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Third Meeting of the Manila Framework Group (7-8 November 1998, Kuala Lumpur, Malaysia)

 

8th November 1998

 

Third Meeting of the Manila FrameworkGroup
7-8 November 1998
Kuala Lumpur, Malaysia

PRESS STATEMENT

  1. A meeting of the Manila Framework Group was held on 7-8 November 1998 in Kuala Lumpur. Finance and Central Bank Deputies from 14 economies: Australia, Brunei Darussalam, Canada, People’s Republic of China, Hong Kong SAR of China, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and the United States attended the meeting. Senior representatives from the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB) also participated in the meeting.

  2. During the discussion on regional surveillance, several positive developments were noted:

  • some signs of stability and strengthening in financial markets;

  • reduction in interest rates in industrialised countries;

  • progress made towards providing additional resources to the IMF;

  • exchange rate stability in the countries most affected by the crisis which has allowed a lowering of interest rates to support the process of economic recovery; and

  • determined implementation of on-going economic and financial reforms.

  1. At the same time, the Meeting recognised several risks remain, including the implications of the deterioration in the external financing environment following developments in Russia, the risks of slower global growth, and the challenges in implementing financial and corporate restructuring in the crisis countries. This calls for perseverance by individual economies to adhere to sound policies that promote sustainable growth, including continued efforts by the crisis-affected countries to pursue structural reforms and by industrialised countries to sustain and create conditions for strong domestic demand-led growth.

  2. The Meeting also called for urgent action by affected countries, with support from the international financial institutions and bilateral donors, to strengthen and accelerate social programmes to mitigate the impact of the crisis on the poor and vulnerable.

  3. In discussing the policy responses of individual countries to the crisis, Deputies noted that Indonesia, Korea, and Thailand have made solid progress in implementing reform programmes supported by the IMF, the World Bank and ADB. They emphasised the importance of continuing the gains already made, in particular in the areas of bank restructuring and the establishment of a framework for corporate restructuring. Japan stressed its commitment to provide a sustained boost to domestic demand and stated its intention to implement comprehensive banking reforms swiftly and effectively, including the recapitalisation of banks with appropriate conditions. In China, interest rates have been eased and an expansionary fiscal package is being implemented to further stimulate economic growth. Maintenance of the renminbi exchange rate has provided an important anchor to help secure regional financial stability.

  4. Deputies stressed the specific measures necessary to strengthen private financing and official capital flows. Continued pursuit of appropriate macroeconomic and structural policies to promote an environment conducive to foreign investment would facilitate this process. Deputies welcomed Japan’s proposed financial package of US$30 billion to support economic recovery efforts in Asia. They emphasised the importance of broadening and deepening domestic financial markets to ensure greater efficiency in the intermediation of savings within the region. The Meeting agreed on the need for greater transparency and openness in both public and private sectors.

  5. The meeting welcomed the recent formalisation of the ASEAN surveillance process based on peer review. The process will complement regional surveillance within the Manila Framework Group and draw upon surveillance by the IMF. Deputies recognised that efforts to enhance regional surveillance must also be complemented by measures to strengthen the architecture of the international financial system.

  6. Deputies discussed progress in reforming the international financial system in the light of the proposals endorsed by the Interim Committee of the IMF and by the Meeting of Finance Ministers and Central Bank Governors from 26 economies in Washington D.C. in October, and those included in the recent statement of Finance Ministers and Central Bank Governors of the G-7. They considered rapid implementation of these proposals essential to improve the outlook for sustainable growth across the region and to strengthen the capacity to prevent future financial crises. They called for active involvement of regional economies in advancing this work.

  7. Deputies thanked the Malaysian Government for its hospitality and arrangements. The next meeting is scheduled to be held in Australia in March, 1999.

 

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