1. We, the ASEAN Finance Ministers, convened our Sixth Annual Meeting in Yangon on 5-6 April 2002 under the chairmanship of H.E. U Khin Maung Thein, Minister for Finance and Revenue, Myanmar. We exchanged views on recent economic developments and discussed the outlook for the ASEAN economies and the policies being adopted by Member Countries to sustain the economic recovery of the region. We are confident that, after registering moderate growth in 2001, the ASEAN economies will grow more strongly at 3.5 – 4.0 percent this year. This is based on the projected recovery of the global economy, our sound domestic macroeconomic policies and ongoing structural reforms, and the closer economic cooperation that ASEAN has fostered.
2. We reviewed the progress of regional financial cooperation initiatives, such as the Chiang Mai Initiative, liberalization of the financial services sector, and development of the capital market. We agreed to undertake a number of initiatives for 2002, including the launch of the third round of negotiations on financial services liberalization.
Recent Economic Developments
3. We noted that the global economic slowdown, exacerbated by the September 11 attack, had hampered efforts to sustain ASEAN economic recovery, which had built strong momentum since 1999, when growth recovered from negative 7.2 percent in 1998 to positive 5.5 percent in 2000. External demand, particularly the demand for electronics goods, which has underpinned strong export growth in our economies since 1999, slowed significantly. Member Countries that were more dependent on external demand were more affected, as seen in sluggish manufacturing activities and negative export growth. This, together with a general decline in foreign direct investment, resulted in economic growth for the ASEAN countries moderating to 2.8 percent in 2001.
4. Global monetary easing, especially the interest rate cuts by the US Federal Reserve, and generally well-contained inflation in the region, allowed ASEAN central banks to ease monetary policy last year. Past prudent fiscal management provided some Member Countries the flexibility to adopt expansionary fiscal policies to support domestic demand and sustain growth in 2001. These measures helped to mitigate the impact of weak external demand.
5. Despite more challenging economic conditions, we continued to make significant progress in financial and corporate sector restructuring last year. More non-performing loans from commercial banks were transferred to, and resolved by, asset management companies. This significantly improved the banking system’s capital adequacy ratio. Some of our Member Countries have taken positive steps to consolidate the banking sector. In addition, measures were instituted to further strengthen banking regulation and supervision, as well as corporate governance.
Sustaining ASEAN Economic Recovery
6. The outlook for the global economy has improved, supported by positive developments in the US. Although the outlook for the Japanese economy remains uncertain, there are signs of a turn-around in the US and some European economies in the first quarter. The signs point towards a gradual recovery in the global economy, with increased momentum in the second half of 2002. We therefore expect our exports to perform better in 2002. Domestic demand will continue to strengthen on the back of fiscal expansion and higher income. These developments are expected to stimulate recovery in the region with real GDP growth of between 3.5 and 4.0 percent in 2002.
7. Despite encouraging signs of global recovery, downside risks remain. In 2002, we will continue to be supportive of domestic demand through appropriate fiscal and monetary policies. We will also move forward with structural reforms, including financial and corporate sector restructuring.
8. To ensure fiscal sustainability in the medium term, we shall strive to further improve revenue collection and public expenditure management. In this regard, Indonesia, Malaysia, Myanmar, the Philippines and Thailand aim to achieve balanced budgets in the next three to five years. Privatization will be carefully phased to adequately support prudent fiscal measures in the near term, as well as maintain the ability to generate a sustained stream of revenues.
9. While we have made substantial progress in strengthening the financial sector, we have resolved to enhance the regulatory and supervisory framework, as well as promote the development of our capital markets as an important alternative to bank financing. Priority will be acco
rded to facilitating effective operational restructuring and the revitalization of the small and medium-sized enterprises sector, as well as ensuring that this sector continues to have adequate access to financing.
10. We recognized the significance of good governance, greater transparency and disclosure. We have seen substantial progress made in a number of Member Countries. We agreed to enhance public sector and corporate governance in the region through closer cooperation and exchange of information in these areas. We also resolved to make further progress on good corporate governance through the evaluation and possible adoption of relevant OECD principles of corporate governance.
11. To further strengthen our financial systems, we agreed to adopt and implement the International Organization of Securities Commissions (IOSCO) principles for securities regulators most relevant to our respective markets. Our insurance regulators also agreed to largely observe 11 International Association of Insurance Supervisors (IAIS) core principles by the end of this year.
12. We noted the Report on Monitoring Hedge Fund Activity and supported the move for greater transparency and disclosure from this sector.
Regional Finance Cooperation
13. We are pleased to note the substantial progress made in the implementation of regional self-help and support mechanisms through the Chiang Mai Initiative (CMI). To date, six bilateral swap agreements (BSAs) have been signed between Japan and Malaysia, Japan and Thailand, Japan and the Philippines, China and Thailand, Japan and China, and Japan and Korea with a combined size of USD 14 billion. Eight more BSAs are being negotiated.
14. We successfully concluded the second round of negotiations on the liberalization of financial services, with commitments of further liberalization made by all Member Countries in a variety of financial services sub-sectors. We signed the Protocol to implement the package of commitments this morning. We remain committed to further liberalize our financial services sector. Therefore, we are pleased to announce the launch of the third round of negotiations, which we expect to be concluded in 2004. Our Working Committee will explore ways to facilitate negotiations in this round. In addition, we welcomed the initiative to explore ways to form an ASEAN common position on issues related to financial services negotiations under GATS.
15. We also noted the progress made on customs cooperation. In particular, we welcomed the initiative to strengthen the exchange of best practices on duty deferment and security management as well as on the adoption of Customs Declaration, recommended by the World Customs Organization and UN agencies. The Protocol on the ASEAN Harmonized Tariff Nomenclature (AHTN) is being finalized.
16. The ASEAN+3 framework is working well with our regular economic reviews and enhancing policy dialogues with China, Japan and the Republic of Korea.
17. We exchanged views with the President of the Asian Development Bank (ADB) on global and regional economic developments. We welcomed ADB’s continuing efforts to support the economic recovery of the region. We appreciated ADB’s confirmation of its continued support for the ASEAN Surveillance Process and other regional and sub-regional cooperation activities such as the Initiative for ASEAN Integration, the Greater Mekong Sub-region and BIMP-EAGA (Brunei Darussalam, Indonesia, Malaysia, and the Philippines East ASEAN Growth Area).
18. We also exchanged views with representatives of the US-ASEAN Business Council on recent economic developments, US investment in ASEAN and cooperation activities implemented over the past year, including the visit of our senior central bank officials to the US. We reviewed with them the progress of ASEAN economic integration and discussed possible cooperation in capacity building in such areas as information technology and customs administration.