August 3, 2000
2:30 pm - 5:00 pm

SESSION IV Regional cooperation and collaboration on money and finance:
Contemporary experiences and lessons for future policy options for the Asia-Pacific region

Moderator: Mr Rubens Ricupero, Secretary General, UNCTAD

Heiner Flassbeck, former Deputy Minister of Finance, Germany

Jan Kregel, High Level Expert in International Finance, UNCTAD

Masaru Yoshitomi, Dean, Asian Development Bank Institute

Summary of Issues to be Discussed

The urgency of regional collaboration on monetary and financial issues arises from the continuing and pervasive effects on all countries in the region, including the least developed, of the recent financial crisis. A crisis of this severity in terms of lost output, employment and incomes as well as the sharp declines in wealth has not been witnessed since the 1930s. Losses on such a scale were thought to have become impossible within the international financial framework set up in the aftermath of the Second World War.

The current recovery across the region cannot hide the fact that many of the same structural forces in the international financial system which generated the crisis have not weakened. Since the occurrence of financial crises now appears to be systemic and their propagation international the management and prevention of crises should be undertaken through multilateral institutions.

• Why has multilateral reform being moving so slowly and is the pace likely to pick up soon?
• What experiences have policy makers gained in the region over the past few years and has this prepared them for managing regional arrangements?
• Is the moral hazard problem more or less likely at the regional level?

The extensive integration of intra-regional trade in East and South East Asia was an important aspect of the integration of these economies into the global trading system and a cause of the rapid growth in the region. The high degree of integration of trade and production had also given rise to increasing regional financial flows prior to the crisis; and this high degree of integration through trade and finance was one reason for its rapid propagation among countries in the region. Since the regional integration of trade, production and financial flows thus produced both positive and negative influences on financial stability and growth within the region, the real issue is not whether regional financial arrangements conflict with global solutions, but how the benefits of regional integration can be reinforced so as to provide financial stability and support for high rates of economic growth. Regional arrangements could then continue to provide support to multilateral measures when they are finally agreed and put in place.

• Are regional arrangements an obstacle to further global integration?
• How would trade and financial regional arrangements be coordinated? What coherance problems would policy makers face?

Although some view regional arrangements as conflicting with the pursuit of multilateral reforms, they can also be designed as complements to the process of creating a more integrated and balanced global economic system.

• Is there more to cooperation than standard setting, improving transparency, monitoring and sharing and information?
• What would a regional monetary fund look like and how would it work?
• What are the possibilities for cooperation and coordination on exchange rate policies?

Regional financial integration might appear to be an issue of little concern to the least advanced developing countries of the region as well as to the larger countries. Yet, given that interdependence among Asia Pacific countries is unlikely to diminish, successful regional collaboration on a broad front including trade, finance, money, investment and technology is likely to be key to the future success of all countries of the region.

• What are the political obstacles to more formal regional arrangements?
• What are the lessons from other regional arrangements in overcoming these obstacles?
• Are countries likely to move along different tracks? How to deal with those moving at a slower pace?