ASEAN shelves fund plan
BANDAR SERI BEGAWAN: Southeast Asian finance ministers on Sunday shelved a
plan to create a regional crisis fund and agreed instead to expand an
existing currency swap deal to support economies facing balance of payments
woes.
"A proposal was made that the existing arrangements within the swap
agreement to meet short-term balance of payments problems might be
expanded," Singapore Finance Minister Richard Hu told a news conference.
"This will be one of the ways in which short-term balance of payments
facility could be arranged," he said.
Finance officials from members of the Association of Southeast Asian Nations
(ASEAN), meeting for two days in this oil-rich sultanate, had said earlier
the regional grouping was expected to unveil a watered-down version of a
proposed regional financing fund. The fund had been proposed as a way to
prevent a recurrence of the financial crisis which hit Asia beginning in
1997, causing wrenching economic and social change in many countries of the
region. But ASEAN finance ministers agreed instead to expand the existing
currency swap arrangement, totalling a meagre $200 million, among their
central banks and to include Japan, China and South Korea to enlarge the
kitty. Hu said the response of the three East Asian nations to an expanded
currency swap arrangement was positive. But he added that details were still
to be worked out. ASEAN's international reserves, combined with those of
economic powerhouses China, Korea and Japan, could be used to bail out
economies facing balance of payments crises. A joint ministerial statement
released at the end of the two-day meeting said: "Recognizing the need for
the availability of financial resources in times of crisis, they agreed to
conduct a study on the modalities and mechanisms for a regional financing
arrangement to supplement the existing international facilities." ASEAN
groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Vietnam.
International Monetary Fund (IMF), which made presentations at the weekend
meeting, was lukewarm to the proposal of a separate Asian fund. ASEAN
secretary general Rodolfo Certeza Severino told reporters there were
divisions within the regional grouping itself on the issue. But Singapore's
Hu did not rule out the ASEAN finance ministers re-opening the two-year-old
debate over the proposed Asian Monetary Fund at their next meeting in
Thailand's resort town of Chiang Mai. Officials said Japan has to provide
the initiative for the controversial AMF, which has been opposed by the
United States and other Western nations. The U.S. fears a separate Asian
financial facility could undermine the IMF and weaken Asian countries'
willingness to embrace tough reforms advocated by the IMF. The IMF extended
large fiscal and monetary bail-out packages to Thailand, Indonesia and South
Korea in the wake of the Asian economic crisis. But Malaysia, a strong
proponent of the regional financial facility, has staunchly opposed the
painful economic reforms advocated by the IMF as part of the rescue
packages.
The joint statement said the ministers agreed to set up a regional
monitoring mechanism, as part of an early-warning system, to keep a close
eye on capital flows in ASEAN. "A study will also be conducted to look at
measures that can mitigate the adverse impact of a sudden shift in capital
flows," it said. The study will be finished by end-April. The ministers
pledged to sustain the fledgling economic recovery and achieve the projected
regional growth rate of 4.5-5.0 percent in 2000. They reassured to carry out
structural reforms, privatization of state-owned firms, spur domestic
demand, improve corporate governance, transparency and establish a regional
framework for development of an ASEAN bond market. "Our aim is to develop
and deepen ASEAN's capital markets, particularly bond markets. This would
provide a better variety of financing instruments and facilitate better risk
management," the joint statement said. (Reuters)
For reprint rights: Times Syndication Service
|Disclaimer|
For comments and feedback send Email
© Bennett, Coleman & Co. Ltd. 2000.