Asean+3 macro research office wants to be ‘gym trainer’, not doctor, for region’s economies
The focus should be on practical solutions that cater to the member economies’ realities, says Amro chief, Yasuto Watanabe
[SINGAPORE] Regional cooperation is accelerating across South-east and East Asia, driven by ministers and governors showing an unprecedented drive in launching fresh policy exchange initiatives as the private sector expands its use of local currencies.
This push is taking shape through a new fiscal policy exchange initiative that saw finance ministers in May exchanging views and updates on fiscal policies and management practices. The intent is to make it a regular discussion.
These meetings focus less on coordinated or binding enforcement and more on preventing regional officials from undermining each others’ efforts, Yasuto Watanabe, director of the Asean+3 Macroeconomic Research Office (Amro), told The Business Times in an exclusive interview.
The way he sees it, it is not about having a common monetary policy or fiscal rules to the extent the European Union does, but knowing enough so regional officials can avoid potential economic conflicts and enhance policy effectiveness.
Neither is it about one country having hegemony over another, but about supplementing each other.
“They’re not necessarily coordinating enforcement because fiscal policy is a matter of sovereignty. But knowing other countries’ moves is important – especially for Asean, knowing how China, Japan or South Korea may move,” said the international and development finance veteran.
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Watanabe, who was previously Japan’s senior deputy vice-minister of finance, stepped up four months ago to lead the macroeconomics surveillance organisation.
Besides, regional cooperation facilitates trade financing and foreign direct investment inflows, he said. “For recipient countries, regulatory harmonisations will be a good facilitator for the enhancement of regional prosperity.”
Local currency usage
Fiscal cooperation aside, Watanabe also highlighted growing private-sector adoption of local currencies in bilateral trade – all the more relevant with the growing share of intra-Asean+3 deals.
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He pointed to the increasing use of direct quotation between regional currencies, which eliminates the need to route transactions through the US dollar.
The greenback will still remain king in the foreseeable future and dominate trade and capital flows, said the Amro chief, noting its convenience, reliability and the fact that no other country is challenging its dominance.
“But the usage of local currencies will be supplementary, making local financial systems more robust and resilient,” he noted.
This becomes all the more significant with intra-regional trade now accounting for 45 per cent of Asean+3’s total exports, with China becoming the region’s largest final demand market. The share of exports going to the US has sunk from about 24 per cent in 2000 to under 15 per cent in recent years.
Growing private-sector adoption of local currencies in bilateral trade has been one engine. But Watanabe called for greater action and facilitation by regional authorities to eliminate barriers related to the use of local currencies, maintaining that it should not be driven only by the private sector.
The way forward
As regional cooperation and financial integration deepen, Amro itself is evolving to strengthen its role in Asean+3 macroeconomic surveillance under Watanabe’s three-year term.
Headquartered in Singapore, Amro looks at the 10 Asean member states plus China, Hong Kong, Japan and South Korea – a region that altogether contributes to more than 40 per cent of global growth.
Amro was established in 2011 by the then-finance ministers of the Asean+3 economies. The organisation conducts macroeconomic surveillance, supports regional financing arrangements and provides technical assistance.
Its surveillance spans individual economies, the region as a whole and key sectors – delivered through annual economy-specific consultation reports; two flagship papers on the region’s economic outlook and financial stability; and others.
The organisation also ensures the operational readiness of the Chiang Mai Initiative Multilateralisation – a multilateral currency swap arrangement among Asean+3 members.
Though it has never been deployed to date, the US$240 billion facility acts as a financial safety net to address any balance-of-payment and short-term liquidity difficulties among member states.
Its third core function involves providing secondment, consultancy as well as research and training programmes to build capacity, especially in countries such as Laos or Cambodia.
Writing impactful reports is one thing, but the timely provision of actionable policy suggestions as a trusted adviser is another, said the Amro director.
“Sometimes, established institutions may create desirable options that are not actionable,” said Watanabe, but, as far as he is concerned, the focus should be on practical solutions that cater to the member economies’ realities.
Amro used to be described as a regional family doctor, he said. “But we are not waiting for some disease or crisis. We want to instead become like a ‘gym trainer’... It’s about creating economic resilience and not only about crisis management.”
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