BI: ASEAN members should cooperate to manage capital inflows

Antara News, Wednesday, November 10, 2010 20:59 WIB | Economic & Business

Nusa Dua, Bali (ANTARA News) - Indonesia`s central bank official said ASEAN (Association of Southeast Asian Nations) member countries need to collaborate to manage their capital inflows to avoid their negative impacts.

"Policy coordination among the monetary authorities in ASEAN member countries is necessary to minimize the negative impact ofs the capital inflows," Bank Indonesia Deputy Governor Halim Alamsyah said in his speech at the 18th ASEAN Banking Conference and 40th ASEAN Banking Council Meeting at Hotel Westin, Nusa Dua, Bali, on Wednesday.

He said the good management of financial system and stability of the financial system in the ASEAN region would promote sustainable economic growth.

Halim said the capital inflow normally would benefit the developing countries` economy but the inflow of short-term capital this time could disrupt economic management.

The massive capital inflow would appreciate exchange rates and reduce the bargaining power of a country`s exports.

As an example he referred to the case of Thai Baht which in October appreciated by around 11.3 percent year-to-date, the Malaysian Riggit by 10.6 percent, the Singapore dollar by 7.6 percent, Peso of the Philippines 6.6 percent and Indonesian Rupiah by 5.5 percent.

"The capital inflow also affects the capital market as shown by the spectacular hike in stock indexes in the past few months," he said.

He said the stock index in Indonesia rose by around 43.4 percent year-to-date, in the Philippines by 39.8 percent, in Thailand 34.0 percent, Malaysia 18.3 percent and Singapore 8.5 percent.

"In response to it the government as well as the central bank has issued a number policies such as in the field of tax, market intervention and others," he said.