Asean leaders vow tariff cuts despite global crisis

SOUTHEAST Asian leaders pledged to cut tariffs, lift trade barriers and open more service industries as the bloc struggles to overcome a global recession that has eroded export demand and boosted protectionist sentiment.

“The leaders reaffirmed their determination to ensure the free flow of goods, services and investment,” the 10-member Association of Southeast Asian Nations said in a statement after meeting in Cha-am, Thailand.

“They agreed to stand firm against protectionism and to refrain from introducing and raising new barriers.”

The 10-member Asean also wanted to negotiate as a group with the European Union for a proposed free-trade agreement, Indonesian Trade Minister Mari Pangestu said.

The group also called for coordinated action and reform of international financial systems to tackle the global crisis, and at the same time warned against protectionism.

The group’s leaders agreed to create an emergency rice reserve to ensure food security, and to increase their currency pool to $120 billion to boost short-term liquidity.

The Philippines, Indonesia, Malaysia and Brunei agreed to create a common fishing ground and to build a nautical highway as proposed by President Arroyo, who arrived in Manila yesterday after the Asean meeting.

Asia is being hit hard by the global economy’s worst crisis since the Great Depression as the region is almost twice as reliant on exports as the rest of the world.

That has prompted Asian governments to unveil fiscal stimulus packages worth almost $700 billion to kick-start local consumer and business spending.

Growth in Indonesia, Southeast Asia’s largest economy, was the least in two years last quarter, and Thailand is expected to enter its first recession in a decade.

Singapore is in its deepest downturn ever, while Malaysia’s economy grew at the slowest pace in seven years last quarter.

Central banks have responded to weakening growth by slashing interest rates.

Bank Negara Malaysia on Feb. 24 reduced its benchmark rate for a third straight meeting to 2 percent, aiming to bolster an economy that policy makers say faces an increasing risk of contracting this year. The economy last posted an annual decline in 1998.

Thailand’s central bank on Feb. 25 lowered its key policy rate by 50 basis points, to 1.5 percent, adding to its most aggressive cuts ever.

The Bank of Thailand would probably cut rates further this year to boost growth as the country faced its first recession in 11 years and one million job losses, Finance Minister Korn Chatikavanij said.

Asean leaders warned of the dangers of measures aimed at shielding domestic industries and goods from overseas competition as the worldwide economic downturn threatens jobs and hurts manufacturing.

“We want to be clear that the Asean countries are firmly committed to free trade, and we’ll do whatever we can to make sure no countries resort to protectionist measures to try to ease their way out of the crisis,” Thai Prime Minister Abhisit Vejjajiva said.

“If any of that happens, and if all countries begin to join in, then everybody loses.”

Asean would “take assertive action” against protectionism and would emphasize the point “to the rest of the world,” including the G20 meeting in the UK in early April, Abhisit said.

Asean is attempting to create an economic zone modeled after the European Union, without a common currency, by 2015. The group has said it needs to improve its competitiveness as China and India, the world’s two fastest-growing major economies, attract an increasing chunk of global investment.

Asia’s export-dependent nations are reeling from the global slowdown, which has slashed demand for the region’s computer chips, cars and commodities.

“Regional cooperation becomes even more important as we seek to pursue joint approaches and pool our resources to cope with difficulties that we all face,” Asian Development Bank president Haruhiko Kuroda told leaders in Cha-am, Thailand.

Asean together with Japan, China and South Korea last week agreed to form a $120-billion pool of foreign-exchange reserves that can be used by countries to defend their currencies to battle fallout from the global financial crisis.

The group on Feb. 27 also signed a free-trade pact with Australia and New Zealand that covers trade in goods, investment and services. It will implement one with India in the next few months after years of negotiations.

“All of this standard Asean procedure amounts to very little in the current context of the global financial crisis and rising protectionism around the world,” said Razeen Sally, a director of the European Centre for International Political Economy, a Brussels research group that backs free trade. Bloomberg with AFP, Joyce Pangco Pañares and Roy Pelovello