Asia-Pacific Finance and Development Center
Biennial Forum
Shanghai, 22 September, 2006
Regional Cooperation and
Innovation Development
Dr. Aslim Tadjuddin
Deputy Governor Bank Indonesia
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Outline
I. Introduction
II. Financial Cooperation
III. Initiatives and Suggestions to Foster the
Asian Financial Integration
IV. Sustainable Development and Innovation
V. Conclusion
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Introduction
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Economic Integration
• 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 integration.
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Financial Cooperation
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Driving factors for integration
Politic
Market
Asian financial integration should mainly
be driven by market force.
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Economic Integration is no panacea
• Economic and financial integration will
increase the flow of capital within the
region.
• The increasing financial integration also
contains risks that relate to the possibility
of sudden and huge capital reversal.
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Financial integration among Asian
economies is still limited
Financial market integration in Asia has
lagged substantially behind the trade
integration. Therefore, surpluses of saving
are largely intermediated through financial
markets outside Asia.
• Major foreign lenders in Asian banking industry
are mainly American, European, and Japanese
Institutions.
• Major foreign investors in Asian capital market
are still from non-Asian economies.
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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 (Asian Basket Currency/ABC) as a reference for each
local currency would promote intra-regional exchange rate
stability and that in turn would promote intra-regional
economic growth.
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Initiatives and Suggestions to
Foster the Asian Financial
Integration
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Initiatives to establish
resource pooling
• The Asian Money Fund (AMF)
• Chiang Mai Initiative (CMI)
– Bilateral Swap Agreement (BSA)
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Capital market development
EMEAP countries launched the Asian
Bond Fund program
– ABF1
– ABF2
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Suggestions to improve
monetary policy coordination in the region
• Creating a forum to formally the exchange
rate policy dialogue and information
exchange among East Asia economies.
• Strengthening cooperation and coordination
among central banks in maintaining
exchange rate and financial market stability
by looking possibility of conducting
coordinated and concerted intervention in
the foreign exchange market.
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Sustainable Development and
Innovation
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Innovation and the role of
government
• With innovation, an effective and efficient technique
or method would be continually created.
• Government and private sector must create a good
climate for growing innovation.
• In Indonesia, the central bank obligate banks to
spend certain amount of fund to enhance human
development.
• Sharing knowledge among countries in the region
plays a key role as well in propping up innovation.
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The Importance of Intellectual
Property Right System
• A good system will provide confidence to
innovators that their rights will be respected.
• A balance must be pursued between intellectual
property protection and sharing innovation benefit.
• Adoption of Anti-Counterfeiting and Piracy
Initiatives by APEC economies will reduce trade of
counterfeit goods, protect against unauthorized
copies, and prevent the sale of counterfeit goods.
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Indonesia’s measures in establishing
and improving the intellectual property
right system
• Member of the World Intellectual Property Organization
(WIPO) and in 1997 became full party to the Paris
Convention for the Protection of Intellectual Property.
• Signing:
– The Trade Related Aspect of Intellectual Property Right (TRIPS
Agreement).
– The Nice Agreement for the International Classification of
Unclassified Goods and Services, the Strasbourg Agreement
Concerning the International Patent Classification.
– The Budapest Treaty on the International Recognition of the
Deposit of Microorganisms.
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Conclusions
• The regional economic cooperation and
coordination becomes more relevant than before,
because Asian economies are facing new external
risks like global imbalances, US dollar depreciation,
and raising volatility in capital markets.
• Securing of world wide intellectual property
protection is an important element to foster
innovation development that in turn will bring
considerable economic benefits to the region.
• The APEC member economies to work hand in hand
to promote public awareness through education and
sharing of knowledge.
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Thank you
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