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April 10, 2011

President reminds Asean ministers not to wait for financial crisis

Bali International Convention Center, Nusadua, 8-4-2011

Opening Remarks at The 15th ASEAN Finance Ministers` Meeting


BALI, 8 APRIL 2011

Bismillahirrahmanir rahim,
Assalamu’alaikum warahmatullahi wabarakatuh
Peace be upon us,
Salam sejahtera untuk kita semua.
Om Swastiastu,</i>

Dr. Surin Pitsuwan, Secretary General of ASEAN,
Distinguished Ministers of Finance,
Distinguished Central Bank Governors,
Prof. Haruhiko Kuroda , President of the Asian Development Bank,
Dr. Sri Mulyani Indrawati, Managing Director of the World Bank for the East Asia Pacific, Latin America, Carribean, Middle East, and North Africa,
Prof. Naoyuki Shinohara, Deputy Managing Director of the International Monetary Fund.
General I Made Mangku Pastika, Governor of Bali

Distinguished Participants,
Ladies and Gentlemen,
I am very pleased for this opportunity, to address the ASEAN Finance Ministers meeting here in Bali. To all the Finance Ministers and Central Bank Governors who are here today, I bid you a warm welcome to Indonesia.

Indonesia is honored to be the chair of ASEAN this year, and as we move forward, certainly finance cooperation is an area that has become increasingly urgent. We need to work together to strengthen regional financial resilience, which would advance the cause of the ASEAN Economic Community.

All of us felt the pinch of the recent global financial crisis, which bled the world economy. We are fortunate to have passed the depth of this crisis, and avoided the worst case scenario of a global depression. Today, the global economy is recovering, but the path to full recovery remains fraught with risks and vulnerability.

One important lesson from that global financial crisis was that countries needed to act fast, and to act together. This is precisely what the G20 did by working together to reform the financial architecture, prevent protectionism and aiming for a strong, sustainable, balanced global economic growth.

But even as the worst is behind us, some developed countries are still struggling to fix domestic economic challenges, and regain the growth momentum. This is a picture that is likely to continue in the short-term. In contrast, emerging and developing economies have led global economic recovery with positive economic growth.

In Asia, after a rigorous restructuring of its financial architecture since 1998, the region has become more resilient to global shocks.

In fact, emerging and developing countries in Asia have become important engines for global growth. The economies of ASEAN and East Asia registered robust growth, and provided the expansion that was helpful for the global growth.

This is of course no time to be complacent. Our economies are still facing many challenges. These are, among others: the continuing global imbalances, upward pressures on commodity prices, the rising price of oil, and the increasing severity and impact of natural disasters and climate change—which in their own right affect the supply of our precious commodities.

Indeed, the recent global financial crisis and the recent commodity price increases, amplify the urgency for both policy coordination and global surveillance capacity building. Those challenges pose major threats to the global economic recovery, food and energy security, and achieving Millennium Development Goals.

While this situation is not new—we had it in 2008—it warrants our collective efforts to lessen its adverse effect.

ASEAN should therefore be better prepared, in responding to this challenge. The increasing linkage of ASEAN to the global economy has enhanced the potential spillover from external shocks into our region.

The recent financial crisis has also taught us that global problems can be effectively addressed through, three separate but inter-connected policy actions:

First, strong and prudent policies of individual countries,
Second, coordinated regional responses, and
Third, globally coordinated policy measures.

In the face of these realities, I urge our ASEAN colleagues and partner economies to enhance our strategy, and renew our commitments towards a more sustainable growth and stability within our region. ASEAN needs to be more adaptive and innovative.

On top of this, we in ASEAN must strengthen our framework, and become part of solutions to emerging global issues.

There are a number of questions that we should consider:
 How much have we done, to mitigate the potential impact of future financial crisis?
 How far have we come, in ensuring the security of our food and energy supply? And
 How much have we done collectively and individually, in responding to the challenge of climate change?

Answers to these questions, along with our own agenda for improving regional prosperity and growth, should be an important part of this meeting’s discussions.

At the same time, we also need to look closely on ASEAN’s vision and our collective aspiration for our regional grouping.

