Significant progress was made in regional finance cooperation in 2001 despite the more difficult economic situations in most ASEAN countries due to the global economic slowdown. Important economic developments and financial reforms were closely monitored through the ASEAN Surveillance Process. Greater efforts were made in strengthening the region�s financial systems through financial and corporate restructuring, the further development of capital markets, and the implementation of regional self-help and support mechanisms. Cooperation between ASEAN countries and China, Japan and the Republic of Korea (ASEAN + 3) also gathered pace.
At the ASEAN Finance Ministers� peer review in Yangon on 5-6 April 2002, the Ministers exchanged views on economic developments in 2001 and discussed the outlook for the ASEAN economies and the policies being adopted by Member Countries to sustain economic recovery. In 2001, ASEAN economic growth moderated to 2.8 percent from 5.5 percent in 2000 due to weak global demand, particularly for electronics goods. Global monetary easing and generally well-contained inflation in the region allowed ASEAN central banks to ease monetary policy, while expansionary fiscal policies were adopted to support domestic demand.
Financial and corporate sector restructuring has advanced as more non-performing loans from commercial banks have been transferred to, and resolved by, asset management companies, significantly improving the banking system�s non-performing loans and capital adequacy ratios. Some ASEAN countries also took positive steps to consolidate their banking sectors. In addition, measures were instituted to further strengthen banking regulation and supervision, as well as corporate governance.
Regional surveillance capacity was strengthened through the training of ASEAN finance and central bank officials in surveillance and the establishment of national surveillance units in Cambodia, Lao PDR, Indonesia, the Philippines, Thailand and Viet Nam, supported by technical assistance from the Asian Development Bank. Technical studies on fiscal management, corporate restructuring, and the development of an ASEAN bond market were completed, with financial support from the United Nations Development Programme, and their policy recommendations discussed among senior officials concerned.
Finance Work Program
Efforts to implement the ASEAN Finance Work Program have been intensified to strengthen macroeconomic and financial stability in the region. A Protocol to carry out the second package of commitments on financial services liberalization under the ASEAN Framework Agreement on Services (AFAS) was signed by the Finance Ministers on 6 April 2002 in Yangon. The Finance Ministers also launched the third round of negotiations and directed the Working Committee on ASEAN Financial Liberalization under AFAS to discuss the specific parameters to guide the negotiations, including exploring ways to form an ASEAN common position on issues related to financial services negotiations under GATS.
A study has been completed to further develop the infrastructure, institutions and instruments to promote capital markets in ASEAN. This is in addition to initiatives that have been undertaken to enhance payment and settlement linkages among countries, corporate governance, transparency and disclosure. A report on �Monitoring Hedge Fund Activity� has also been submitted. The report highlights issues of common concern to ASEAN financial markets and the reform of the international financial architecture. Meanwhile, greater efforts have been pursued by ASEAN regulators to substantially comply with all International Association of Insurance Supervisors (IAIS) core principles within the next two years and to further standardize the compilation of insurance statistics. To further strengthen the ASEAN financial systems, the ASEAN Finance Ministers have agreed to adopt and implement sixteen International Organization of Securities Commissions (IOSCO) principles for securities regulators deemed most relevant to respective markets.
In other areas of cooperation, a report on the costs and benefits of having a common currency and exchange rate system in ASEAN is expected to be completed in the first half of 2002. Discussions on possible bilateral payments arrangements among Member Countries continued. Some Member Countries have concluded agreements for the avoidance of double taxation while improving training and exchange of information in tax and public finance.
Chiang Mai Initiative (CMI)
The conclusion of currency swap arrangements under the Chiang Mai Initiative continued to gather momentum. Since the CMI was launched in 2000, six bilateral swap agreements (BSA) among ASEAN countries, China, Japan and Korea have been concluded. BSAs between Japan and Korea, Japan and Thailand, Japan and the Philippines, Japan and Malaysia, China and Thailand, and China and Japan have been signed with a combined amount of US$17 billion. Negotiations on two BSAs between China and Korea and Korea and Thailand are at advanced stage, while those between Korea and Malaysia and Korea and the Philippines have reached substantial agreements. Negotiations for four other BSAs involving Indonesia and Japan, Japan and Singapore, China and Malaysia, and China and the Philippines have been initiated.
|
BSA1 |
Currencies |
Status |
Size |
|
Japan-Korea |
USD/Won |
Concluded/ 4 July 2001 |
USD 2 billion |
|
Japan-Thailand |
USD/Baht |
Concluded/ 30 July 2001 |
USD 3 billion |
|
Japan-Philippines |
USD/Peso |
Concluded/ 27 August 2001 |
USD 3 billion |
|
Japan-Malaysia |
USD/Ringgit |
Concluded/ 5 October 2001 |
USD 1 billion |
|
China-Thailand |
USD/Baht |
Concluded/ 6 December 2001 |
USD 2 billion |
|
Japan-China2 |
Yen/Renminbi |
Concluded/ 28 March 2002 |
USD 3 billion |
Notes:
These are in addition to the bilateral swaps that Japan is providing to Korea and Malaysia under the New Miyazawa Initiative.
Japan-China BSA is a two way yen/renminbi swap arrangement where each party can request the other party to provide liquidity support in the specified currency up to the agreed amount. The overall availability for this BSA is therefore counted as USD 6 billion (equivalent) though the face value of the BSA is USD 3 billion (equivalent).
A study group among senior finance and central bank officials was established to look into ways to enhance the effectiveness of economic reviews and policy dialogues among the East Asia countries as envisaged under the Chiang Mai Initiative. Resulting from that, the ASEAN+3 Finance and Central Bank Deputies would meet informally once a year to discuss economic and policy issues. The first such meeting was held successful in Yangon in April 2002.
In addition to CMI, considerable efforts were made to strengthen the ASEAN + 3 finance cooperation, including the monitoring of short-term capital flows, the establishment of regional self-help and support mechanisms, and enhancing human resource development. The Japan-ASEAN Financial Technical Assistance Fund was established primarily to assist Member Countries in improving their short-term capital flows monitoring and reporting systems and to study other mechanisms for regional self-help and support. In addition, the bilateral and voluntary exchange of short-term capital flows data has been formalized, with seven countries having agreed to participate. Progress has also been made in the development of a regional early warning system with technical assistance from the Asian Development Bank.
Customs
The ASEAN Finance Ministers Meeting of 5-6 April 2002 in Yangon welcomed the initiative to promote the exchange of best practices on duty deferment and security management as well as on the adoption of Customs Declaration as recommended by the World Customs Organization and UN agencies.