Introduction
1. We, the ASEAN Finance Ministers convened a special meeting in Manila to discuss issues relating to the sustainability of our economic recovery, the enhancement of ASEAN's role in the reform of the international financial architecture, and other financial and economic developments in the region.
2. H.E. Mr. Edgardo B. Espiritu, Finance Secretary of the Philippines, presided over our meeting.
Recent Economic Developments
3. We conducted a peer review and found a continued improvement in our economic performances since our last meeting in March 1999 in Ha Noi. ASEAN, as a whole, is expected to grow by 2-3 percent this year compared to its contraction of seven percent in 1998. More importantly, all ASEAN countries are expected to post positive GDP growth rates of up to six percent in 1999. This positive development has restored investor confidence in our economies as shown by the rebound of the stock markets across the region and a rise in capital inflows. We expect ASEAN to begin the next millennium poised for higher and sustainable growth.
4. The recovery in our economies has been built on supportive fiscal and monetary policies as well as corporate and financial sector reforms. Expansive fiscal policy has contributed to improved domestic demand while mitigating the adverse impact of the crisis on the poor and the unemployed. Reforms in the corporate and financial sector have set the stage for their healthy development.
5. Exports have staged a turn-around due to sustaining growth in the U.S., recovery in Japan, restoration of exports financing and depreciating real exchange rates. In this respect, we note the concerted actions of the G-7 economies last summer to stabilise the financial markets and sustain global demand. Expected rebound of the EU economics next year would also do well to minimise an impact of the continued soft landing of the U.S. economy on ASEAN exports. Increases in oil prices have also lifted economic performances in our oil producing and exporting members.
Risks and Challenges for a Sustainable Growth
6. While our economies look much healthier compared to a year ago, the situation still remains vulnerable and there are risks that need to be addressed if our economies are to experience high sustainable quality growth.
7. A critical short-term risk is the possibility of sharply slower growth in export demand if growth slows down in the US and the expected rebound of the Japanese economy fails to materialise next ear. In this respect, Japan's recovery, which is critical for ASEAN, is still subject to significant risks despite recent positive news. We urge the G-7 economies, in this regard, to pursue policies that are conducive to global financial stability and sustained global demand.
8. Over the medium-term, we recognize the need to begin the process of fiscal consolidations especially given the large amounts of public resources committed to financial sector restructuring, to re-establish more balanced fiscal positions and reduce the likelihood of inflation.
9. Despite the recovery in our economies, we intend to press on with structural reforms to ensure that the recovery is sustained and to restore our position as one of the world's fastest growing regions. These reforms include (a) implementation of measures in the financial sector; (b) further progress in corporate and debt restructuring; (c) improvements in our legal structures; and (d) implementation of social safety nets programmes.
10. We are pleased with the progress in restructuring the financial sector. Public and corporate governance is being strengthened. Viable banks are being re-capitalised, bad assets are being dealt with, and prudential supervision and regulation is being tightened. Most ASEAN countries are strictly adhering to international standards and best practices in the area of accounting and disclosure standards, loan classification and provisioning requirements and capital adequacy rules. Our efforts will now focus on effective implementation of these improvements.
11. Corporate restructuring will be accelerated as the institutional framework is now in place. These include measures to implement bankruptcy codes and foreclosure laws that are in line with international standards. We expect that corporate restructuring will accelerate given this new enabling environment.
12. We are also cognisant of the social costs of the recent crisis and have taken steps to strengthen social safety nets to lessen the impact of restructuring on the poor and most vulnerable segments of the population. In particular, we shall continue to pursue and support programs to improve the skills and productivity of our people and to ensure that the fruits of growth are more equitably distributed within our societies.
13. We recognise the important role of capital flows to further sustain growth in our region. We support the ASEAN efforts to expedite the implementation of the ASEAN Investment Area (AIA) for the early realisation of an investment region with free-flowing capital. We reiterate our commitment to facilitate such an investment regime. We invite foreign investors to take advantage of the special incentives and privileges for foreign investment made in the region between 1999 and 2000 as announced in the "Bold Measures" statement of the ASEAN Leaders during their Sixth Summit in 1998.
International and Regional Financial issues
Regional Financial Cooperation
14. We have intensified cooperation with our East Asian dialogue partners, namely, China, Japan, and Korea, with a view to promoting sustained economic growth and creating a financially stable environment for East Asia. We are considering with them ways of cooperation by strengthening the institutional capacity for consultation and collaboration on monetary, fiscal and financial issues, including policy dialogue among the East Asian countries.
Reform of the International Financial Architecture
15. The reform of the international financial system is important and crucial for the sustained recovery in ASEAN. In this regard, we consider it important to develop meaningful discussions on international financial reform issues, with broad participation. We agreed to strengthen our efforts to urge for a more substantial role in the work on the reform of the international financial system, specifically through the IMF, the Financial Stability Forum, and the newly formed G-20. We also reaffirm our call for the expeditious implementation of the concrete measures that have already been agreed upon.
List of Participants
The Special ASEAN Finance Ministers Meeting was attended by:
H.E. Pehin Dato Abdul Aziz Umar, Acting Minister of Finance, Brunei Darussalam;
H.E. Mr. Keat Chhon, Senior Minister, Minister of Economy and Finance, Cambodia;
H.E. Dr. Bambang Sudibyo, Minister of Finance, Indonesia;
H.E. Mr. Liane Thykeo, Vice Minister of Finance, Lao People's Democratic Republic
Hon. Dato' Dr. Abdul Aziz Mohd. Yaacob, Deputy Secretary General (Policy) Ministry of Finance, Malaysia;
H.E. U Khin Maung Thein, Minister of Finance and Revenue, Myanmar;
H.E. Mr. Edgardo B. Espiritu, Secretary of Finance, Philippines;
H.E. Dr. Richard Hu Tsu Tau, Minister for Finance, Singapore;
H.E. Mr. Tarrin Nimmanahaeminda, Minister of Finance, Thailand;
H.E. Madam Le Thi Bang Tam, Vice-Minister of Finance, Vietnam;
and their respective delegations.
H.E. Mr. Rodolfo C. Severino, Jr., Secretary-General of ASEAN and his staff were also present.