We need to look at how do we develop strong national and regional economies with strong, sustainable, balanced and inclusive growth.

We need to move faster towards a true ASEAN Community by 2015. This means, among others, strengthening ASEAN institutional frameworks and mechanisms.

We need to improve the quality of life of all ASEAN peoples. This is not just about higher living standards, but also about inclusiveness, through ensuring better access to public services, social safety nets, Small and Medium Enterprises (SMEs) development and financial inclusion schemes. It is also about ensuring better transparency and accountability, as well as ensuring an increased sense of security. Indeed, it is about bringing ASEAN to the people.

To realize this vision, there are three key priorities for ASEAN in 2011 and beyond.

The first priority is ensuring significant progress and implementation of ASEAN community. For ASEAN Finance Ministers, this implies building on progress in financial services liberalization, capital market development and management of capital flows.

This also means continued cooperation in customs initiatives, especially on the strategic plan for customs development, and the implementation of the ASEAN Single Window. Another challenge is to address any tax related impediments to integration, and ensure that the regional dialog on this issue will produce concrete recommendations and action.

The second priority is that, ASEAN needs to be more cohesive and competitive, to maintain its role as a driver for East Asia wide regionalism and architecture. In this context, post East Asian financial crisis of 1997 and 1998, Finance Ministers and Central Bank Governors have already put in place an ASEAN plus Three mechanism on macro economic policy coordination and surveillance, bilateral swap agreements, and a regional reserves pooling scheme under the Chiang Mai Initiative.

Finance Ministers and Central Bank Governors need to continue these regional efforts, to ensure that these schemes can be operational and implemented, and continue to be linked to international schemes.

Don’t wait for the next financial crisis.

And the third priority is, for ASEAN to contribute to the global agreements and governance. Hence, I believe that we in ASEAN should strengthen our engagement with emerging global forums, such as the G20.

As a premier forum for global economic cooperation, the G20 has been able to provide collective responses and initiatives, to mitigate impacts of the latest financial crisis, as well as to build confidence towards global economic recovery.

In addition, through G20 forum, we managed to guide the reform process of International Financial Institutions.

The increasing involvement of ASEAN in the international forums, should be aimed not only to foster regional economic and financial growth, but also to encourage investment in the region, and to improve our resilience against possible future crises.

We will need to work closer together to manage the world economy, so that it can meet our needs, and also the global needs. Essentially, we are talking about regional and global partnerships.

This effort is in fact, in line with the mandate given by the leaders to the ASEAN Finance Ministers, to sustain the recovery and restore growth. This can be done by way of implementing appropriate macro- economic policies, which is supported by structural reforms. We need to give a particular emphasis, on enhancing the stability of our financial markets.

We need to ensure that, our discussions will contribute to sustaining the global recovery in a post-crisis world. Moreover, we also need to ensure they will lead to the prospects for, an effective economic policy cooperation and coordination.

These are all momentous challenges for all of us, but we are up to meet them in a variety of ways.

ASEAN can take the lead in resolving problems in our own backyard. ASEAN nations can serve as the “agent of change,” that drives progress and development in many areas of cooperation within the region, be it financial cooperation, food security, energy security, inclusiveness, or equitable growth.

ASEAN can also serve as a building block for global growth, and also for a more effective global governance.

Without the growth of dynamic regionalism in all parts of the world, there can be no globalism. This is why the key theme for ASEAN this year is, “ASEAN Community in a Global Community of Nations”.

Distinguished Ministers,
Ladies and Gentlemen,
Let me now touch on the significance of finance cooperation for the realization of the ASEAN Economic Community, an important pillar of the ASEAN Community.

Financial cooperation must touch on the issue of development, in particular when addressing the development gap between and within ASEAN economies. If we do not deal with this issue, then we run the risk of a two or even three-tier ASEAN. We therefore need to focus our structural policies and reforms, as well as developing economic corridors, to enhance national and regional connectivity and regional infra- structure development.

I am pleased that there is already an ASEAN Connectivity Master Plan, and I do hope that the plan will ensure not just land-based regional connectivity, but also maritime-based regional connectivity.

