Financial Liberalisation Key to Recovery says McKinnon

"Controlling capital movements, and halting or stalling on financial liberalisation is no answer to Asia's economic problems," said Foreign Minister, Don McKinnon, at the ASEAN Post Ministerial Conference in Manila today.

In his address to Foreign Ministers of the Asia Pacific, Mr McKinnon said the real challenge was to maintain an economic environment in which capital funds respond to the market and what the market can return.

"Maintaining exchange rates which respond to markets and keeping inflation under control are critical," he said.

"Financial transparency and the absence of Government imposed distortions are the two factors required if nations are to withstand economic buffeting in the region."

Mr McKinnon said the region remains vulnerable if some seek to escape the impact of bad news.

"It is important, that those whose assessments turn out to be wrong - whether creditors or debtors - face the consequences of their bad judgements.

"We must remain conscious of the problem of `moral hazard', that is the risk that providing more money might shield banks and others from facing up to their failings.

"The challenge is for all countries to ensure their citizens have the maximum amount of information available to ensure transparency in markets."