Asean to consider sustainable growth

The Bangkok Post, WICHIT CHANTANUSORNSIRI, 8/04/2009 at 12:00 AM

How best to co-ordinate fiscal stimulus programmes and set the foundations for sustainable economic growth will be high on the agenda for Asean finance ministers meeting this week in the seaside resort of Pattaya.

Over six months after the crisis began with the near-failure of the US financial system, some promising signs have emerged that the massive monetary and fiscal stimulus programmes enacted worldwide are beginning to bear fruit.

But Somchai Sujjapongse, the director-general of the Fiscal Policy Office, said the key was to ensure that stimulus funds have a lasting, beneficial impact on jobs, productivity and future growth.

"The leaders fortunately have moved in the right direction, and are looking at how not only to build up employment, but how to ensure sustainable growth once the current crisis passes," he said.

The global financial crisis has taken centre stage at the Asean meetings this year. While regional economies have escaped the bank collapses that have plagued the US and Europe, growth across Asia has plummeted with the sharp decline in export demand.

The meetings started yesterday with the arrival of finance and central bank deputies from Asean, Korea, Japan and China, with the 13th Asean Finance Ministers' meeting on Thursday. Country leaders will meet in Pattaya through the weekend, with the programme to close on Sunday with the Asean Global Dialogue conference, featuring the leaders of international organisations such as the United Nations, the World Bank, the International Monetary Fund, the World Trade Organisation and the UN Conference on Trade and Development.

Officials hope to further progress on plans to upgrade the Chiang Mai Initiative bilateral swap programme into a larger, multilateral pool to serve as a financial lifesaver against future crises. They want to increase it by 50% to $120 billion.

China, Japan and Korea will provide 80% of the funds for the pool, with the remainder financed by Asean. The five largest Asean economies - Singapore, Malaysia, Indonesia, the Philippines and Thailand - will contribute $4.5 billion each, with Laos, Burma, Cambodia, Vietnam and Brunei the rest.

Discussions will include details of pool operations, with officials tentatively agreeing that countries could borrow for terms of 90 to 360 days at interest rates set at LIBOR plus 150 basis points.

Dr Somchai said Thailand, which holds the Asean chair this year, will push for an Asean infrastructure fund to channel the region's savings into infrastructure investments across the region.

Finance Minister Korn Chatikavanij proposed each country contribute to the fund based on their readiness, with financing from direct budget allocations, foreign reserve holdings or even private sector investments.

Countries could tap the fund to finance domestic infrastructure programmes, with the Asian Development Bank serving as a guarantor for bond issues.

Ministers will also discuss ways of facilitating trade and investment across the region to create an Asean Economic Community (AEC) by 2015.

"Investment and market liberalisation will be the highlight of the meetings," Dr Somchai said.

Capital market integration will also be on the agenda, with ministers hoping to endorse an implementation plan ultimately aimed at building up the region's markets by facilitating cross-border securities listings and investment.

Asean finance ministers will also discuss policies and issues raised at the G20 meetings held earlier this month in London, a conference attended by China, Japan, Korea and Indonesia as members and Thailand as Asean representative.

Dr Somchai said Asean ministers will also discuss co-operation in the region's life and non-life insurance sectors, including regulatory standards, customs procedures and work towards the creation of an Asean "Single Window" to facilitate customs clearance as well as initiatives to guard against money laundering and terrorist financing.

Financial sector liberalisation will also be discussed. This will be the fifth round of negotiations towards sector liberalisation under the AEC framework, and the Asian Development Bank has agreed to perform a "financial landscape assessment" to help assess the readiness of different markets for liberalisation.

Capital account liberalisation is on the agenda, aiming to reduce barriers to portfolio investment and foreign direct investment, either through outright capital controls, taxes or other barriers.