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ASEAN: MAINTAINING GROWTH, ADDRESSING CHALLENGES,AND TAPPING OPPORTUNITIES

Governor

 

MINISTER AGUS MARTOWARDOJO

ASEAN: MAINTAINING GROWTH, ADDRESSING CHALLENGES,
AND TAPPING OPPORTUNITIES

2010 Institute of International Finance Annual Membership Meeting, Washington DC, 8 October 2010

 

Distinguished Colleagues, Ladies and Gentlemen,

I am delighted and honoured to have the opportunity to participate in today’s dialogue which is taking place at a time when the global economy has shown encouraging signs of recovery.  Globally coordinated economic stimulus measures have underpinned the recovery and this has boosted higher domestic demand, created stronger market confidence, and helped the stability of financial markets.  Collectively this has seen global growth forecasts upgraded in 2010. 

Indonesia’s growth is also set to grow at a faster pace in 2011.  Indonesia’s economic outlook remains robust.  We are enjoying healthy consumer and business confidence, and the government has a proactive spending policy that is pro-poor, pro-employment, pro-growth and pro-environment.  Growth in the second quarter for 2010 reached 6.2% year-on-year.  For 2011 we are expecting 6.4% economic growth or higher with a deficit of 1.7%.  The inflation rate is stable and currently stands at 5.8% (yoy) and we are expecting a lower figure next year.   We are also expecting the rupiah exchange rate to remain stable over the coming year.

Although the external economic environment has improved considerably, a large degree of uncertainty remains.  Indonesia and our fellow ASEAN economies are aware that the global recovery is still at risk.  The globe has witnessed a sharply rising sovereign debt level, a slow recovery in the labour market, and subdued credit growth with low capital utilization in many advanced economies.  These issues could hinder or even reverse the recovery in advanced countries which could be distressing for emerging and developing economies.

Distinguished Colleagues, Ladies and Gentlemen,

At this economic crossroads, the economies of the Asian region are playing a pivotal role in helping to boost global growth.   The strong growth of China, India and Indonesia has helped improve the economic conditions of regional trading partners.  A large number of Asian economies are reporting limited spare capacity and falling unemployment rates.  With or without a global financial crisis, this growth is crucial to the region as many countries, including Indonesia, still have to combat unacceptable levels of people living in poverty. 

ASEAN economies have rebounded strongly due to the resilience of domestic demand, appropriate policy responses, a robust financial system, sound economic frameworks, and the recovery in global trade and financial markets.  These favourable conditions and pro-business policies have cushioned ASEAN economies from the full impact of the external shocks and helped to re-attract investments.  ASEAN is confident that the region will grow between 4.9 and 5.6 per cent in 2010 which is up from the 1.5 per cent recorded last year.    

The upside risks to this outlook include the rebound of commodity prices, the return of risk appetite and capital inflows, and stronger domestic demand due to fiscal stimulus measures.  In addition, there are many downside risks which include weaker growth in advanced economies with a moderate possibility of a double dip, sluggish growth in private investments, delays in project disbursements, and the possible resurgence of inflation and asset bubbles.  

The issue of currency values has increasingly become a focus of major economies. Indonesia does not wish to see any escalation of tensions that could lead to a trade war or any return to protectionism.  We believe that inter-regional and intraregional trade is crucial to sustaining growth.  Indonesia supports the free trade agenda, and will work against protectionism, and to make our economies conducive for investment. 

To this end, ASEAN is advancing free trade negotiations bilaterally with other regional trading partners and through ASEAN FTAs with China, Japan, Korea, India, and Australia and New Zealand.  These agreements reflect ASEAN’s commitment to provide mutually improved economic opportunities to producers and consumers throughout the region.  ASEAN also remains committed to the global free trade processes under the WTO and GATT agreements. 

Distinguished Colleagues, Ladies and Gentlemen,

The post global financial crisis presents a clear opportunity to promote further integration of ASEAN financial markets to ensure a continued flow of funds within the region and for ASEAN governments and business to have continued access to liquidity.  This is in line with the broader direction and objectives of ASEAN integration as envisaged in the ASEAN Economic Community (AEC) 2015 Blueprint, which is something that will benefit all who invest in the region.

In regard to capital markets, we are targeting the broadening and deepening of regional capital markets through measures that enhance market access, liquidity, and linkages.  Work is underway to create brand recognition for ASEAN products, to lift standards of regulations, and to build global trust in ASEAN standards through mutual recognition regimes.  The endorsement of the Implementation Plan to Promote the Development of an Integrated Capital Market in ASEAN is aimed at achieving the objectives set out in the AEC Blueprint. 

In the area of financial services, Indonesia is participating in a study to review and map the current financial sector regimes within ASEAN.  This will help identify constraints that inhibit financial integration.  It will also provide the groundwork to develop a comprehensive framework with specific recommendations and timelines for achieving the progressive liberalisation of financial services.

Infrastructure development is another key focus and something that we know is of particular importance to investors, both those who wish to invest in infrastructure and those investors who wish to benefit from more expansive infrastructure networks.  Our goal is to create a facilitative environment for infrastructure financing and infrastructure development to strengthen the medium-term and long-term growth prospects of the region. 

Engaging the private sector and multilateral institutions to facilitate fund raising and to mitigate risks will be pivotal to support higher levels of infrastructure development.  To this end, ASEAN agreed to work closely with the ADB to work out an appropriate structure for the ASEAN Infrastructure Fund that could catalyse the necessary financing.  Indonesia is a strong supporter of this initiative.

ASEAN has also reaffirmed the importance of regional and international resources to support ASEAN growth and stability.  International financial institutions (IFI) like the ADB, World Bank and IMF can play positive roles in advancing regional economic, financial, and trade integration goals.  In this regard, ASEAN will explore ways to enhance synergies between regional initiatives such as the Chiang Mai Initiative Multilateralisation (CMIM) and IFI financing facilities.

Indonesia and our fellow ASEAN economies are determined to engage and cooperate with standard setting organizations such as International Organization of Securities Commissions and financial regulators forums such as the Financial Stability Board.  We also believe there is an expanded role in this area for Multilateral Development Banks and the International Monetary Fund (IMF) in areas such as surveillance, early warning systems, and the provisioning of contingency funds.

Distinguished Colleagues, Ladies and Gentlemen,

I would like to conclude my presentation today by saying that Indonesia and our ASEAN colleagues will endeavour to continue playing an active and leadership role in the global policy dialogue and we will continue to implement policy reforms.  In 2011 Indonesia will host the ASEAN Summit, the ASEAN+3 Summit and the EAS Leaders’ Meeting.  These gathering will provide useful opportunities to address these issues further.  On behalf of Indonesia and my ASEAN colleagues, thank you and Good Day.

 

 

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