BANGKOK, Feb 26 (NNN-Bernama) -- A United Nations senior regional official Monday warned East and Southeast Asian governments not to be lulled into false security by the current economic boom, as some of the risks which preceded the massive financial crisis 10 years ago could be seen today.

Kim Hak-Su, UN Under-Secretary-General and UN's Economic and Social Commission for Asia Pacific (Unescap) Executive Secretary, said a global liquidity bonanza, inflated asset values, and tremendous speculative pressures on regional currencies could destabilise regional economies, as happened in 1997.

In his keynote at the "Conference on 10 years after the Asian Financial Crisis: Vulnerabilities of East Asia," here, Kim said the region cannot afford to rest on its laurels.

"Globalisation, along with its many benefits, exposes economies to quick and harsh risks from the constantly shifting international environment," he said.

"Greater flexibility would help take away the one-way bet that encourages even more capital inflows than would otherwise take place. Since markets would quickly realise that the currency could move in either direction," he added.

Kim said central banks need to be clear about their objectives for price stability and their exchange rate policy and recommended that the overarching goal of governments in the region should be to build strong and flexible economies that could weather global shocks and adapt to new realities.

He proposed a four-track approach which included ensuring solid macroeconomic fundamentals, developing healthy financial sectors, having robust microeconomic foundations, and improving regional cooperation.

Looking back at the achievement of the affected countries in Southeast Asia and South Korea, Kim said they have made great progress in reviving the strength of their economies with impressive growth rates in recent years.

"Between 1999 and 2005 average per capita income in these countries grew by more than eight percent. Enormous strides were made in reducing the poverty and unemployment which had resulted from the events of 1997," he said.

More recently, the crisis-affected countries displayed robust GDP growth of more than five percent in 2006, driven by strong international demand for manufactured goods such as electronics, and a similar rate of growth was expected this year, he said.

He said these countries have taken significant macroeconomic policy measures to improve their resilience to shocks, including adopting more flexible exchange rates, improvement in the current account, much-improved banking sectors and remarkable foreign currency reserves.

Kim also said that Southeast and East Asia has displayed progress in regional cooperation to increase self-reliance in crisis prevention and recovery through sharing information about portfolio flows, collaborating in regulatory activities, and have established a financial support mechanism against disruptive capital movements through the Chiang Mai currency swap initiative.

Besides that, the cooperation also manage to reduce the dependence of countries on bank financing through the Asian Bond Market Initiative of Asean Plus Three and the Asian Bond Fund project of EMEAP. -- NNN-BERNAMA