Ministers predict gloomy outlook for SE Asia

Ministers predict gloomy outlook for SE Asia

KUALA LUMPUR (AFP): Southeast Asia faces an "increasingly
uncertain" economic outlook this year amid the U.S. slowdown and
Japan's still-stalled recovery, ASEAN finance ministers say.

In a draft joint ministerial statement obtained by AFP on
Thursday, the ministers predict average economic growth of 4.5 to
5.0 percent for 2001 compared with 5.3 percent last year.

Stronger domestic demand will help compensate for the fall in
exports, the draft says.

Ministers from the 10 members of the Association of Southeast
Asian Nations will meet in the Malaysian capital on Saturday and
Sunday. Officials have been holding preparatory talks since
Wednesday.

The draft statement notes sharp falls in U.S. share prices and
the rise in the number of U.S. firms announcing layoffs and
earnings downgrades.

"The Japanese economy continues to be hampered by structural
problems within the banking and corporate sectors and is unlikely
to provide stimulus for growth."

Growth is also expected to moderate in the European Union but
will be mitigated by relatively robust domestic demand there.

"With G-3 economies rapidly losing momentum, the outlook for
the ASEAN economies has become increasingly uncertain," says the
draft statement, which is dated April 2.

Export growth in Southeast Asia has already fallen sharply
since late last year and foreign direct investment is expected to
remain subdued in the near term, the draft says.

ASEAN members are taking measures to mitigate the slowdown
"through easier fiscal and monetary policies to the extent that
they do not compromise medium-term fiscal sustainability or
financial stability."

Privatization will continue, partly to lessen the burden on
government borrowing to finance budget deficits.

In the longer term corporate restructuring will remain "our
top priority until the banking and corporate sectors are able to
function normally."

Officials are working to develop a "vibrant capital market in
the ASEAN economies" to reduce dependence on bank borrowing.

The draft declaration praises moves to establish a regional
currency swap arrangement to help avert future financial crises,
involving the ASEAN members plus China, Japan and South Korea.

It says monetary authorities are considering ways to stabilize
foreign exchange markets though bilateral payment arrangements
"and in the longer term the establishment of a single common
currency or exchange rate system in ASEAN."

A workshop will be convened in June to discuss a common
currency.
Currency swap

Meanwhile Malaysia on Thursday proposed an alternative
mechanism to prevent any IMF involvement in a Southeast Asian
currency swap plan aimed at averting future financial crises.

But ASEAN's senior finance ministry officials said no
agreement has been reached on the issue in preparatory meetings.

Samsudin Hitam, secretary general of the Malaysian treasury
who chaired the meeting, told reporters an alternative
surveillance mechanism was put forward and debated.

He declined to give details.

Malaysia opposes any role for the International Monetary Fund
(IMF) in the plan known as the Chiang Mai initiative.

This aims to link the international reserves of the 10 ASEAN
nations with those from China, Japan and South Korea and Japan to
provide greater resources in future currency crises.

ASEAN finance ministry and central bank officials are holding
talks Thursday and Friday before a two-day ministerial meeting
from Saturday.

Officials from China, Japan and South Korea are not taking
part in the current talks but will join their ASEAN counterparts
Sunday.

Sathit Limpongpan, director general of fiscal policy in
Thailand's finance ministry, told reporters that there were
various views on the IMF role but "everyone agreed that there
should be an ASEAN consensus."

"The bottom line is that we want to achieve the bilateral swap
arrangement but in any international arrangement, we need a
compromise, we need to negotiate with the other three countries,"
he said.

Sathit said he was "positive" that the grouping could reach
agreement on the plan. "I have a positive thinking about that."

The Thai official said the aim "is to have a clear framework
for the conclusion of the arrangement between ASEAN and those
three countries, possibly before the meeting in Honolulu."

ASEAN finance ministers will meet their counterparts from
China, Japan and South Korea in Honolulu in May on the sidelines
on the Asian Development Bank (ADB) meetings.