Statement by
H.E. Dr. Manaspas Xuto, Executive Director of the
International Institute for Trade and Development at
the High Level Conference on Asian Economic
Integration Tokyo, 18-19 November
2004
Mr. Chairman, Distinguished
participants, Ladies and Gentlemen,
May I take this opportunity to firstly
express my sincere appreciation to the organizers of
this High Level Conference on Asian Economic
Integration, especially the Research and Information
System for the Non-Aligned and other Developing
Countries (RIS), for inviting me to attend this
Conference once again.
In March last year, I was invited by RIS
and other associates to the International Conference on
“Building a New Asia: Towards an Asian Economic
Community” in New Delhi. I remember enjoying the
presentations made by the distinguished panelists as
well as the discussions that followed. After almost two
years, it is an opportune time for us to recap what has
progressed since our last gathering, which may or may
not change our thinking and perspective towards Asian
Economic Integration.
Last year, I presented to you the
initiative of Thailand on the establishment of the Asia
Cooperation Dialogue or ACD and the promotion of the
Asian bond market development. What I will be speaking
about now may not be entirely new, but a good message
such as this needs to be repeated here and everywhere.
The ACD is an Asia-wide forum which
focuses on the consolidation of Asia’s inner strength
and the utilization of its combined abundant resources
to enhance Asia’s competitiveness and prosperity. The
ACD could be considered a roadmap towards the Asian
Economic Integration. Our final goal is to achieve a
step-by-step shift towards a fully integrated Asian
Community. We are strongly committed to this aim, and
our actions follow up on our commitments.
Geographically speaking, ACD presently
encompasses 26 member countries from all sub-continents
of Asia, accounting for half of the Asian countries. The
forum includes the leading economies of Asia, namely
Japan and South Korea, as well as the emerging economies
like China, India and the ASEAN countries which have
been recovering since the 1997 financial crisis - all of
these can serve as driving engines towards a new era of
Asian prosperity.
Mr. Chairman, Distinguished
participants, Ladies and Gentlemen,
During the past year, ACD has made
swift progress in terms of both the dialogue and the
project dimensions. On dialogue, the Second and Third
ACD Foreign Ministers’ Meetings were held in June 2003
and June 2004 in Thailand and China, respectively. In
addition, the ACD Ministers had opportunities to meet
and exchange views on the sidelines of the annual United
Nations General Assembly session in New York. Frequent
dialogues help enhance comfort level among the policy
makers of Asian countries and provide them with a
platform to candidly exchange views on Asia-related
matters and beyond. The comfort level, mutual
understanding and friendship will be a strong basis for
enhanced cooperation, particularly for a continent as
diverse as
Asia.
On the project dimension, 18 activities
within 12 ACD areas of cooperation have been organized
by their prime movers. Let me provide some examples.
Japan hosted the ACD Workshop for
Strengthening Legal Infrastructure. The Workshop agreed
on the continuation of the project by putting together
legal experts from the ACD member countries to deepen
and broaden substantial discussions on the legal
infrastructure. In addition, the Workshop on
Environmental Education was also organized by Japan,
providing an opportunity for ACD member countries to
discuss a wide range of issues pertaining to
environmental education - namely the basic principles
and ideas on environmental education, activities to
enhance understanding and awareness, institutional
framework, and international and regional cooperation.
India hosted the Consultative Meeting
of ACD on Biotechnology in New Delhi. The meeting
agreed to the establishment of the ACD Biotechnology
Consortium, with a secretariat in India, and of the Apex
Governing Body (AGB) whose membership will constitute
all member countries at the key decision-making level.
The meeting of the Working Group on Energy
Security was held twice in Bahrain and in the
Philippines, respectively, amidst the backdrop of the
tight world oil supply/demand and high oil prices, which
has affected most countries in Asia. ACD possesses the
advantage of having both oil consumers and producers
within the forum, thereby making it an appropriate venue
to address the issue and to find ways of alleviating
its impact. Issues such as joint oil stockpiling,
renewable energy sources, energy efficiency and
conservation, as well as improvement of regional
infrastructure networks, including oil storage systems,
regional energy transport and power transmission systems
have all been discussed and promoted.
