Ishrat Husain: The Asian Clearing Union
Welcome address by Mr Ishrat Husain, Governor of the State Bank of Pakistan, at the inaugural
ceremony of the 34th Annual Meeting of the Board of Directors of the Asian Clearing Union (ACU),
Lahore, 16 May 2005.
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It is a great honour for the State Bank of Pakistan to host the 34th Annual Meeting of the Board of
Directors of the Asian Clearing Union. I welcome you all to Pakistan and wish you a pleasant and
productive stay in our country. It is also indeed a pleasure for me to welcome the guests from
Afghanistan and the Maldives Monetary Authority, who are attending this conference as Observers.
We all are familiar with the purpose and background of the Asian Clearing Union. We have also
reviewed each year the progress that was made and problems that our members had faced in
international trade and payments and tried to modify the coverage, mechanism and procedure of the
Asian Clearing Union. What I wish to emphasize today is that major changes have taken place in the
international scene during the last one year which necessitates our taking a closer look at the record
and relevance of the Asian Clearing Union in relation to fast changing global environment.
In the rapidly changing environment, in which regional grouping is becoming a vehicle for trade
promotion and economic co-operation, the Asian Clearing Union should revisit its charter, examine its
relevance and find ways to expand the intra-regional trade and economic co-operation in a multilateral
context. We have to be outward looking and our objective should be to bring about coherence and
consistency in our macroeconomic policies that attract direct foreign investment. The Annual Report of
ACU for the current year (2004) indicates that even though intra-regional trade is growing, the
operations through the Asian Clearing Union are limited. Our efforts to expand its membership have
not as yet succeeded. However, I may add here that the ACU has not experienced a default. Although
there have been persistent debtors in the ACU system, their negative net balances have not been
large. There has not been a "structural creditor problem" in the ACU.
I would like the Governors to give some thought as to how we can make Asian Clearing Union an
important vehicle for the expansion of intra-regional trade and further economic coordination, and how
our banking and financial markets could be made complementary for the maximization of economic
welfare of the member states.
Asian Countries have demonstrated during the last several decades that it is possible to make great
strides in uplifting the living standard of the majority of the people within a short span of time. I am
extremely encouraged by the impressive progress that is being made by member countries of the
Asian Clearing Union. Each and every country is working hard to bring about reduction in the
incidence of poverty and improve the human development indicators. There is no doubt that the
challenges ahead of us are quite formidable but giving the political will, national determinations and
collective action I am sure we will be able to march ahead on the road to progress and prosperity.
The last five years have been extremely critical for our own country, Pakistan. The strategy of
economic revival that was initiated in December, 1999 has been successfully implemented and its
main pillars were achieving macro-economic stability, improve the governance, introduce structural
reforms and resume the path to accelerated growth. The results of the implementation of this strategy
are quite well known and I will not get into the details as Pakistan delegation will dwell on them in their
presentation.
Let me briefly add here that the banking sector reforms undertaken by the State Bank during the last
five years have helped us provide stability and strength to Pakistan's financial sector. Independence of
monetary policy has been a major factor in inculcating financial discipline in the public finances, while
autonomy of the State Bank in regulating the financial system has been the main strength of reviving
the financial institutions of the country. By contributing to financial discipline and financial stability, we
have managed to turn a poorly managed financial system into a strong and sound one. The State
Bank would be glad to share the details of the legal, structural, prudential and administrative changes
that Pakistan has undertaken in the last five years to reach this stage of stability in the banking and
the financial sector of the country.
I would like to briefly mention here that country's economy has been continuously growing for the past
two years. The GDP for the current fiscal year is likely to be over 71⁄2 per cent which will be the highest
growth witnessed in the country during the past 13 years.
Before concluding, I would once again like to welcome the participants and wish them a pleasant stay
in Pakistan.