Asian finance ministers agreed Friday to speed up regional integration and pledged to press ahead with plans for a disaster insurance fund in the wake of Japan’s tsunami disaster.
They also warned that rising food and oil prices could threaten the global economic recovery, and expressed concern about massive inflows of destabilising “hot money” from abroad.
Indonesia’s rupiah hit four-year highs against the greenback earlier this week and inflation is running at more than 6.5 percent, underlining concerns that the region’s more successful economies may be close to boiling point.
“In contrast (to developed countries), emerging and developing economies have led the global economic recovery,” Indonesian President Susilo Bambang Yudhoyono said at the start of the talks on the Indonesian island of Bali. “This is of course no time to be complacent,” he added, warning of inflation and the “increasing severity and impact of natural disasters and climate change”.
Trade and liquidity imbalances combined with rising commodity prices “may threaten the global economic recovery, food and energy security and the achievement of millennium development goals” such as poverty reduction, he said.
“The increasing linkage of ASEAN to the global economy has enhanced the potential spillover from external shocks into our region,” he told finance ministers and central bankers from the 10-member Association of Southeast Asian Nations (ASEAN).
With Europe’s sovereign debt crisis spreading to Portugal and much of the developing world’s economies still in the doldrums after the global financial downturn, Asia has become a magnet for capital seeking better returns.
But much of it has been in the form of volatile portfolio capital that can be withdrawn just as fast as it is injected, raising fears of instability in economies that are leading the global recovery.
A joint statement released at the end of the talks said the ministers had “discussed concerns about the current surge in capital flows, (and) emerging inflationary pressures combined with strong commodity price vulnerability”.
Yudhoyono said the best protection from external shocks was closer regional cooperation and the creation of a planned ASEAN common market of almost 600 million people by 2015.
Indonesia is the current chair of the grouping and its biggest economy. The block also includes Brunei, Cambodia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
The ministers said they had agreed to implement a $700 million credit guarantee and investment facility next month as previously promised under a broad range of initiatives to more closely link the region’s economies.
Along with the Asian Development Bank, they also pledged initial contributions of $482 million towards a Malaysia-based ASEAN infrastructure fund.
They also agreed to move forward with the liberalisation of financial services, and emphasised the need for “disaster risk financing” to insure against the impacts of catastrophes like Japan’s devastating tsunami.
ASEAN secretary general Surin Pitsuwan said the Japan disaster would have “minimal impact” on Southeast Asian economies, ahead of an ASEAN-Japan foreign ministers’ meeting in Jakarta on Saturday.
Singaporean Finance Minister Tharman Shanmugaratnam said it was “too early” to tell what impact it would have. He warned that Southeast Asia would be “prudent” to assume the knock-on effects would last beyond a quarter or two.
The ASEAN region grew at around five percent last year, up from 1.5 percent in 2009 in the aftermath of the global credit crunch, yet Yudhoyono said it still counted almost 120 million people who live on less than $1.25 a day.
Nusa Dua, Indonesia, April 8, 2011 (AFP)
