Kerangka Kerja Kebijakan Moneter dengan Sasaran Akhir Kestabilan Harga

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East Asian Financial Markets Seminar 22 -23 June,
2006
Regional Financial Integration Opportunities and
Challenges Dr. Aslim Tajuddin Deputy Governor
Bank Indonesia
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Introduction

• Economic and financial regional integration are
  vehicles to achieve the ultimate goal of economic
  cooperation which is the stable and prosperous
  region
• Geographical proximity and strong economic
  relations among countries have been the main
  driving force behind the establishment of
  regional economic and monetary integration

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Driving factors for integration

• Politic
• Market
• Asian financial integration should mainly be
  driven by market force

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Approaches for financial integration

• Through establishment of Regional Financial
  Arrangement, or
• By establishment of currency union as in Europe

• Due to the large differences in the structure and
  economic performance of Asian countries remain,
  the launching of the RFA is more appropriate for
  the first stage that latter on could be followed
  by other measures, including the adoption of a
  common currency

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Three types of RFA

• RFA with single currency basket
• RFA without a uniformed of fixed exchange rate
  system
• RFA that focuses only on strengthen the financial
  system
• Adopting the RFA with the support of a single
  currency basket will providing a reference for
  each local currency that in turn could promote
  intra-regional exchange rate stability.

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Challenges ahead

• The process of financial integration in the Asian
  region should be prepared well.
• Strengthening the CMI by
• Augmentation, multilateralism and de-linking of
  the BSA from the IMF program
• Formalized the CMI into an institution that can
  provide open-ended short-term financing to Asian
  economies (Establishing Asian Monetary
  Cooperation Fund)
• Strengthening the regional surveillance

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Challenges ahead

• Steps to liberalize the capital account should be
  implemented step by step as needed, and giving
  opportunities domestic financial markets to
  strengthen their position.
• Strengthening monetary policy coordination can be
  done through
• Establishment of a formal forum for exchange rate
  policy dialogue and information exchange among
  officials of Asian economies
• Conducting coordinated and concerted policy
  action, especially in the foreign exchange
  market.

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Conclusion

• The lesson learn from the 1997 crisis has
  fostered our belief that we need to band together
  to protect ourselves from the contagious effects
  of financial crisis and the destabilizing
  impulses emanating from outside
• The regional monetary policy cooperation and
  coordination become more relevant than before as
  we are facing new external risks like global
  imbalances, an increased trend of interest rates
  in developed economies, the raising volatility in
  capital markets, as well as the surge oil prices
• The agenda of economic and financial integration,
  especially regional monetary cooperation are our
  homework that we need to do together by
  establishing a set of intra-regional financial
  integration arrangement and domestic economic
  reform plans.

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Toward the East Asian Economic and Financial
Integration...
Thank you