Information about Asia and the Pacific Asia y el Pacífico
Chapter

2 Opening Remarks

Editor(s):
John Hicklin, David Robinson, and Anoop Singh
Published Date:
July 1997
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Information about Asia and the Pacific Asia y el Pacífico
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Author(s)
Mar’ie Muhammad

I would like to express my sincere gratitude to the IMF for sponsoring this conference on the major macroeconomic issues facing the ASEAN countries. Equally, my appreciation is extended to Bank Indonesia, whose strenuous efforts have been crucial to the success of the conference.

This gathering of distinguished policymakers, economists, and scholars from the ASEAN region, other countries, and the IMF is timely indeed. It confirms our growing commitment in the region to an open sharing of ideas, information, and policy experience in the macroeconomic area.

There is no doubt that maintaining the region’s economic success in the face of the emerging global environment requires that we guard against complacency and remain alert to new opportunities and challenges. Despite the solid record of the region’s achievements, there are clear challenges. For example, some of the region’s economies need to address high levels of external debt, both private and public, accumulated through persistent current account deficits.

The rationale for this concern is obvious. Evidence from other parts of the world—from some Latin American, Asian, and European economies—demonstrates clearly the adverse implications of inconsistent macroeconomic policies for sustained economic growth. Their experience is testimony to the ill effects of distorted policy settings, such as currency overvaluation, large external deficits, reliance on short-term capital inflows, and a fragile financial sector. In this context, I would especially like to highlight that a key factor behind some unfortunate episodes of economic instability was excessive reliance on a nominal exchange rate anchor. While such a policy was motivated by the desire to reduce inflation, the associated excessive real appreciation of the currency hurt growth and resulted in a high current account deficit. I refer to this experience to make the more general point that macroeconomic policies need to remain prudent and consistent and that policymakers must be constantly alert to challenges and risks.

In concluding, let me reiterate that sustainable economic growth with social development is the overriding objective of the region’s economies, as they strive to increase further their rising share of world output. Among the many imperatives to meet this goal, and to build more resilient and vibrant economies in the region, let me mention three. First, there is an urgent need for greater economic cooperation, and I call for a wider economic forum that would enable finance ministers and central bank governors to better share views, exchange experiences, and build a consensus in certain key economic areas. Second, we need to recognize the growing importance of the private sector in the money and capital markets and to include their key financial representatives in such a dialogue. Finally, such an enhanced dialogue underscores the need for a wider sharing of economic information. In this context, I applaud the IMF for its initiative in launching the Special Data Dissemination Standard. It has the potential to function as an early warning system and facilitate decision making in the private sector, in particular by investors and other market participants. We in the region fully support this program and will endeavor to make it a success.

Note: Mar’ie Muhammad is the Minster of Finance of the Republic of Indonesia.

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