1. We, the ASEAN Finance Ministers, convened our Seventh Annual Meeting in Makati, Philippines on 6-7 August 2003 under the chairmanship of H.E. Jose Isidro N. Camacho, Secretary of Finance, Philippines.
2. We are greatly saddened by the loss of lives in the bombing in Jakarta on 5 August 2003. We strongly condemn this act of terrorism and re-affirm our fullest support for Indonesia. We are confident that Indonesia will speedily bring the perpetrators to justice and call on all investors and our people not to let this isolated incident affect their confidence in our region. In light of this incident, we reiterate our full commitment to the global fight against terrorist financing and money laundering. We are pleased to note that all member countries are making significant progress in this area.
3. We had a fruitful meeting. We exchanged views on recent global and regional economic developments and the policies adopted by Member Countries. We discussed the outlook for the ASEAN economies, which is expected to improve in the second half of the year. We also reviewed the progress of regional financial cooperation initiatives towards strengthening regional self -help and support mechanisms.
4. We finalized the Roadmap for Integration of ASEAN in Finance, which we will submit to the ASEAN Leaders.
Recent Economic Developments
5. We are pleased to note the region’s solid growth of 4.4 percent in 2002 compared to 3.2 percent in 2001. For most of our economies, growth has continued at an average of 4.4 percent into the first quarter of 2003. Notwithstanding the SARS outbreak that affected the second quarter economic performance, the outlook is expected to be more robust for the rest of the year. Growth has continued to be supported by private consumption and revival in investment, underpinned by accommodative monetary policy and fiscal stimulus, intra-regional trade, and trade with East Asia
6. We expect growth to average 4.3 to 4.9 percent for this year.
7. We recognized the need to remain vigilant in view of the existing risks and uncertainties in the global economic outlook such as the current account imbalances in the major industrial countries, as a sudden shift in these imbalances may adversely affect the global economic outlook including that of the ASEAN countries.
8. Sufficient liquidity in the banking system and the general absence of inflationary pressure have allowed interest rates to remain low, thus providing a conducive environment for investment. The expansionary fiscal policy instituted in many of our countries throughout this year is expected to help maintain the necessary level of domestic demand while at the same time ensuring our fiscal consolidation targets in the medium term.
9. We are also pleased to note the progress in financial and corporate sector restructuring, and we remain committed to advancing the process of restructuring to further strengthen our financial systems. We shall continue to enhance our regulatory, supervisory and corporate governance frameworks. We also recognize the importance of public governance.
Strengthening Regional Collaboration and Support Mechanism
10. To further strengthen regional collaboration and support mechanism, we have expanded our network of bilateral swap arrangements (BSAs) under the Chiang Mai Initiative (CMI), which now totals twelve BSAs with a combined size of USD 31.5 billion. Four more BSAs are being negotiated. Meanwhile the ASEAN Swap Arrangement (ASA) has been renewed in November 2002.
11. Further to the Chiang Mai Initiative, we are developing domestic and regional bond markets and exploring other modalities of regional collaboration and support mechanism. We welcome the establishment of the Asian Bond Fund, which is participated by five ASEAN central banks/monetary authority. We believe that this initiative would complement our overall efforts to promote the domestic and regional bond markets.
12. To ensure that our efforts in this area take into consideration private sector views, we continue to hold dialogues with the private sector. In this meeting, we had a fruitful exchange of views with the US-ASEAN Business Council.
Progress in Regional Finance Cooperation
13. Regional cooperation on customs has advanced with our signing of the Protocol Governing the Implementation of the ASEAN Harmonized Tariff Nomenclature (AHTN). The uniform classification of traded goods will facilitate regional trade and investment by simplifying and streamlining customs processes. We are pleased to note the progress on other customs issues, including the issuance of the ASEAN Customs Valuation Guide and the ASEAN Post-clearance Audit Manual.
14. Our insurance regulators signed a Memorandum of Understanding on the establishment of the ASEAN Insurance Training and Research Institute. Protocol 5 on ASEAN Compulsory Motor Vehicle Insurance is being implemented with the setting-up of the Council of Bureaux and the Blue Card system.
Roadmap for Integration of ASEAN in Finance
15. To implement our Leaders’ Vision to achieve “a free flow of goods, services and investments, and a freer flow of capital” by 2020, we agreed on the Roadmap for Integration of ASEAN in the areas of capital market development, capital account liberalization, financial services liberalization and ASEAN currency cooperation.
16. On capital market development we have agreed on a two-pronged approach. The first prong shall involve institutional capacity building in areas necessary to the development of capital markets, including the legal and regulatory framework, market infrastructure, and international best practices. The second prong shall focus on initiatives to foster greater cross-border collaboration between capital markets in the region, such as in the areas of training networks, development of products and market linkages, and harmonization of capital market standards.
17. To facilitate closer integration in ASEAN, we agreed to take an orderly approach to capital account liberalization, where appropriate, with adequate safeguards against volatility and systemic risks.
18. To expedite the process of financial services liberalization, we agreed on a positive list modality and adopted milestones to facilitate negotiations. Furthermore, we shall continue to strengthen capacity building in the financial sector in order to realize the benefits of liberalization.
19. On ASEAN common currency, we agreed to focus first on areas of currency cooperation that could further facilitate and promote intra regional trade and deepen regional economic integration.
20. We are pleased with the efforts taken towards regional integration, including the significant cooperation and exchange of information among ASEAN finance and monetary authorities and are committed to the implementation of the Roadmap and other initiatives.