Evolving ASEAN 3 ERPD: From Peer Reviews to Due Diligence

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Evolving ASEAN3 ERPDFrom Peer Reviews to Due
Diligence

• Masahiro Kawai
• Asian Development Bank Institute
• The First OECD-Southeast Asia Regional Forum
• Peer Review Mechanism for Policy Reform
• Organized by OECD
• Jakarta, 23-24 January 2007

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Outline

• 1. Key Issues
• 2. ASEAN3 Finance Ministers Process
• 3. ASEAN3 Economic Review and Policy Dialogue
  (ERPD)
• 4. Three Levels of Policy Dialogue
• 5. Role of Private Sector Assessments
• 6. Enhancing ASEAN3 ERPD
• 7. Challenges Ahead

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Introduction Key Issues

• What is peer review in East Asia?
• What should be its objectives?
• How does the ADB contribute?
• Is there a role for the private sector?
• What are the major challenges for improving
  ASEAN3 ERPD?

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ASEAN3 Finance Ministers Process

• Origins in 1997-98 Asian Financial Crisis
• Key Initiatives
• Chiang Mai Initiative (CMI)
• Economic Review Policy Dialogue (ERPD)
• Asian Bond Markets Initiative (ABMI)

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ASEAN3 ERPD

• Key elements
• Finance Ministers Meeting
• Finance Central Bank Deputies Meeting
• National Surveillance units

• Recent Decisions
• Integrate ERPD CMI
• Collective decision-making for CMI
• Launch GOE and ETWG
• Study ways to evolve CMI

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Three Levels of Policy Dialogue

• Good economic management needs
• - objective economic assessments
• - identification of risks and vulnerabilities
• - analysis of policy options
• - implementation of desirable policies

• Peer reviews and peer pressure
• Information sharing
• Due diligence
• - assessments of potential borrowers
• - ability to pay, solvency credit worthiness

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Role of Private Sector Views

• Provide additional perspective
• Strengths (e.g., frank assessments)
• Weaknesses (e.g., sometimes myopic)
• Affect economic performance
• Move markets
• Influence business decisions
• Important input for Policymakers
• Methodology (e.g., due diligence)
• Views

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Enhancing the Effectiveness of ASEAN3 ERPD

• Clarifying objectives
• From information sharing to peer reviews
• Possible need for due diligence
• Focus on Structural Issues
• Maintain sense of peer review among equals
• Greater institutionalization of ERPD desirable
• Central Bank Governors and the private sector
• Strong professional secretariat for objective
  routine surveillance and possible due diligence
  assessment

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Conclusion Challenges Ahead

• ASEAN3 ERPD is in its infancy as peer review
  but is integral to regional cooperation.
• ADB supports the ASEAN3 FM process, including
  ERPD.
• Integration of ERPD CMI requires evolution from
  information sharing to peer reviews to due
  diligence.
• Institutionalizing ERPD by involving all key
  players and ensuring technical competence

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Thank youFor more information
Dr. Masahiro Kawai Dean, Asian Development Bank
Institute mkawai_at_adbi.org 81 3 3593
5500 www.adbi.org