Southeast Asia needs to push ahead with a regional free trade bloc and policies to cope with global financial crises, Indonesia’s government said.

Indonesia’s Vice President Boediono, addressing trade ministers from the Association of Southeast Asian Nations (ASEAN), said it was evident since the 2008 financial crisis that the United States and Europe could no longer be the main engines of growth for the world.

He said sound economic fundamentals and policies had enabled ASEAN economies to bounce back by last year.

But last week’s downgrade of the U.S. sovereign rating, debt crises and a potential double dip recession meant renewed problems for a region sending about a fifth of its exports to the United States and Europe.

“To realise our vision of an ASEAN community, much more needs to be done. The strength and relevance of regional cooperation will once again be tested as we face uncertainties in the global economy,” Boediono said in a speech.

“This is no time for complacency. We all have to be vigilant and be prepared with national policy responses, as well as regional policy responses and cooperation.”

Ten-member ASEAN, ranging from resource-rich Indonesia to impoverished Laos and financial centre Singapore, is planning a union by 2015 to allow for free flow of goods, capital, services and labour, but economists say it is not even close.

Home to 600 million people and a combined GDP of $2 trillion, the region is angling for foreign investment and its stock markets were the best performers in Asia in 2011 before this week’s selloff following the U.S. downgrade.

Boediono, formerly Indonesia’s central bank governor and credited with guiding its economy through the 2008 credit crisis, said the region needed more mechanisms to deal with both financial shocks and shortages of food and energy.

Indonesian Trade Minister Mari Pangestu said turmoil in the world economy showed the need for the region to stick together.

ASEAN is often dismissed as a talking shop, given its policy of consensus and non-interference in member’s internal affairs, with the group unable to broker a deal to end a border dispute this year between members Thailand and Cambodia.

Minister Cities Successful Initiatives
Pangestu cited the Chang Mai Initiative—a multilateral currency swap agreement between ASEAN, China, Japan and South Korea—and a move to create a strategic rice reserve among the same group, as examples of what the region needed to do.

“There are many other programmes we can put in place in response to uncertainties,” Pangestu told the ministers, without giving details of other possible policies.

The region wants to become a single market and production base to compete with rising Asian powerhouses China and India. ASEAN trade ministers will meet with their counterparts from those countries, as well as the United States, Russia and Australia, this week in Manado, a three-hour flight east of Singapore.

ASEAN exports within the region picked up to a quarter of the total by 2009, from 21 percent in 1993, while exports to the United States and Europe have declined from 35 percent in 1993. China is now the group’s largest trading partner.

The bloc’s secretary general, Surin Pitsuwan, said there was progress towards establishing ASEAN as a major and resilient player, but “bold steps” were needed by 2015.

“We need to move at a faster pace,” Pitsuwan said. “What we are worried about is if they (the United States and Europe) take a long time to get their act together, then we may be affected…we need to power on with the integration effort, increase intra-ASEAN trade,” he told Reuters. (Reuters)