Bangladesh organized a Seminar on
“Rehabilitation of Working Children of Asia” in Dhaka,
which is an integral part of the area of cooperation
dealing with poverty alleviation. It is worth noting
that this activity demonstrates that ACD activities not
only address economic development, but also pay close
attention to the human face of development, with an aim
to raising the standard of living of people at the
grass-roots level.
These efforts have formed a web of
functional cooperation that, taken together, could be
viewed as an Asian community in the making, in the
“embryo” stages. Mr. Chairman,
Distinguished participants, Ladies and Gentlemen,
The challenge ahead is how to
sustain the development pace of the ACD process, to
concretize the actions and outcomes of ACD areas of
cooperation, and how to further instill the idea that
the ACD belongs to Asia. It is the collective
responsibility of each member country to drive the
process forward. Moreover, in order to ensure that ACD
will pave the way towards the end-goal of an Asian
community, awareness and participation of public and
private sectors, civil society and, above all, the
people’s participation in the process are imperative. In
this connection, Thailand, as the ACD Coordinator, will
host the ACD Think Tank Symposium from 15-17 December in
Bangkok in order to raise awareness among academic
institutions in Asia of the ACD process and to provide a
forum for those institutions to share their thoughts on
the future direction of ACD and of Asia as a
whole.
Mr. Chairman, Distinguished
participants, Ladies and Gentlemen,
The call for an Asian community is not at
all premature, given the sweeping changes that have
occurred on the international strategic landscape and
the emergence of continent-wide cooperation in other
regions. Likewise, the call for a more stable financial
infrastructure in Asia is not at all illogical. Lessons
learnt from the 1997 Asian financial crisis demonstrate
that a major factor behind its advent was related to the
capital account crisis. The influx of short-term capital
into Asian countries was highly dependent on the level
of confidence of the lending countries with regard to a
stable environment in Asia; hence, the drastic
withdrawal of capital from the Asian market in the
immediate wake of the crisis. We also learnt that
individual countries’ foreign reserves alone could not
deal with the sudden impacts of large and volatile
short-term international capital
reversals.
Given its tremendous amount of foreign
reserves, accounting for 65% of the world’s total of US$
3 trillion reserves, Asia has great potential for
furthering its growth and stability if those resources
are properly managed and utilized. In order to avoid a
recurrence of the 1997 financial crisis, a new financial
architecture needs to be developed to avoid the root
causes of such a crisis and to provide a wider
opportunity for Asia to channel its abundant foreign
reserves for investment within the region. An Asian bond
market is one answer in this regard since it will
eliminate the double-mismatches -- maturity and currency
-- as well as stabilize capital movements within the
region. The initiative will also rectify imbalances
between bank loans and other types of borrowings so as
to be less dependent upon commercial banks and to allow
for an efficient development of the financial
system.
The need for Asian bond market stems also
from the current account deficit of the United States,
which has led to the anticipation that the US may not be
able to sustain its role in driving world growth. The
world, particularly developing countries in Asia and
other regions, would suffer badly should the US dollar
crash, especially if there is no appropriate financial
instrument like the Asian bond to cushion the fall and
absorb the consequences. Moreover, the developed Asian
bond market will provide a viable alternative for Asian
countries to diversify their reserve holdings by
swapping part of their assets among each other according
to the proportion of their existing international
reserves.
Mr. Chairman, Distinguished
participants, Ladies and Gentlemen,
A few years ago, the Asian bond market
development initiative may have sounded in-credible, but
today, it has become widely accepted across Asia and
vigorously developed in various fora. The demand side of
the bond market has been promoted under the framework of
East Asia and Pacific Central Banks and Monetary
Authorities, or EMEAP. The First Asian Bond Fund or
ABF-1 was announced on 2 June 2003 at US$ 1 billion. It
was a lead investor, which helped stimulate the Asian
bond market. The forum is now working on the Second
Fund, or ABF-2, which will invest in local currency
denominated bonds. Within the structure of this fund,
there will be components that could possibly be open to
investment by non-EMEAP public and private sector
investors.
On the other hand, the supply side of the
regional bond market has been developed under the
ASEAN+3 and APEC framework. ASEAN+3 focuses its work on
the need for a joint and comprehensive set of actions by
its member countries in two broad areas that (1)
facilitate access to the market by a wide variety of
issuers and (2) create an environment conducive to
developing bond markets. At present, the 7th ASEAN+3
Finance Ministers’ Meeting has given Thailand the task
of conducting the ASEAN+3 Withholding Tax Project to
develop the supply side, especially for local currency
bonds. This project is intended to propose to ASEAN+3
countries exempt withholding tax for non-resident
investors. Exemption will apply to revenues from
interest, capital gains, and capital losses. Withholding
tax is one of the most crucial impediments for trading
of bonds across countries in Asia.
