ASEAN PLUS (Details)

Mr Chuang Shaw Peng asked the Minister for Finance whether he will elaborate on the details of the mechanism in the proposed early financial warning system, the ASEAN Plus.

Dr Richard Hu Tsu Tau: Mr Speaker, Sir, the need for a regional surveillance mechanism within ASEAN was recognised during the First ASEAN Finance Ministers' Meeting in Phuket in March 1997 before the outbreak of the regional financial crisis. The onset of the regional financial crisis gave impetus to this initiative. In November 1997, ASEAN central banks established the ASEAN Central Bank Forum (ACBF), and this was followed by the formation of the Select Committee of Finance and Central Bank Officials called the ASEAN Select Committee.

The ACBF carries out regional surveillance with the technical support of the IMF and complements the global surveillance work of the IMF. It aims at evaluating potential economic and financial risks of member countries, highlighting policy options and implications, and encouraging early action to minimise such risks. The ACBF recently concluded its second meeting in Jakarta on 8th-9th May 1998.

The Early Financial Warning System mentioned in press reports refers to a proposal to establish an ASEAN Economic Monitoring Mechanism (AEMM) to support the surveillance initiative. ASEAN Finance Ministers agreed during their second meeting in Jakarta in February this year to a proposal by the Philippines that the ADB be asked to provide technical and secretariat support for the surveillance process during the first two years, with a view to the ASEAN Secretariat taking over thereafter. The ADB and the ASEAN Secretariat had proposed to establish the AEMM during the ADB Meeting in Geneva in April this year. However, at that meeting, ASEAN Finance Ministers have agreed that the proposal requires further careful study.

It should be noted that arrangements for the establishment of the surveillance mechanism are primarily focused on the meeting of ASEAN's needs, contrary to the impression given in newspapers (and quoted in the above question), about it being an "ASEAN plus". ASEAN Finance Ministers have, however, agreed to meet with the Japanese Finance Minister on a regular basis to exchange views. The first such meeting was held at the fringe of the ADB Meeting in Geneva this year. Japan's Vice-Minister for Finance, Dr Eisuke Sakakibara, who represented his Minister at the Meeting, had dubbed this meeting "ASEAN Plus", and that is how it originated.

Mr Zainul Abidin Rasheed: Sir, on "ASEAN Plus", is the financial system in the ASEAN countries transparent enough to make "ASEAN Plus" effective?

Dr Richard Hu Tsu Tau: The whole idea of this ASEAN surveillance mechanism is, in fact, to produce a list of statistical data which participating member countries would be prepared to divulge. Because it is a complex process, therefore it is now being studied very carefully by the deputies of the Finance Ministers to ensure that the list of statistical information required is detailed enough and meets the requirements for proper surveillance.

Mr S. Iswaran (West Coast): May I ask the Minister: is it envisaged that this monitoring system will eventually lead to the establishment of some financial arrangement or fund to assist countries deemed to be in distress or where distress is anticipated?

Dr Richard Hu Tsu Tau: Not at all. That is not the objective at all. There will be no special fund outside the IMF arrangements. All the current arrangements are bilateral agreements.

Dr Lee Tsao Yuan: Could the results of the analysis of the ASEAN surveillance mechanism be publicised?

Dr Richard Hu Tsu Tau: Initially, the data would be exchanged between the participating countries themselves. I do not think at this point of time it has been considered whether the data should be published.

Dr Lee Tsao Yuan: I recall that in the case of Thailand when their financial crisis first started, I think IMF had said that they actually mentioned to Thailand that there was trouble but no action was taken. So supposing that in this case, the surveillance results do show that there is actually a potential problem in one of the ASEAN countries, what sort of follow-up action will be taken then?

Dr Richard Hu Tsu Tau: It is envisaged that peer pressure from the other participating countries would hopefully influence the government to take some action. Publicising it or revealing the details to the public at large, I think, really does not solve the problem.