WASHINGTON DC – Finance Secretary Carlos Dominguez III has cited substantial progress made by the Association of Southeast Asian Nations (ASEAN) in moving closer to creating a common market for a region tagged one of the world’s major growth drivers, but flagged the member-states’ concerns over “inward-looking” policies of developed countries.
In a report before the International Monetary Fund (IMF), Dominguez cited the accomplishments that the Philippines and other ASEAN member-states have done so far in step with their financial inclusion agenda.
Dominguez also relayed the ASEAN finance ministers’ concerns over the prospect of more developed countries adopting inward-looking policies and the possibility of “sharper-than-expected” financial tightening in this export-oriented region amid the normalization of US policy rates.
Given these concerns, Dominguez said ASEAN continues to meet its timetable on economic integration as spelled out in the ASEAN Economic Blueprint 2025.
“The ASEAN has moved dramatically in its effort to build a region-wide policy framework to enhance trade, economic cooperation and financial flows among the association’s member countries. We are now moving closer towards achieving the strategic goal of a common regional market,” said Dominguez here at the IMF Managing Directors Roundtable Meeting with ASEAN Finance Ministers and Central Governors.
With the Philippines chairing this year’s ASEAN, Dominguez spoke on behalf of his fellow ministers at the event held at the IMF Headquarters.
Dominguez reported that average growth this year among the ASEAN countries is expected at 5 percent, driven by strong domestic consumption in their respective economies.
In some ASEAN economies, faster growth is inhibited by higher inflation and weaker-than-expected trade flows, which, Dominguez noted, “are short-term limitations” and could turn for the better once global growth picks up.
“The ASEAN region is presently one of the fastest and main drivers of global growth. As a group of export-oriented economies, however, we look with concern at the prospect of more developed countries adopting more inward-looking trade and investment policies,” Dominguez said.
He expressed ASEAN’s concern over the normalization of US monetary policy rates, pointing out that “the period of low interest rates, supplemented by low fuel costs, saw the region’s economies expand rapidly.”
Dominguez also reported the “significant progress” in the ASEAN + 3 (Korea, Japan, China) Finance Cooperation Framework jointly chaired by the Philippines and Japan.
On the Chiang Mai Initiative Multilateralization (CMIM), Dominguez said the ASEAN finance ministers have so far:
· Completed the revision of the CMIM operational guidelines and the preparation of the CMIM Conditionality Framework that will clarify the activation process of the IMF De-linked Portion of the CMIM
· Been developing the qualification indicators for the CMIM Precautionary Line based on the Economic Review and Policy Dialogue (ERPD) Matrix; and
· Completed the 7th test run which examined the activation of the CMIM arrangement with the IMF program, underscoring he needs for strong coordination between the two agencies.
The CMIM is a currency swap agreement among the finance ministries and central banks of the ASEAN + 3 economies that aims to provide financial support for short-term liquidity problems.
“We have achieved progress as well on the ASEAN+3 (Japan, China, Korea) Macroeconomic Research Office (AMRO). We have finalized the AMRO’s Strategic Direction and Medium-term Implementation Plan. This Plan seeks to build up AMRO towards delivering high quality and original surveillance to member economies supportive of the CMIM,” Dominguez said.
According to Dominguez, a Memorandum of Understanding between the AMRO and the Asian Development Bank (ADB) has already been signed, with the ASEAN looking forward to the conclusion of a similar agreement with the IMF.
In the IMF meeting, Dominguez also reported the following key achievements of the ASEAN finance ministers:
· Adopted strategic action plans created by the different working groups in the ASEAN finance ministers’ track. The working plans include detailed deliverables and timelines in conformity with the ASEAN Economic Blueprint 2025;
· Endorsed the key performance indicators to be used by the working groups in tracking deliverables in the strategic action plans;
· Made good progress in the ratification of the 6th and 7th Package of Financial Services Commitments and the start of negotiations for the 8th package;
· Developed a Roadmap for the ASEAN Insurance Integration Framework (AIIF), including the commitment of the member-states to substantially liberalize catastrophe reinsurance and international maritime, aviation and transit insurance;
· Achieved significant progress in the ASEAN Banking Integration Framework, including the signing of the agreement between Indonesia and Malaysia; completed the negotiations between the Philippines and Malaysia; and started negotiations between Indonesia and the Philippines;
· Signed agreements among the Indonesia, Malaysia and Thailand on the settlement of trade in domestic currencies to promote the use of local currencies and facilitate intra-ASEAN trade and investments;
· Launched financial inclusion initiatives to support national financial inclusion strategies; and initiated capacity building moves for enhancing financial inclusion ecosystems, promoting innovative digital platforms; and increasing financial education as well as consumer protection; and
· Signed Protocol 2 (Designation of Frontier Posts) which will promote trade facilitation in the region by streamlining border procedures through the ASEAN Framework Agreement on Facilitation of Goods in Transit (AFAFGIT).