ASEAN finance officials and the heads of regional central banks yesterday homed in on the possibility of economic crisis as well as potential means of averting contagion in fledgling Southeast Asian economies.
The officials have also agreed “in principle” to doubling a regional currency fund to US$240 billion.
Protection from the US and European economic crisis – which threatens many regional exporters exposed to the West – would come in the form of integrated finance among member states and boosted access to emergency funds, officials from several Southeast Asian countries said yesterday on the sidelines of the 16th ASEAN Finance Ministers’ Meeting in Phnom Penh.
“The most important thing is preventing the crisis . . . In my personal opinion, the biggest threat to this region is the large capital inflow from other regions,” Central Bank of Myanmar deputy governor U Maung Maung Win told the Post on the sidelines of the closed-door meeting.
He noted the potential for economic shock should investment or exports dry up as a result of sustained crisis in the West.
Aligning the region’s capital markets, customs regulations and insurance and tax practices would make investment between the 10 members of the alliance more efficient, Vongsey Vissoth, secretary general at Cambodia’s Ministry of Economy and Finance, said yesterday.
This would also make the region’s markets more attractive to foreign investment, said Vongsey Vissoth, who is chairing the fourday meeting.
Bringing Southeast Asia’s financial sectors onto a level playing field presented major challenges, officials said, as some regional economies were decades behind others.
“If we compare our financial and banking sectors to older members, we are lagging behind them because we are just starting to emerge . . . There are development gaps between [countries] in terms of capital and capacity building,” Vongsey Vissoth said.
Regulatory discrepancies will also hinder Southeast Asia’s attempt to integrate by the 2015 deadline.
“The biggest obstacles for integration are the legal frameworks for each country,” Sonexay Sitphaxay, deputy governor of the Bank of the Lao People’s Democratic Republic, said on the sidelines of the meeting.
Vongsey Vissoth said officials had also “agreed in principle” to doubling a regional currency swap, which would serve as a relief fund in the event of an economic crisis, although there were “some technical issues to be dealt with”.
Doubling the swap would increase Cambodia’s contribution to $240 million, and probably lift the amount the country is entitled to borrow to $1.2 billion, experts have said.