Economic stability essential
Economic stability essential
SANUR, Bali (JP): Finance ministers of the Asia Pacific Economic Cooperation (APEC) forum reaffirmed yesterday the crucial importance of macro-economic stability and balance to enhancing longer-term investor commitment and exchange rate stability.
The ministers said in a joint statement after the close of their second annual meeting that reversal of capital inflows could be minimized if governments demonstrated a commitment to prudent fiscal and monetary policies which, in turn, lead to macro-economic stability.
The meeting, which was opened by Vice President Try Sutrisno on Saturday evening, discussed four major topics: recent economic developments in the 18 member economies, capital flows, the effects of exchange rate movements and resource mobilization for infrastructure financing.
"We have decided to meet again in Kyoto, Japan, on March 17 next year to continue our discussions on those four topics," the chairman of the meeting, Indonesia's Minister of Finance Mar'ie Muhammad, said at a joint news conference.
Thirteen APEC member countries were represented by their finance ministers and the five others by their deputy finance ministers.
Mar'ie said the ministers exchanged views and experiences regarding the management of capital flows because "we fully realize that the surge in capital inflows could also be disruptive".
Mexico's chief delegate, Under Secretary of Finance Jose Julian Sidaoui, said the ministers' discussions also covered the financial crisis his country experienced recently.
"The conclusion is that it is not good to rely too much on portfolio, short term capital," Sidaoui said.
The ministers acknowledged that it was often difficult for authorities to determine in advance whether capital inflows were driven by short-term speculative motives or by longer-term intentions.
"However, policies governing the macro-economic environment play an important role in encouraging longer-term investor commitment," the four-page statement said.
Moreover, the ministers added, the maintenance of macro- economic and financial market stability is a key requirement to achieving free and open trade and investment in the region by 2020, the year targeted by APEC economic leaders for complete trade deregulation at their summit in Bogor, West Java, last November.
The six-year-old APEC forum groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the Philippines, Singapore, Chinese Taipei, Thailand and the United States.
The ministers asked the International Monetary Fund to consider ways of improving current mechanisms to respond effectively to problems of financial market stability.
They admitted that inadequate information about an economy could be one reason for rapidly shifting capital flows.
"Therefore, we believe that increasing the availability of economic and financial information about our economies can play an important role in enhancing the confidence of the financial markets in the strength of regional fundamentals," they added.
The meeting agreed to develop recommendations regarding voluntary public disclosure, on a regular basis, of economic and financial information.
The ministers expressed support for international anti-money laundering efforts in the region and encouraged adherence to the international standards.
Infrastructure
The ministers underlined the need for coordination of public and private resources in financing infrastructure development in view of the increased role of domestic and external private financing in that sector.
In another effort to strengthen the institutionalization of the finance ministers forum, the meeting asked the deputy finance ministers to set up a working group to advance the ministers' work in three areas: financial and capital markets, financial mobilization for infrastructure development and the effects of exchange rate movements on trade and investment.
"Our deputies will meet in Washington, DC, in coincidence with the joint meeting of the World Bank and the IMF in October," Mar'ie said. (vin)