AMRO Director Dr Junhong Chang delivers the opening remarks at the 2017 ASEAN+3 Financial Forum (ATFF) hosted by the ASEAN+3 Macroeconomic Research Office (AMRO) on December 11, 2017, in Asahikawa, Japan.

Opening Remarks by AMRO Director Dr Junhong Chang

2017 ASEAN+3 Financial Forum (ATFF),

11 December 2017, Asahikawa, Japan

Dear ASEAN+3 Finance and Central Bank Deputies,

Co-chairs of 2017,

Distinguished guests,

Ladies and gentlemen – Good morning!

  1. I am honored to welcome you to AMRO’s second ASEAN+3 Financial Forum, or ATFF, held back to back with the ASEAN+3 Finance and Central Bank Deputies’ Meeting here in Asahikawa. The ATFF provides a platform for ASEAN+3 Deputies, academics and high-level representatives from international financial institutions to brainstorm on key challenges and issues relevant to regional economic and financial cooperation. We held our first ATFF at this time last year in Guiyang, China, which was very lively and well received, and many of you were there. Welcome again, and a warm welcome to our guests joining us for the first time this year.
  1. Our theme this year, “Adapting to a Changing World”, aptly describes our two panel sessions today. Protectionism, rapid ageing in Asia and the new technological revolution sweeping the global economy have posed new challenges to the region. The forum today will focus on regional policy response to this changing world, including enhancing the regional safety net of the Chiang Mai Initiative Multilateralization (CMIM) in the evolving global financial environment. Let me share some thoughts on these topics.
  1. The challenges of a changing economic environment are not new to our region. Indeed, our region has weathered the many external shocks in the past decade well, including the Global Financial Crisis and episodes of risk aversion and capital outflows.  We have become stronger through rising integration in trade and investment. The ASEAN+3 region now accounts for more than a quarter of world GDP at market exchange rates, and 30 percent of global trade.
  1. Many risks remain in the short-term – the threat of protectionism, tightening global financial conditions, and the tail risks of geopolitical events. Amidst these immediate concerns, however, let us not forget the global, structural forces that affect our economies and that underlie our theme today. I will touch on two global trends here, technology and ageing populations. The ADB and the World Economic Forum published a White Paper [1] last month on the “Fourth Industrial Revolution” – new and potentially disruptive technologies such as 3D printing, block chain and robotics – and the opportunities and challenges to ASEAN. The opportunities are many, through increasing wealth [2] through higher productivity, improving economic inclusion by lowering fixed investment costs for expanding infrastructure networks such as telecommunications. There are also risks, for example of job losses from automation, that would need to be managed in the economic transition.
  1. On ageing populations, the IMF has warned us in a recent study [3] that Asia may be at risk of growing old before becoming rich. It estimated that demographic trends could subtract ½ to 1 percentage point from annual GDP growth over the next three decades in countries such as China and Japan that are advanced ageing societies. However, it could add 1 percentage point to annual GDP growth in countries with a rapidly growing young population such as Indonesia.
  1. The risks of protectionism on trade, and the impact of these global trends on the ASEAN+3 region also forms the basis of our thematic chapter of AMRO’s flagship report in 2018, which is “Resilience and Growth in a Changing World”. While exports continue to be an important pillar of growth and source of foreign exchange especially in the small, open developing economies in our region, slow growth in global trade after the Global Financial Crisis has prompted economies to rebalance towards domestic demand. Our economies have also looked towards growing intra-regional trade and investment as a source of growth. As for the global trends of technology and ageing, diversity within the ASEAN+3 region may turn out to be our strength, as economies complement others in the region at different points in the technological and ageing cycles.
  1. As these global trends transform the nature of cross-border economic transactions and spillovers, they demand not only a national response, but a coordinated regional response. The demands and expectations placed on the speed of policy reactions and the clarity of policy communication are rising. Take for example capital flows to emerging markets in our region.  With technology facilitating lightning-speed trading, including algorithm trading by computers, sudden shocks in capital flows driven by herd behaviours are risks that policymakers have to grapple with. In this context, policymakers should respond to in a timely manner so as to safeguard regional financial stability, but should not overreact to short-term temporary fluctuations and reversals.
  1. At AMRO, in our support of the CMIM, we are always mindful of the rising expectations on the role of regional safety nets as an integral part of the global financial safety net. This year, we have supported a joint test run with the IMF to enhance the operational readiness of the CMIM facility. Recognising the importance of cooperation among different layers of the global financial safety net, AMRO has signed MOUs with the IMF and the ESM, to strengthen partnerships in maintaining macroeconomic and financial stability, and to leverage on each other’s expertise and knowledge.
  1. Building a robust regional safety net is a long-term project, but we need to start building the foundations today. We have circulated a background paper on “The CMIM in the Evolving International Monetary System” for this forum, which provides a historical perspective on the issues of financial crises and financial safety nets. . We hope to contribute to the policy discussions on enhancing the effectiveness of regional safety nets in the medium to long term.  There is significant room to further strengthen the CMIM down the road, and it is time for our members to consider carefully how to mobilise the vast resources of our region to build up buffers against risks in a changing world.
  1. I am confident that we will have an insightful and stimulating discussion in these two panels. Thank you.

[1] ADB and World Economic Forum, “ASEAN 4.0: What does the Fourth Industrial Revolution mean for regional economic integration?”, November 2017.

[2] Estimates by the ASEAN Secretariat are that increased productivity from such technologies could have an additional US$220 billion to US$625 billion in annual economic impact in ASEAN by 2030. ASEAN Secretariat, “Master Plan on ASEAN Connectivity 2025”, 2016.

[3] IMF, “Regional Economic Outlook: Asia and Pacific”, Chapter 2 “Asia: At Risk of Growing Old before Becoming Rich?”, April 2017.