MANILA, Philippines – Governments in Southeast Asia were told to focus on raising domestic demand, instead of increasing exports, as a way of surviving the global financial crisis.
Professor Masahiro Kawai, dean of the Asian Development Bank Institute, said: "Obviously, Asia (including ASEAN and East Asia) needs to adjust by rebalancing its sources of growth and turning to domestic demand-driven growth rather than export-driven growth."
Dr. William Wallace, lead economist of World Bank Jakarta, said the region needed to coordinate its policies better so that it could adjust smoothly to the crisis.
"In addition to policies that promote domestically sourced growth, ASEAN countries should try to coordinate their policy initiatives by agreeing for example, on the targets and timing of their fiscal expansion," he said.
Kawai and Wallace spoke last week at the fifth Brown Bag Series sponsored by the ASEAN secretariat in Indonesia.
The two experts said the region was in a better position to weather the crisis as its fundamentals were better now than they were during the Asian crisis in 1997 and 1998.
But Kawai said the economies in the region needed to coordinate their policies more because of their high level of economic interdependence.
ASEAN, which groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam, is still in the process of integrating the economies of its member-countries. The ASEAN Charter, which gives the organization a legal framework, came into force last December.
Kawai proposed that the region hasten its integration by strengthening its financial systems. He called for better supervision and regulation, particularly through regional financial cooperation.
He said that while Asia was in a relatively better position to address the global crisis, it had been not insulated from its dire effects.
Since the financial crisis intensified in September 2008, the region had seen slower growth, tighter external financing conditions, and volatile capital flows.
Pushpanathan Sundram, deputy secretary general of ASEAN for the ASEAN Economic Community who moderated the discussion, said the planned establishment of the ASEAN Economic Community by 2015 would deepen and widen trade and economic collaboration in and out of Asia. He said the ASEAN EC would facilitate policy coordination.
"Given the severity of the crisis, policy makers in East Asia must remain committed to pursue policy actions more decisively. The timely activation of the Chiang Mai Initiative Multilaterization facility and the strengthening of regional surveillance mechanism are steps in the right direction to help the region cope with this crisis as well as future ones," he said.
The Chiang Mai Initiative created an $80-billion facility for ASEAN member-countries with liquidity problems.
Since last year, many countries in the region had put in place various policy measures to recapitalize and inject liquidity into financial institutions, in addition to huge stimulus packages to spur domestic demand.
The event, co-sponsored by the Asian Development Bank, ASEAN-German Regional Forest Program, and Australia's Development Assistance Agency, was attended by Jakarta-based businessmen, diplomats and government officials. By Veronica Uy, INQUIRER.net
