Taiwan, as a sovereign economy, should not be excluded from regional cooperation, central bank Governor Perng Fai-nan (彭淮南) said in a written report that was to be delivered yesterday at the Asian Development Bank’s annual meeting in Madrid, Spain.
“Regional cooperation at all levels and in all forms should be inclusive,” Perng said. “All economies with adequate strength and financial resources should be allowed to participate and should not be excluded because of political or ideological considerations.”
The annual meeting this year is mainly focused on the global food crisis. But Perng warned that member states should also pay attention to the flows of short-term cross-border capital, as the capital inflows have emerged as a “potentially destabilizing force” in regional financial markets.
Propelled by the weakened US dollar, the recent massive capital inflows to Asia have threatened financial stability in many Asian countries, Perng said in a draft speech delivered to the press yesterday.
He suggested that member states establish a “multilateral mechanism” within the region to “effectively monitor international capital movement by sharing information and, when necessary, taking concerted actions.”
Perng’s proposal was noteworthy, as most Asian currencies have appreciated substantially against the US dollar since the beginning of the year when the greenback was burdened by the US economic slowdown and the lingering impact of the subprime mortgage crisis. The NT dollar, for instance, has gained 6.02 percent in its value versus the US dollar so far this year and closed at NT$30.490 yesterday in Taipei.
Against this backdrop, Perng called on other Asian central bank heads to urgently set up a formal “regional exchange rate coordination mechanism” to help stabilize currency relationships and reduce the volatility of Asian currencies.
Perng also briefed his counterparts on Taiwan’s latest economic development. For last year, the nation’s GDP increased 5.7 percent and the consumer price index rose 1.8 percent.