Under the ACD
framework, the Asian bond market initiative, for the
first time, received full political support from the
policy level of Asian countries. The Chiang Mai
Declaration on Asian Bond Market Development was adopted
at the Second ACD Foreign Ministers’ Meeting in Thailand
in 2003, providing a guideline for developing the Asian
bond market. Apart from raising public awareness and
political support for the Asian bond market development
initiative, a series of expert groups’ meetings have
been organized by Thailand, as the prime mover on this
matter, in order to seek ways in which ACD could add
value or complement the ongoing work. As ACD has wide
coverage throughout Asia, it is in a better position to
promote the initiative, particularly to engage other
countries in South, West and Central Asia in the
process. India, for instance, has been very active in
supporting the initiative and expressing her intention
to contribute to its development in various
ways. Even
though the Asian bond market development is aimed to
better utilize Asian resources for intra-Asia
investment, thereby boosting Asian prosperity, this
initiative should not be interpreted as an
inward-looking process. On the contrary, it is outward
looking and complies with market-based rules. The
initiative is not merely aimed at reducing Asia’s
dependence on the US dollar but, more importantly, this
new financial architecture represents a means to enhance
regional financial self-help, as well as to lend support
beyond the short-term liquidity provided by the Chiang
Mai Initiative, thereby strengthening the financial
stability of the region. In so doing, sound governance
and institutional transparency need to be firmly
instilled. In the near future, we envisage a stronger
Asia which will be a better partner for other regions.
Moreover, the effort to develop an
efficient bond market is a contribution to the stability
of the world financial system as a whole. Perhaps this
is why the Asian bond market initiative has received
support from non-Asian countries as well. For instance,
at the fourth Asia-Europe Meeting in Copenhagen in 2002,
leaders of both sides agreed to set up a task force to
study ways and means to promote a closer ASEM economic
partnership, including a potential linkage between the
Asian bond and Euro-bond markets. And at the ASEM5 last
October in Hanoi, the leaders agreed to strengthen and
enhance cooperation among regional bond markets.
Mr. Chairman, Distinguished
Participants, Ladies and Gentlemen,
As the promoter of the Asian bond market
initiative, Thailand has exerted her utmost effort to
move the project forward. We have played a key role
in this matter in the aforementioned fora, particularly
the ACD which Thailand views as the core player in the
promotion of the Asian bond market. In fact, I like to
think of the Asian bond market initiative as the
flagship of ACD. On her part, Thailand has
established the National Asian Bond Market Development
Secretariat to disseminate information and coordinate
the work being done on the project in different fora. In
addition, the Thai cabinet already approved the draft
law for the exemption of withholding tax for
non-resident investors and entities. It is expected that
by the end of this year, Thailand will issue the first
batch of Baht denominated bonds with the exemption of
withholding tax, which will be traded actively in Asia
and the rest of the world. The creation of sufficient
supply of Asian bonds with high quality and the removal
of impediments for cross-country trade, particularly the
withholding tax, is needed to match the increasing
demand of the market, including the launch of the Second
Asian Bond Fund in the near
future.
In sum, the effort to promote the Asian
bond market development is timely. It will bring about
several benefits to Asian countries. It will help
resolve liquidity problems, particularly the problem of
over-reliance on short-term funds of Asian corporations.
It will help increase the inflow of foreign capital and
attract foreign investments. It will enhance market
discipline and corporate transparency. It will assist in
debt restructuring. And finally, it will increase
financial stability in Asia and, together with other
bond markets, that of the world financial system.
Mr. Chairman, Distinguished
participants, Ladies and Gentlemen,
The new era of Asia has arrived. History
will not repeat itself if we learn from the past and are
well-prepared. We will be able to avoid not only the
scourge of economic and financial crises, but we will
also successfully take advantage of globalization in
creating a prosperous and stable Asia. This will never
happen unless Asian countries unite to collectively
shoulder each responsibility, and to drive forward
towards the common goal of having a favorable Asian
community for our generation and
beyond.
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