On our part, Indonesia is currently finalizing our own Master Plan for accelerating economic development and economic corridors. There will be six economic corridors in various regions of Indonesia, and in each corridors there will be growth areas. The vision of the master plan is for Indonesia to be locally integrated and globally connected.

Progress is also visible in the implementation of the ASEAN Infrastructure Fund, with a view to narrowing the infrastructure development gaps in ASEAN. We must continue our efforts to increase the capacity of the fund, to meet pressing development demands in the region.

I am pleased to note that since 2003, our cooperative actions in the financial sector have led to notable gains in the areas of financial services liberalization, capital market development, and capital account liberalization.

The ultimate goal of our cooperation, including in the finance sector, is to promote greater stability and prosperity of the ASEAN peoples.

I therefore believe that our collective efforts should contribute to our ability in addressing poverty—one of the most pressing issues in the region.

The situation cannot be ignored: 1.4 billion people of the world population are still living with less than 1.25 US dollars per day, with around 118 million of them living in ASEAN countries.

Thus, we need financial inclusion for all of our ASEAN citizens. People living in poverty, usually do not have affordable access to financial services such as savings, loans, and transfer payment and insurance.

To lift our population out of poverty, we must provide affordable financial services. With broadened access, our population, including those living in poverty/ can unlock financial and small business opportunities. These opportunities will, in turn, improve their well-being. Ultimately, this will reduce poverty and inequality.

Through greater inclusion and participation of people from all levels of economy in society, we may foster greater ideas and innovation. We can promote ASEAN as, an even more people-centered organization than before.

Financial inclusion that addresses poverty must be innovative. It must not be business as usual, like regular financial services.

Let me briefly share with you what I mean, based on our current experience.

Since 2007, the government of Indonesia has introduced an innovative credit scheme called “Credit for the People” (KUR – Kredit Usaha Rakyat), which is executed through commercial banks, and 70% of which is guaranteed by the Government. Annually, the Government of Indonesia guarantees increases capital of the guarantee companies the amount of two trillion rupiah (approximately 200 million US dollars), or guaranteeing 20 trillion rupiah of loans. This allows micro- enterprises lacking collaterals to access bank loans.

The KUR credit program has also been expanded to target micro entrepreneurs, in need of smaller loans of less than 20 million rupiah – approximately more than 2000 US dollars. Remarkably, up to July 2010, more than three million small and medium enterprises have accessed this program. Of these, 96% are micro clients with an average loan size of four million rupiah, or more than 400 US dollars.

I am proud to mention, that this program has improved the status of approximately 400 thousand out of 4.1 million debtors, from unbankable to the entitled ones. More bankable persons mean more opportunity for development.

To complement financial inclusion program, the Indonesian Government has also developed other poverty reduction programs such as: cash support to the very poor, to compensate their decreasing purchasing power following the increase in oil price; and promoting “The National Program for Community Empowerment”.

In short, there is a sea of opportunity for the finance sector of ASEAN countries to innovate growth, both on the global economic front, as well as on the rural poverty front.

No matter what is the level of development, each ASEAN economy has a stake in the success of the other. Our common future and shared interests bind us together like no other time before.

Distinguished Ministers,
Ladies and Gentlemen,
Before I conclude, I would like to wish you all productive deliberations.

I encourage you to delve into matters, critical to the advancement of finance cooperation within ASEAN. I encourage you to come up with tangible steps, towards building a strong and sustainable ASEAN Economic Community.

I also wish to thank the Asian Development Bank, The World Bank, the IMF and other international organizations for their continued support in the development of our region. I hope that this outstanding partnership will flourish further.

Despite the pristine beaches and the many entertainment spots on this island, the meetings this week will surely drain your energy levels. To recharge, I encourage you to spend an extra few days, to go and explore other Indonesian remarkable sites and islands.

And, finally, by saying <i>Bismillahirrahmanirrahim,</i> I declare The Fifteenth ASEAN Finance Ministers’ Meeting open.

