A message for Asia: Go global.

by Michel Camdessus
Asia is clawing its way back from crisis, but more needs to be done to ensure the region's stability. The International
Monetary Fund's MICHEL CAMDESSUS(*) outlines how Asia can sustain its recovery.
The countries at the heart of Asia's crisis are close to or even past the turning point.
Most clearly in South Korea, the Philippines and increasingly in Thailand and Malaysia, we see signs of an upturn in
activity.
In Indonesia, where it took rather longer for financial stabilisation to take hold, economic activity is expected to pick
up in the second half of the year.
But as we all know, much remains to be done in strengthening the structure of these economies before we can be
confident that a truly sustained recovery has begun.
The long lists of tasks completed or work in progress is very encouraging, but it is not enough.
What should be done next?
In very broad terms, I see two key directions uppermost in our work: one is to go ahead implementing what has been
agreed, a time-consuming and technically complex task; the other is to pursue with even greater vigour the mission that
we embarked upon before this crisis, namely to integrate a larger number of developing countries into the global
financial system.
Going in these directions, we will be faced with several more specific issues.
First, a key systemic implication of the recent crisis needs to be studied in depth, (particularly) exchange rate
arrangements.
It is striking that each of the crisis countries was operating some form of peg at the time crisis struck.
We must consider carefully whether such arrangements are appropriate to certain stages of development, at certain
times, under certain conditions, or whether they simply suffered from technical shortcomings.
Second, we need to focus on the trend towards integration of international financial markets.
Countries must be able to tap the benefits of the capital flows that are available by liberalising their capital accounts
through an orderly process, but also guard against the risks.
Third, social policy has come to the forefront of the international debate in the past few months. It must be kept at the
forefront.
Asia's experience with crisis reminds us that countries need strong social policies.
Fourth, it is time to bring the debate on debt relief to closure, lifting the burden of unsustainable debt on poorer
countries.
Fifth, we need to press ahead with adapting international institutions, including the IMF, to the new challenges posed
by globalisation.
The more responsibilities are entrusted to us, the more the IMF needs to be able to count on the strongest possible
support and close involvement of all national authorities in decisions that affect the global community.
One of the key issues for this region is to establish supervisory agencies that have a high degree of independence from
the banks, the private sector and other official agencies.
The precise institutional arrangements will vary from one country to another -- whether it be an independent agency, a
part of the monetary authority or affiliated with a government ministry -- but the execution of its mandate should be
without external influence.
Such strengthening of the financial system will be a precondition for continuous progress towards open capital markets.
Everybody now, I presume, has clearly understood that to successfully liberalise their capital accounts, countries
should do so under two conditions.
First, liberalisation should proceed in a properly sequenced fashion with the strengthening of domestic financial
systems. Second, they should not allow the easing of controls on longer-term flows.
This is one of the key lessons of the crisis. Another such lesson suggests making the concern for social justice truly
central to the design of national policies. As recession deepened, many Asian countries descended into poverty as
formal social safety nets were missing, placing too heavy a burden on the extended family.
In the context of fund-supported programs, major steps have been taken to develop social systems in collaboration
with the World Bank.
Social safety nets are essential to protect those affected by the dislocation -- such as unemployment -- that remains a
risk in even fast-growing economies.
And for long-term development, stronger education systems will be needed.
(*) Michel Camdessus is the managing director of the International Monetary Fund. The text above is edited excerpts
from a speech Mr Camdessus gave recently in Seoul at the 34th South East Asian Central Banks Governors'
Conference.
Publication Information: Article Title: A Message for Asia: Go Global. Contributors: Michel Camdessus - author. Magazine Title: Business
Asia. Volume: 7. Issue: 11. Publication Date: June 14, 1999. Page Number: 16. COPYRIGHT 1999 First Charlton Communications Pty Ltd.;
COPYRIGHT 2002 Gale Group