Philippines Calls for ASEAN+3 Response to Financial Crisis

UNCLAS MANILA 002370

STATE FOR EAP/MTS, EAP/EP/ EEB/IFD/OMA
STATE PASS EXIM. OPIC, AND USTR
STATE PASS USAID FOR AA/ANE, AA/EGAT, DAA/ANE
TREASURY FOR OASIA

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON RP
SUBJECT: Philippines Calls for ASEAN+3 Response to Financial Crisis

SENSITIVE BUT UNCLASSIFIED

Ref: A) Manila 2340, B) Manila 2174


1. (SBU) Summary: In a press conference on October 12, Philippine
President Gloria Macapagal-Arroyo called for an ASEAN+3 meeting on
the sidelines of the upcoming October 24-25 Asia-Europe summit in
Beijing to coordinate regional responses to the global financial
crisis (ref A). Philippine officials believe they now have a
consensus from ASEAN+3 national leaders to attend, and that the
summit will definitely take place. Trade Secretary Favila, Finance
Secretary Teves and Central Bank Governor Tetangco expect to
accompany President Arroyo to provide details on specific mechanisms
for coordinating financial policy among the Asian economies.
Philippine officials hope the summit produces more than a mere show
of unity, and Asian economies come together in a proactive approach
to the global financial crisis. End summary.


2. (SBU) Department of Trade and Investment Secretary Peter Favila
told us on October 17 that arrangements were proceeding smoothly for
the ASEAN+3 summit that President Arroyo proposed on October 12 to
coordinate responses to the global financial crisis. He said there
was a "consensus" among ASEAN+3 leaders to attend the summit, and
that his staff was busy preparing materials for use at the summit.
Favila noted that President Arroyo has long been an advocate of
stronger financial coordination by ASEAN nations and tried to
establish formal mechanisms for coordination during her tenure as
head of ASEAN. He described her as primed for this opportunity.


3. (SBU) Secretary Favila went on to describe Malaysia's recent
guarantee of all bank deposits as the type of uncoordinated action
that could negatively affect other ASEAN countries. He said
Malaysia's guarantee sent a dangerous signal that Asian banks could
also be at risk from the crisis, and this would cause an outflow of
bank deposits from neighboring economies that did not offer to
guarantee all deposits. He said that if there had been
consultations with Malaysia prior to its action, he and his
counterparts from other ASEAN economies would have advised against
it. Secretary Favila indicated that another area for coordinated
action was in stimulating regional economies. He said the
Philippines would increase spending on infrastructure and
agricultural projects, and he hoped other regional economies would
do that same.


4. (SBU) Officials at the Department of Finance confirmed to us
that Secretary Margarito Teves would also attend the ASEAN+3 summit
in Beijing and officials at the Central Bank confirmed that Governor
Tetangco would attend. Recent media reports have suggested that the
expansion of an emergency fund already in place would be a key goal
of the discussions.


5. (SBU) Comment: President Arroyo obviously wants to take
advantage of the mileage provided by the World Bank/IMF meetings in
Washington and the October 23-24 Asia-Europe summit in Beijing to
promote regional financial coordination, an issue she has pushed for
some time. New coordination mechanisms for dealing with financial
issues between ASEAN, China, Japan and South Korea could obviously
have important implications not only for the immediate response to
current economic problems, but also for the economic architecture of
Asia.

KENNEY