy" can be implemented effectively.

"With the advent of the new economy, we can expect changes in underlying structural relationships," he said. "It is crucial that we anticipate such changes and fine-tune our monetary policy formulation and strategy accordingly."

Central banks need to have an "open" communications channel with the financial markets so that the policies of the former are not misinterpreted, Lim said.

"In this way, the financial markets are more likely to respond in the intended manner and not negate the central bank's announcements."