Southeast Asian finance officials gathering this week in the tiny oil-rich state of Brunei will be looking for ways to sustain the region’s rapid growth.
Asean officials, who are meeting in Brunei this week, want to see results from an infrastructure fund they created last year.
The four-day summit is for members of the Association of Southeast Asian Nations, or Asean: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Also attending some meetings are partners China, Japan and South Korea.
Asean members have largely fared well in recent years, even as many major economies struggle to revive output. They hope to create an Asean Economic Community by late 2015 that would lower trade barriers within the bloc but not have a common currency. They also will look to make it easier for capital and workers to move between Asean countries.
Changyong Rhee, chief economist at the Asian Development Bank, says that deepening regional integration has been one of the key factors supporting Asean economies’ robust growth.
“Deeper integration after 2015 will further boost growth momentum of the region and diversify export markets. However, [the] easy agendas were already achieved,” he said. “New areas … will require stronger political will.”
One shared goal of the bloc is to build infrastructure, which has proven difficult because of the challenge of raising money. Because such projects are costly and slow to complete, investors often fear that returns won’t be high enough to compensate for the risks.
In one high-profile example, Jakarta’s efforts to build a two-line monorail stalled in 2008 after successive investors failed to secure $500 million in financing. Dubai-based investors courted for the project demanded a sovereign guarantee, something the Indonesian government couldn’t grant.
The Asian Development Bank calculates that Asean regional infrastructure projects will require $60 billion in investment every year through 2020. That figure excludes national projects that are also important to the wider region, such as airports and seaports.
In Brunei, Asean finance ministers and central bankers will work on how to put into play a new infrastructure fund they created last year. The fund was established with initial contributions of $485 million from Asean nations — excluding Myanmar — and the Asian Development Bank, and is due to make its first loans this year.
To boost its firepower to its next target of $700 million, the fund is planning to sell hybrid securities, as well as debt that central banks in the region could buy with their foreign-exchange reserves.
Bambang Brodjonegoro, co-chair of the fund’s board of directors and head of the fiscal policy office at Indonesia’s Finance Ministry, said in a recent interview that the infrastructure fund could raise its capabilities by inviting the Asean +3, +6 or +8 members to join in future. Asean +3 includes China, Japan and South Korea, Asean +6 adds Australia, India and New Zealand, while Asean +8 incorporates Russia and the U.S.
Also on the agenda this week is the region’s financial safety net, which was set up in the aftermath of the late-nineties Asian financial crisis and is known as the Chiang Mai Initiative Multilateralization. The facility has assumed new significance in light of massive capital inflows into the region.
Asean deputy finance ministers and central bank governors, along with their counterparts from China, Japan and South Korea, will work out details of a crisis-prevention facility that should speed up access to emergency aid.
They also will finalize plans to upgrade Asean’s watchdog, Amro, as a step toward giving it more responsibility for spotting and tackling risks in the region. –Natasha Brereton-Fukui/The Wall Street Journal
What They Say About Us
- Working through the ASEAN Trade Union Council (ATUC), a number of labor groups from Southeast Asia have proposed the ASEAN Social Charter, which they see …
- Labour rights do not feature prominently on ASEAN’s agenda, but the ASEAN Trade Union Council (ATUC) is pushing for a social charter and a framework for the protection of migrant workers.
- ASEAN22 : The ASEAN Social Charter was designed by the ASEAN Trade Union Council (ATUC) and labour-friendly NGOs as a social counterpart to ASEAN’s economic
c/o Trade Union Congress of the Philippines
No. 2 Kalaw-Ledesma Circle, Tierra Verde 2, Tandang Sora, Quezon City 1116