1. Evolving ASEAN+3 ERPD: From 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

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

3. Introduction: Key Issues What is peer review in East Asia?What is peer review in East Asia? What should be its objectives?What should be its objectives? How does the ADB contribute?How does the ADB contribute? Is there a role for the private sector?Is there a role for the private sector? What are the major challenges for improving ASEAN+3 ERPD?What are the major challenges for improving ASEAN+3 ERPD?

4. ASEAN+3 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 )

5. ASEAN+3 ERPD Key elements Finance Ministers’ MeetingFinance Ministers’ Meeting Finance & Central Bank Deputies’ MeetingFinance & Central Bank Deputies’ Meeting National Surveillance unitsNational Surveillance units Recent Decisions Integrate ERPD & CMI Collective decision- making for CMI Launch GOE and ETWG Study ways to evolve CMI

6. Three Levels of Policy Dialogue Good economic management needs:Good economic management needs: - objective economic assessments - identification of risks and vulnerabilities - analysis of policy options - implementation of desirable policies 1.Peer reviews and peer pressure 2.Information sharing 3.Due diligence - assessments of potential “borrowers” - ability to pay, solvency & credit worthiness

7. 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

8. Enhancing the Effectiveness of ASEAN+3 ERPD Clarifying objectivesClarifying objectives From “information sharing” to “peer reviews”From “information sharing” to “peer reviews” Possible need for due diligencePossible need for due diligence Focus on Structural IssuesFocus on Structural Issues Maintain sense of ‘peer review’ among equalsMaintain sense of ‘peer review’ among equals Greater institutionalization of ERPD desirableGreater institutionalization of ERPD desirable –Central Bank Governors and the private sector –Strong professional secretariat for objective routine surveillance and possible due diligence assessment

9. Conclusion: Challenges Ahead ASEAN+3 ERPD is in its infancy as “peer review” but is integral to regional cooperation.ASEAN+3 ERPD is in its infancy as “peer review” but is integral to regional cooperation. ADB supports the ASEAN+3 FM process, including ERPD.ADB supports the ASEAN+3 FM process, including ERPD. Integration of ERPD & CMI requires evolution from “information sharing” to “peer reviews” to “due diligence”.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 competenceInstitutionalizing ERPD by involving all key players and ensuring technical competence

10. Thank you For more information: Dr. Masahiro Kawai Dean, Asian Development Bank Institute mkawai@adbi.org +81 3 3593 5500 www.adbi.org