CORRECTED: Asia financial leaders to meet as regional economy picks up

Asian Economic News, May 17, 2004

SINGAPORE, May 12 Kyodo

Financial chieftains from the Asia-Pacific region are to assemble on South Korea's resort island Cheju this weekend for annual talks of the Asian Development Bank at a time when the regional economy shows signs of gathering strength.

At a three-day meeting starting Saturday, the ministers are expected to paint a brighter picture for regional growth on the back of China's red-hot economy, along with an upturn in the developed economies.

''Developing Asia is the world's fastest growing region,'' ADB President Tadao Chino said in an interview with Kyodo News. ''This is partly because of expanding intraregional trade stemming from China.''

Chino also attributed the brightening outlook for the region to robust personal spending in such countries as South Korea, Thailand and India, a trend underpinned by a growing middle class with a high propensity to consume.

The Manila-based ADB said in a report last month it expects economic growth in developing Asian countries to grow 6.8% in 2004 and 6.7% in 2005, up from 6.3% in 2003.

Another topic likely to be raised during the conference is how China will try to rein in its overheating economy and how such action will affect the rest of the world.

The Chinese economy grew 9.1% in 2003.

The ADB projects it to moderate to 8.3% in 2004 and 8.2% in 2005 as a result of policy steps taken by Beijing anxious to engineer a soft landing for the economy.

On the sidelines of the ADB talks, finance ministers from the 10-member Association of Southeast Asian Nations plus Japan, South Korea and China will meet Saturday to explore the possibility of accelerating regional cooperation on any future financial crises.

The ASEAN-plus-three ministers are likely to agree to initiate work on an existing network of bilateral currency swap deals known as the Chiang Mai Initiative by, for example, converting it into a multilateral regional currency fund, officials said.

Under the current mechanism, which forms a network of bilateral swap accords totaling $36.5 billion, central banks from the countries involved are allowed to swap foreign exchange reserves to fight speculative attacks on their currencies.

The ministers are also expected to examine progress made in fostering viable bond markets in East Asia, especially the work undertaken by six working groups launched last year to come up with concrete steps to develop bond markets.

A major objective for developing efficient and vibrant bond markets in the region is to provide Asia's expanding private sector with more stable supplies of long-term capital.

Proponents say that should end the situation whereby Asian savings are funneled into global markets and then back to the region in the form of higher-premium loans.

The ASEAN-plus-three consists of the 10 members of the Association of Southeast Asian Nations -- Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam -- plus Japan, South Korea and China.