Thank you.
<i>Wassalamu’alaikum warahmatullahi wabarakatuh.
Om Santhi, Santhi, Santhi Om</i>



Nusa Dua, Bali (ANTARA News) - President Susilo Bambang Yudhoyono opened the 15th ASEAN finance ministers meeting at Bali International Convention Center, Westin Resort, Nusa Dua, on Friday.

Started at 9 am local time, the meeting was one of a series of ASEAN`s annual events.

Present at the meeting were among others former Finance Minister Sri Mulyani who is currently World Bank managing director, ASEAN Secretary General Surin Pitsuwan, Asian Development Bank President Haruhiko Kuroda, and International Monetary Fund Managing Director Nayauki Shinohara.

The primary objectives of the ASEAN finance ministerial meeting this time in the Indonesian island resort of Bali are to speed up cooperation and policy dialogues among ASEAN countries in the field of economy to strengthen regional monetary system, expand effective

financial markets, and contribute to sustainable economic development.

ASEAN countries will this year make special cooperation in the field of insurance, customs,infrastructure financing, and capital market development.

Under the cooperation, the ASEAN capital market is expected to get stronger in the face of world financial markets integration and to facilitate the real sector.

In addition, ASEAN will also cooperate in raising access to the insurance market and harmonization of regulation through exchange of information in a bid to support business certainty.

While the cooperation in the field of customs is directed to harmonize customs regulations within the framework of improving trade facilitation and investment toward ASEAN as a single market and production base.

In the field of infrastructure financing, the ASEAN finance ministers woill also discuss the formation of an ASEAN Infrastructure Fund as an alternative to financing sources for infrastructure development projects in the ASEAN region.

In the meeting, various deputy finance minister-level officials, gatherings of ASEAN+3 covering South Korea, China, and Japan, will also be held.

ASEAN forecasts lower GDP growth

Esther Samboh, The Jakarta Post, Nusa Dua, Bali | Mon, 04/11/2011
ASEAN finance ministers have estimated the surge in the price of crude oil would hurt economic growth in the region this year.

In a joint media statement following the 15th annual ASEAN Finance Ministers’ Meeting in Nusa Dua, Bali, on Friday, ministers said they estimated average economic growth in the region would decline to between 5.7 and 6.4 percent this year from 7.6 percent in 2010.

However, they said that despite the projected lower growth, economic expansion in the association’s 10 member states would still be higher than in the rest of the world.

The ministers said economic activity in the region remained buoyant despite a slow recovery in the global economy. “Most ASEAN countries have returned to, or even surpassed, their pre-crisis growth rates,” ministers said in the statement, in reference to the 1997 Asian financial crisis and the 2008 US-led global economic slowdown.

The “high level” growth rate projected by ASEAN finance ministers was mainly due to sustainable growth in domestic demand, in addition to the surge in investment in the private sector, which has emerged as a key driver of the region’s economic growth.

Thai Finance Minister Korn Chatikavanij attributed the slower growth estimate mainly to the impact of the surge in oil prices rather than due to other factors such as decline in domestic demand and investments.

“Higher-than-expected oil prices will affect economic growth because most of the association’s members are net oil importers,” Chatikavanij said at a news conference following the meeting.

Despite the positive outlook, ASEAN finance ministers agreed that risks remained, especially around surging global commodity prices, both in food and oil.

Social and political turmoils in the Middle East have caused oil prices to rise above the psychological US$100 per barrel level, while extreme weather has undermined productivity in the agricultural sector. Because of the unprecedented weather patterns, Indonesia has seen a disruption in its rice self-sufficiency program this year, and has been forced to import rice to meet demand.

“Given the high interdependence among our economies, coordinated responses are crucial. We reiterate our call to enhance economic integration as a strategy for sustained recovery,” the ministers said.

Indonesian Finance Minister Agus Martowardojo mulled the establishment of a fund by the 10 member states to counter food price increases through speculation and for food-related research to ensure food sufficiency and stability — the same recommendation Indonesia issued at a G20 forum earlier this year.

“We spoke about the possibilities of pooling funds to help each other if there are threats to food security. ASEAN countries will strengthen cooperation and see if they can avoid worst-case scenarios around food or other commodity prices,” Agus said.
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