ASEAN countries affirmed their commitment to strengthening economic growth, as well as promoting financial stability and integration in the ASEAN region, amidst the uncertainty caused by the COVID-19 pandemic. This was the conclusion of the 6th ASEAN Finance Minister and Central Bank Governors’ Meeting (AFMGM) which was held virtually on 2 October 2020. In addition, at the meeting with the theme “Cohesive and Responsive ASEAN”, several other commitments were agreed upon, including:
1.Agree that extraordinary policy responses in the form of fiscal and monetary policies, financial support for the real and financial sectors, smooth flow of goods and services, as well as solidarity and cooperation are the keys to overcoming the impact of the pandemic and recovering the economy.
2.Strengthen the effectiveness of economic and financial surveillance in the region, and support the readiness of the Chiang Mai Initiative Multilateralization (CMIM) as an effective financial safety net in the region and an important component of the global financial safety net.
3.Encouraging wider intra-ASEAN trade and investment through the establishment of Qualified ASEAN Banks and increasing transparency, standardization and harmonization of regulations among ASEAN countries to support financial integration in the region.
4.Support initiatives to use local currency in trade settlement, direct investment and other related activities such as income transactions and transfers, among ASEAN countries as part of efforts to increase the resilience of the region’s economy and financial system.
5.Welcoming the progress of cooperation in the field of infrastructure financing, including in the form of preparing several guidelines to encourage the expansion of private investor involvement, as well as supporting efforts to advance the sustainable finance agenda (sustainable financing) cohesively in all fields, be it banking, capital market, as well as insurance.
6.Support efforts to utilize digital financial services to increase financial inclusion in the region and increase cooperation in sharing information regarding handling cyber risk.
During the meeting, the Ministers of Finance and the Governors of the ASEAN Central Banks underlined three main pillars to promote financial stability and integration in the ASEAN region, as well as strengthen economic growth, amidst the challenges of the COVID-19 pandemic, namely connectivity, sustainability and responsiveness of ASEAN.
The meeting was also attended by several international institutions, namely the International Monetary Fund (IMF), the Asian Development Bank (ADB), and the ASEAN+3 Macroeconomic Research Office (AMRO) as ASEAN partners. The presence of these institutions is intended to exchange views on current global and regional economic conditions as well as policy recommendations that can be taken by the authorities. Going forward, the Minister of Finance and the Governor of the ASEAN Central Bank will continue to strengthen regional financial cooperation to achieve a more advanced, resilient and integrated ASEAN region.
By holding the chairmanship of ASEAN in 2023, Airlangga Hartanto as the Coordinating Minister (Menko) for the Economy stated that Indonesia was pushing for the Association of Southeast Asian Nations (ASEAN) to become the anchor of global economic stability through its chairmanship in ASEAN 2023. According to the Coordinating Minister for the
Economy, namely Airlangga, stated that “The government continues to encourage ASEAN to become a stable and peaceful region to become the anchor of global economic stability,”
What about Economic Stability?
Economic stability is a fundamental factor to ensure sustainable economic growth. Economic stability is also a basic prerequisite for achieving increased people’s welfare through high growth and improving the quality of growth. Efforts to maintain economic stability are carried out through measures to control the inflation rate, exchange rate stability, and low interest rates. These efforts face tough challenges, such as the high prices of some foodstuffs and international oil prices.
Economic stability or inflation is very important to provide certainty for economic actors. Macroeconomic stability is achieved when the relationship between the main macroeconomic variables is in balance, for example between domestic demand and national expenditure, balance of payments, fiscal revenues and expenditures, as well as savings and investment. The relationship doesn’t always have to be in a very precise balance. Fiscal imbalances and balance of payments remain in line with economic stability, provided that these must be financed on an ongoing basis.
An unstable economy creates high costs for the economy and society. This instability will make it difficult for the community to plan ahead, especially in the longer term needed for investment. Low levels of investment will lead to a reduction in the potential for long- term economic growth. There are high fluctuations in production growth which can reduce the skill level of the long unemployed workforce. High inflation and high fluctuations create enormous costs for society. The heaviest burden due to high inflation will be felt by the poor who experience decreased purchasing power. So that high fluctuating inflation makes it difficult to distinguish prices caused by changes in demand and supply of goods or services from price increases caused by excess demand.
Why is economic stability important?
Promoting economic stability is the main goal of economic policy. Economic stability enables other macro-economic goals to be achieved, such as stable prices and stable and sustainable growth. It also creates the right environment for job creation and balance of payments.
Stability is important in making economic decisions. This makes it easier for businesses to make predictions on economic indicators such as inflation, which is useful for formulating strategies such as setting selling prices or increasing employee salaries.
Conversely, instability can increase uncertainty. It also discourages investment, stifles economic growth, and undermines living standards. The challenge for policy makers is to minimize volatility without compromising the economy’s ability to raise living standards through increased productivity, employment and sustainable growth.
On November 13, 2022, at the ASEAN Summit in Cambodia, Indonesia received the mandate to hold the Chairmanship of ASEAN 2023 Indonesia through leadership in ASEAN 2023 which will carry the theme “ASEAN Matters: Epicentrum of Growth.” Where ASEAN Matters consists of three important elements namely strengthening the capacity and effectiveness of ASEAN, ASEAN unity, and ASEAN centrality.
While the epicentrum of growth is related to ASEAN’s role as the center of regional and world economic growth which consists of four important elements, namely health architecture, energy security, food security, and financial stability. In detail, Indonesia raises three priority issues in the economic sector including recovery and rebuilding, digital economy, and sustainability whose implementation is translated into 16 Priority Economic Deliverables (PED) for 2023.
“Indonesia’s chairmanship in ASEAN will focus on handling multidimensional crises such as food, energy and financial crises,” said Coordinating Minister Airlangga Hartarto. Indonesia will also strive to strengthen ASEAN’s position as a stable and peaceful region while upholding international law. In addition, Indonesia seeks to strengthen cooperation so that ASEAN is able to become a region that is strong, inclusive and has sustainable economic growth.
Through its important role as the 2023 ASEAN Chairmanship, it further emphasizes Indonesia’s position as a global middle power. This will substantially influence the global agenda as well as be part of the solution to global problems. “Mr. President Joko Widodo believes that by 2045 ASEAN will become a group of countries that are more adaptive, responsive and competitive in line with the ASEAN global agenda,” said Coordinating Minister Airlangga Hartarto.