ASEAN urged to seek new areas of cooperation to collectively weather impact of Ukraine crisis

Finance Secretary Carlos Dominguez III has called on his fellow finance ministers and the central bank governors in the Association of Southeast Asian Nations (ASEAN) to explore new avenues for cooperation on enabling the region to collectively contain the economic fallout from the ongoing conflict between Russia and Ukraine.

Collective and urgent action is indispensable, said the Finance Secretary, as this geopolitical development will certainly magnify the dislocations caused by the two-year global battle against the COVID-19 pandemic—and “open a new horizon of risks and aggravate[s] supply chain problems.”

Regional cooperation should focus on sustaining the cross-border movement of people, preserving the flow of goods and services to stimulate the regional market, and maintaining ASEAN’s participation in global value chains, Secretary Dominguez said in his interventions during the series of meetings of the ASEAN Finance Ministers and Central Bank Governors held Friday.

Secretary Dominguez also said ASEAN must pursue sustainable finance initiatives at the regional level to solidify this economic bloc’s transition towards a sustainable post-pandemic recovery.

To study new areas of regional cooperation, Secretary Dominguez proposed that the finance ministers and central bank governors convene a small group of experts to continuously monitor the situation, assess possible impacts on the individual ASEAN economies, and submit recommendations for this regional group’s collective approval and implementation.

“Together with our development partners, the ASEAN countries must collaborate closely with each other to help weather the adversity,” Secretary Dominguez said during the meeting of the finance ministers and central bank governors with international financial institutions.

“Regional cooperation will be indispensable in rapidly reviving our economies and effectively managing the risks of the Ukraine crisis to the region’s strong recovery,” he said.

Hosted by Cambodia, the 8th ASEAN Finance Ministers and Central Bank Governors Meeting (AFMGM) along with its related meetings were held via videoconferencing this year.

During the meeting with his fellow ASEAN finance ministers and central bank governors, Secretary Dominguez pointed out that the region faces collateral damage from the Russia-Ukraine crisis.

He said “it will be prudent for us to begin a process of exploring new areas of regional cooperation to fend off the adverse fallout from this conflict.”

“Rest assured, the Philippines is committed to supporting the ASEAN’s collective efforts to rapidly revive our economies from the pandemic and weather the external risks triggered by the Ukraine conflict,” he said.

Secretary Dominguez said the current conflict will most likely lead to elevated inflation levels across all countries, and if tensions become prolonged, will result to serious food supply problems because Ukraine is a significant producer of wheat, vegetable oil and corn.

Shortages in oil and gas supplies also remain an open possibility, Secretary Dominguez said. “A Pandora’s Box seems ready to open,” he added.

“The conflict in Ukraine will certainly magnify the dislocations caused by the world’s two-year battle with the COVID-19 pandemic. It opens a new horizon of risks and aggravates supply chain problems,” Secretary Dominguez said.

Secretary Dominguez said the Philippines, for its part, is well on its way to a post-pandemic recovery, but its optimism has been tempered by these external developments that could affects its economic growth prospects.

He said the Philippines worked hard to liberalize its economic policies and improve the ease of doing business through the passage and enactment of the amendments to its Retail Trade Liberalization Act (RTLA), Foreign Investments Act (FIA) and Public Service Act (PSA), which all widen the scope of international investments in its economy.

“These forward-looking measures will increase opportunities for synergy between international and domestic firms. We likewise look forward to a surge in green investments as the country moves forward to reducing greenhouse gas emissions by 75 percent in 2030,” Dominguez told members of the ASEAN Business Advisory Council, EU-ASEAN Business Council and the US-ASEAN Business Council during their meeting with the finance ministers and central bank governors.

Secretary Dominguez said these liberalization measures complement the law that lowered the corporate income tax (CIT) rates for businesses and modernized the fiscal incentives system in the Philippines to make it more performance-based, time-bound, specifically targeted and fully transparent.

“With all the reforms introduced, including the rapid digital transition of our public agencies and financial system, we are confident in the near- and medium-term prospects of the Philippine economy,” he said.

During the finance ministers’ meeting with international financial institutions, Secretary Dominguez took the opportunity to thank the World Bank (WB), Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB) for aiding the Philippines’ recovery from the pandemic by working together “in an unprecedented manner to arrange joint financing for the Philippines’ procurement of COVID-19 vaccines.”

He called on the multilateral banks to replicate this successful cooperation in assisting ASEAN as it moves towards a new post-pandemic economy.

“This was the first in the Asia-Pacific region and probably in the world. This is an excellent example of how harmonizing development assistance among multilateral banks can yield optimal results,” Secretary Dominguez said.

The trilateral collaboration among the WB, ADB and AIIB in supporting the Philippines’ COVID-19 response was an offshoot of a proposal broached by Secretary Dominguez in 2017 for multilateral banks to coordinate with each other in eliminating overlapping functions, reducing costs, and being more effective and responsive in providing official development assistance (ODA) to member-countries.

Secretary Dominguez said the Philippines is closely monitoring the Russia-Ukraine conflict and has quickly acted to mitigate the adverse effect of these external events on the Filipino people by providing direct subsidies to the country’s most vulnerable sectors.