The chief of the United Nations Conference on Trade and Development (UNCTAD) says Asia needs to strengthen regional financial regulations and cooperation to stem the impact from future financial downturns in the global economy. As Ron Corben reports UNCTAD Secretary General Supachai Panitchpakdi calls for the Association of South East Asian Nations (ASEAN) to take a leading role to boost regional cooperation and oversight of the finance markets.
Supachai Panitchpakdi, UNCTAD secretary general, says the current global financial crisis provides Asia an opportunity to boost regional cooperation and regulation that could help strengthen banking systems.
Asia's banking industry has undergone significant reforms since the region's financial crisis in the late 1990s when lending excesses led to scores of banks and finance companies closing, millions of jobs lost and a sharp contraction in regional economies.
Supachai says the Association of South East Asian Nations (ASEAN) should take the lead in boosting intra-regional cooperation in the banking sector.
"Financial regulation within ASEAN, which could help to shield, to shelter the financial system in Asia, is going to be important - because fortunately this time the system has not been globalized enough to have been affected by the ongoings in the U.S. and EU," he said. "This is the time to be deepening the Asian financial system to set up the pooling of resources.
Regional central banks have poured billions of dollars into credit markets over recent weeks to ease tight credit conditions since the financial crisis erupted in the United States in September. The central banks are also holders of billions of dollars of foreign exchange reserves.
Supachai's comments come as the U.S. House of Representatives Friday is expected to vote again on a revised $700 billion bailout plan after the bill was struck down Monday. The U.S. Senate voted overwhelmingly Wednesday for a revised package.
Supachai says the rescue package must be seen only as a first step towards major reform of the U.S. financial system.
"The rescue operation, the relief measure will be just a relief measure," he said. "This is just to prevent the crisis from deepening - it doesn't mean that we've already succeeded in tackling the basic issues. So there needs to be a rethinking of the way that financial institutions have been managed and have been regulated in the United States and I think throughout the world."
Supachai warned that the global economy is likely to face both inflation as well as recession going into the final quarter of 2008. He said governments and central banks need to follow policies promoting economic stability in order to enable the financial crisis to pass.
Share prices across Asia fell Friday in anticipation of the U.S. Labor Department's unemployment report. Investors are eager for unemployment to remain in check because widespread job losses could damp consumer spending, which accounts for more than two-thirds of the nation's economic activity. The Nikkei 225 index fell almost two percent, while Australia's SandP/ASX 200 index was down one point three percent with Hong Kong's Hang Seng index down over two percent.