Session III: Economy and Finance

Summary

The third and last session of the Roundtable dealt with three main questions:

• How is ASEAN coping with the economic vulnerabilities that have emerged from the crisis?

• How are the financial and banking sectors in ASEAN faring and coping?

• What would be the implications of this crisis on building an ASEAN Economic Community (AEC) by 2015?

Current ASEAN responses addressing the economic and financial consequences of the crisis include enhancing competitiveness “at”, “behind” and “across” the border; consolidating schedules for eliminating tariffs and other barriers to trade and investment; and addressing structural gaps in infrastructure development. However, as implementation moves slowly in ASEAN, the economic initiatives would need to be regularly reported, monitored and evaluated through a “scorecard” system. This is a necessary compliance mechanism to ensure implementation coordination. ASEAN is also working on a feedback channel so that it can have more engagement with the private sector.

ASEAN member states responded individually to the economic crisis, through interest rates and monetary and fiscal policy measures. The crisis, however, is a clear reminder that a more coordinated response is needed at the regional level. Some suggestions for ASEAN are to:

• Rebalance its growth through diversification, relying less on U.S. consumption and diversifying its export markets;

• Promote investment through infrastructure projects, as there is a need for fiscal stimulus to support real economic growth and infrastructure development (for example, through initiatives such as the ASEAN Infrastructure Mechanism);

• Strengthen financial systems and promote financial market development, including the development of a local currency bond market (to reduce dependence on foreign bond markets) and financial services liberalization (to develop and integrate capital markets); and financial integration through information exchanges (to facilitate collective assessment of economic conditions, risks and vulnerabilities); and

• Participate in credible reforms of the global and regional financial architecture and voice ASEAN's position and views on responses. Global fora such as the G-20, International Monetary Fund (IMF), World Trade Organization (WTO) and Bank for International Settlements (BIS) are such venues. In addition, ASEAN should also undertake reforms in key areas, such as regulation and supervision, early warning systems, and regulatory cooperation and coordination. This would assist ASEAN to act promptly and collectively in responding to the changing financial and economic conditions.