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ASEAN Update, First Quarter 1999



Vol. 1/99, 1st quarter of 1999
Source:ASEAN
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LEADERS AGREE ON MEASURES TO STRENGTHEN
FINANCIAL SECTORS AND STABILIZE CURRENCIES

The heads of state and government of the Association of Southeast Asian
Nations agreed to strengthen their financial sectors and their capacity to
raise capital to finance the region's industrial development and economic
growth. 

At their summit meeting in the Vietnamese capital on 15-16 December 1998,
the ASEAN leaders decided to look into the feasibility of setting up an
ASEAN "currency and exchange rate system" that would keep the ASEAN
currencies stable with one another. 

Such a system would help prevent the sort of currency volatility that
contributed to the financial turmoil of the past year and a half. It would
thus make business conditions more predictable and help businessmen and
corporations in investment decisions. 

A possible currency and exchange rate system is one of numerous measures
that the leaders agreed upon in the Hanoi Plan of Action adopted at the
summit. The Hanoi Plan of Action is the blueprint covering the first six
years of the ASEAN Vision 2020 that the leaders issued at their summit last
year in Kuala Lumpur. 

The Plan of Action aims to hasten the recovery of ASEAN's economies and
cushion the impact of the current global financial turmoil on the region's
people. 

The leaders also decided to develop bond and other financial markets in
ASEAN so as to tap savings within the region and increase the resources
available for economic development. This would reduce the dependence of
governments and corporations on bank finance and limit the likelihood of
financial crises in the future. With bond and other financial markets
undeveloped in Southeast Asia, much of the region's savings currently goes
to financial markets elsewhere. 

The leaders called for the strengthening of the ASEAN surveillance process
recently set up by ASEAN's finance ministers, which would track and analyze
macroeconomic and other indicators and trends. In the declaration that they
also issued, the leaders said, "We shall spare no efforts to quickly restore
financial and macroeconomic stability, bring about early recovery and
maintain sustained growth. In this regard, ASEAN has put in place an ASEAN
Surveillance Process, based on peer review, to highlight emerging risks,
recommend appropriate policy responses, and encourage early action to avoid

such risks." 

In order to improve the management of ASEAN's financial sectors, the leaders
agreed to establish training facilities on taxation, insurance and capital
markets in the region. 

Elsewhere in the Hanoi Plan of Action, the ASEAN heads of state and
government adopted measures to accelerate the region's economic integration,
including the completion of the ASEAN Free Trade Area, and help their people
to cope with the impact of the economic downturn. 

They also agreed on ways to train their people in skills needed by the
industries of the future and thus make the region more competitive in the
global marketplace.

The summit was attended by Sultan Hassanal Bolkiah of Brunei Darussalam,
President B.J. Habibie of Indonesia, Prime Minister Sisavath Keoboun-phanh
of Laos, Prime Minister Mahathir Mohamad of Malaysia, Senior General Than
Shwe of Myanmar, President Joseph Estrada of the Philippines, Prime Minister
Goh Chok Tong of Singapore, Prime Minister Chuan Leekpai of Thailand, and
Prime Minister Phan Van Khai of Vietnam.


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