ASEAN begins search for consensus on money swaps<\/p>\n
KUALA LUMPUR (Reuters): Senior finance officials from
\nSoutheast Asia met on Wednesday to search for consensus on
\ncreating a regional web of currency swaps to ward off future
\nfinancial crises.<\/p>\n
\"There are still some major differences to be sorted out.
\nThere is much to be discussed and agreed,\" said a Southeast Asian
\ncentral bank official attending the meetings.<\/p>\n
The three-day meeting is expected to throw up alternative
\nsolutions to problems plaguing the implementation of the currency
\nswap plan, known as the Chiang Mai Initiative after the Thai city
\nwhere it was conceived last year.<\/p>\n
The plan envisages linking international reserves of the 10
\ncountries from the Association of South East Asian Nations
\n(ASEAN) with those of China, South Korea and Japan.<\/p>\n
The scheme is being discussed at a time when the currencies of
\nmany countries in the region have fallen sharply, some to Asian
\ncrisis levels.<\/p>\n
Plan members, who saw their economies battered by speculative
\nattacks on their currencies in 1997-1998 amid big balance of
\npayments problems, could borrow from the swap network.<\/p>\n
But the initiative envisages tying disbursements under the
\nscheme to reforms supervised by the International Monetary Fund
\n(IMF), a proposal Malaysia staunchly opposes.<\/p>\n
Malaysia, an ardent supporter of regional monetary
\ncooperation, says negotiations have reached a critical stage but
\nforesees extra time being needed to fine tune the arrangements.<\/p>\n
The country, which balked at IMF assistance during the Asian
\neconomic crisis of 1997-98, says there is no role for the
\nWashington-based institution in the regional currency plan.<\/p>\n
\"The time taken to disburse loans or assistance under IMF
\narrangement is long and sometimes too late,\" a Malaysian official
\ntold Reuters.<\/p>\n
The official said Indonesia and Thailand would have been
\nbetter off if IMF had been faster in delivering the bailout
\npackages.<\/p>\n
Malaysia did not turn to IMF for financial help during the
\nAsian crisis. Its radical approach of imposing capital controls
\nand pegging its currency at 3.8 ringgit to the U.S. dollar to
\nward off speculative attacks on its forex and stock markets
\nhelped it to recover faster than its neighbors.<\/p>\n
\"Our success shows that 'one size doesn't fit all'. Sometimes
\npolicy prescriptions have to be country specific,\" the Malaysian
\nofficial said.<\/p>\n
Potential creditor nations, especially Japan, have stressed
\nthat the swaps would not be activated until IMF programs were
\nalready in place or were at the point of being finalized.<\/p>\n
Only in cases where a member country was deemed to be
\nsuffering a passing cash crunch could the swap deal be triggered
\nwithout a link to an IMF program. In such a case, a country could
\nborrow no more than up to 10 percent of the swap line.<\/p>\n
Malaysian officials cite the IMF's loan facility, the
\nContingent Credit Lines, which allows release of one-third of
\ntotal line of pre-set credit provided to a country without any
\nconditions.<\/p>\n
\"We also have a $2.5 billion swap line under the Miyazawa
\nInitiative with Japan. There are no conditionalities in that,\"
\nthe Malaysian official said.<\/p>\n
An international monetary source told Reuters the potential
\nlenders wanted to ensure that their money is put to good use and
\nnot squandered away.<\/p>\n
\"Good economic policies are the only collateral in such kind
\nof a currency swap arrangement,\" he said. \"So, it's important
\nthat there is some kind of surveillance system in place.\"<\/p>\n
Malaysian officials say there is no need for any IMF
\nsurveillance of reforms undertaken by the regional economies.<\/p>\n
\"There are existing institutions within the region which have
\nexcellent facilities to perform the role,\" the Malaysian official
\nsaid, pointing to ASEAN, the Asian Development Bank and Southeast
\nCentral Bank Research and Training Center as alternatives.<\/p>\n
Finance ministers are to consider officials' work at the
\nweekend.<\/p>\n
ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia,
\nMyanmar, the Philippines, Singapore, Thailand and Vietnam.<\/p>",
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