10 years after the Asian Financial Crisis, the ASEAN members are meeting to improve their monetary cooperation.
At a meeting in Thailand, two of the ASEAN members, Thailand and Singapore have already agreed to establish an electronic bond-trading linkage between their bond-trading platforms within the next two years. This bilateral cooperation will be the first step towards an ASEAN-wide cross-border electronic bond trading which in turn is part of the move towards a more integrated financial market as envisaged under ASEAN Economic Community in 2015.
At the wider ASEAN + 3 level, the officials have agreed to pool their international reserves into a multilateral level. This will mean that the current Chiang Mai Initiative (CMI) which is a series of bilateral currency swaps agreements (to provide liquidity) will be “multilateralised” to a tune of about US$80 billions.
Thai Finance Minister Chalongpob Sussangkarn told reporters, “We are pushing the CMI towards mutilateral agreements in the form of self-managed pooling reserves…. But this will still allow each country to manage its own reserves.” He added that details were still being worked out. The proposal will be presented to the ASEAN+3 finance ministers on 5 May in Kyoto, Japan. However, Chalongpob quickly added that the idea of a single currency was not seriously considered.
Regional monetary cooperation is timely not only because it is the tenth anniversary of the Asian Financial Crisis but also due to the recent capital inflows into the region, pushing up regional currencies against the US dollar. Thailand tried to impose capital controls in December but was forced to back down after a sharp fall in the stock market. Fortunately, the baht is likely to weaken in the short term due to increases in the interest rates of the Japanese and European Union central banks.
Other than monetary cooperation, ASEAN is also hoping to achieve more in trade cooperation with its various neighbours. Unfortunately, the ASEAN-India FTA talks are on the verge of collapse. Both sides have agreed to make more progress by July, failing which they would resort to bilateral talks. Both sides have not been able to agree on the type of major goods for reduction of tariffs. The ASEAN-Australia/New Zealand (ANZ) talks have also proceeded much slower. Both sides are currently drawing up lists of sensitive products to be excluded from tariff cuts.
With slow progress on trade cooperation at the regional and inter-regional level, the focus is now shifting towards a more bilateral level where the ASEAN members seem to be more concerned about the competitive threats from other ASEAN members. Thai Director- Chutima Bunyapraphasara, director-general of the Trade Negotiations Department said, “The government does not want to lose our competitive edge to rivals. We will concentrate on the bilateral pact with India.”
The Philippine chief negotiator and senior DTI undersecretary, Tomas Aquino told business leaders that the Philippines is engaged in the ASEAN-Australia-New Zealand talks primarily to equalize the advantages taken by some powerful competitors in the region which have already concluded such agreements with Australia and New Zealand.
The Vietnamese are also intensifying their cooperation with China, with the setting up of an economic cooperation zone as part of the ASEAN-China Free Trade Area (ACFTA). The zone is located at Pingxiang city, south of China’s Guangxi Zhuang Autonomous Region and the bordering Lang Son province of Vietnam. It is a logistic park with processing facilities in which Chinese and Vietnamese made commodities will be tariff-free and have no import linkage tax.
These difficulties faced by ASEAN in concluding negotiations with India, Australia and New Zealand are likely to cast doubts on the viability of the wider East Asian Free Trade Agreement (EAFTA) concept pushed by Japan. The EAFTA will comprise of the ASEAN plus three countries plus India, Australia and New Zealand. It would seem that 10 years after the crisis, the Asian countries have still yet to learn the necessity for greater regional cooperation. (9 April 2007)
Baht Could Get Weaker in Short Term (Bangkok Post, 8 April 2007)
SKorea-US Trade Deal Puts Squeeze on Asian Rivals (Agence France Presse, 8 April 2007)
ASEAN Pushing Ahead With Multilateral Currency Swap (Manila Bulletin, 7 April 2007)
ASEAN Bond Portal Next Step Towards Integration (The Nation, 7 April 2007)
Thailand, Singapore Ink e-Bond Pact (The Nation, 7 April 2007)
International Reserves to be Pooled (The Nation, 6 April 2007)
ASEAN Ministers Vow to Tackle Volatility (Bangkok Post, 6 April 2007)
ASEAN To Bolster Defenses A Decade After Fin’l Crisis (Manila Bulletin, 6 April 2007)
Bilateral Focus to Indian FTA Talks (The Nation, 6 April 2007)
ASEAN-ANZ FTA Talks Going too Slowly (Manila Bulletin, 6 April 2007)
ASEAN Officials Aim to Stem ‘Hot Money’ (Bangkok Post, 5 April 2007)
ASEAN Finance Officials’ Meeting (Bangkok Post, 5 April 2007)
BOT Governor Can Turn to Malaysia for Advice (The Nation, 5 April 2007)
China Vietnam Economic Cooperation Zone to Boost Bilateral Trade (Xinhua, 4 April 2007)