The Association of Southeast Asian Nations (ASEAN) should “learn from the mistakes” of the crisis-stricken European Union as finance ministers agree to go ahead with the plan to integrate the region’s economy by 2015, the World Bank says.
Visiting World Bank managing director Sri Mulyani Indrawati, who is also Indonesia’s former finance minister, said the plan was still relevant in spite of the troubles the EU grouping is facing right now.
Debt-battling Greece may leave the union while other heavily indebted members like Portugal, Italy, Iceland and Spain may strain the other member states’ finances.
“Inconsistency in macroeconomic policy and fiscal management must be avoided,” she told reporters on the sidelines of the ASEAN Finance Ministers’ Investor Summit (AFMIS) at the Shangri-La Hotel in Jakarta on Tuesday.
There are concerns that the 10 Southeast Asian nations may decline like the EU as their economies are not equal and ASEAN leaders have different political agendas. Home to 600 million people, ASEAN has a combined gross domestic product (GDP) of US$1.8 trillion with total trade valued at $2 trillion among the countries.
“Some countries are advanced, some still need to catch up, but it’s our commitment to reach this ASEAN economic integration by 2015. And we are still on track,” Indonesian Finance Minister Agus Martowardojo told a press briefing.
Singapore, Malaysia and Thailand are more advanced, but the rest are still lagging while some, like Cambodia and Laos, are far behind, as highlighted in several competitiveness surveys.
Malaysian Second Finance Minister Ahmad Husni Hanadzlah said the ASEAN grouping “fully understands the position of each country”.
“The capital market integration is a challenge. In terms of trade we have done well. We have to really make sure that we know the non-trade barriers between countries. Investment-wise, it’s very strong,” Ahmad sad.
ASEAN would “cautiously” move forward to establish a single currency once the ASEAN Economic Community had solved its disparity issues, as the region would learn from eurozone failures, Cambodia’s Minister of Economy and Finance, Kong Vibol, said.
“We learned those problems in the 1997 Asian financial crisis. We are now more resilient in terms of the financial system of the ASEAN members. That’s why the Chiang Mai Initiative took place,” Kong added.
The $120 billion Chiang Mai Initiative is a multilateral currency swap arrangement among ASEAN countries and China, Japan and South Korea, allowing members with cash flow problems to withdraw from the account at times of crisis, with the ASEAN+3 Macroeconomic and Research Offices (AMRO) having a surveillance function to offer early warnings.
As the world economy “enters a dangerous new phase”, Sri Mulyani said it was important for ASEAN states to “always focus on creating healthy environments for investment” in order to strengthen domestic economies and offset weaker exports due to slowing global demand.
ASEAN’s finance ministers agreed to address investors’ concerns through better policies as they saw the need to accelerate investment, given that the global economic uncertainties will affect respective economic growth, they said. –Esther Samboh, The Jakarta Post, Jakarta
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