Southeast Asian finance leaders discuss resilience amid global risks

Picture source: ASEAN

31st March 2023 – (Bali) Southeast Asian central bank governors and finance ministers gathered in Bali this week to discuss how the region can remain resilient in the face of a spike in global risks. The discussions, which often focused on high inflation, financial market turmoil, and capital outflow, were set to conclude on Friday.

Finance deputies put forward a proposal that countries in the region increase the use of local currencies for trade or investment in order to reduce dependency on currencies such as the U.S. dollar. According to Indonesia’s deputy central bank governor, Dody Budi Waluyo, using local currencies can help the economy become more resilient by reducing exposure to safe-havens like the dollar and the euro.

During the meeting, finance deputies also discussed connecting payment systems in the region, even though the infrastructure of some ASEAN countries was not fully developed yet. They also delved into the topic of cryptocurrencies and central bank digital currencies. Dody Budi Waluyo noted that the discussions on cryptocurrencies were still in the exploratory stage.

The gathering of finance leaders from the Association of Southeast Asian Nations (ASEAN) comes amid a backdrop of recent global banking turmoil, including the collapse of Silicon Valley Bank and the bailout and takeover of Credit Suisse. However, the central bank governors of Indonesia and the Philippines said their banking systems were resilient and that stricter regulations were in place to prevent a repeat of the Asian financial crisis in the late 1990s.

“….people running the banks (now) were probably vice president or the managing director in 1997. They knew the memory of the Asian financial crisis,” Philippine central bank governor Felipe Medalla told the seminar on economy resiliency.

Despite the challenges posed by global risks, the ASEAN finance leaders are determined to maintain the region’s resilience. According to Dody Budi Waluyo, the problems faced by ASEAN countries are similar, including high inflation, financial market turmoil, and capital outflow. He added that ASEAN finance leaders are looking at the impact of banking turmoil in the U.S. and Europe on the region.

The finance deputies’ proposal to increase the use of local currencies for trade or investment could also help ASEAN countries become more self-reliant and less exposed to the risks of hard currencies. The discussions on connecting payment systems in the region and exploring cryptocurrencies and central bank digital currencies could also pave the way for greater financial integration and innovation in the ASEAN region.