Crisis fund idea gets mixed reaction<\/p>\n
By Vincent Lingga<\/p>\n
HONG KONG (JP): The proposal to set up an Asian emergency fund
\nto counter a currency crisis such as the one hitting several
\nSoutheast Asian countries received mixed reactions from delegates
\nat the International Monetary Fund-World Bank meetings here.<\/p>\n
Japan was the only member of the Group of Seven leading
\nindustrial countries (G-7) which supported the idea and brought
\nit up at the G-7 ministerial meeting here Saturday.<\/p>\n
The G-7 meeting of finance ministers and central bank
\ngovernors ended Saturday without issuing an official communique
\nbut only notes of handwritten remarks read out by the ministers
\nof several members at separate news conferences. There was no
\nmention of the proposed Asian emergency fund.<\/p>\n
France's Minister of Economy and Finance Dominique Strauss-
\nKahn was quoted by Reuters here yesterday as saying that the G-7
\nministers were opposed to the idea of an Asian crisis fund as it
\ncould amount to a disincentive to bolstering financial
\ndiscipline.<\/p>\n
Japan's Finance Minister Hiroshi Mitsuzuka was quoted earlier
\nby Kyodo as saying that Japan would consider supporting such a
\nmove if requested.<\/p>\n
Indonesia's President Soeharto was one of the first Southeast
\nAsian leaders to raise the idea of a regional fund but he called
\nit a regional safety net instead of a crisis or emergency fund.<\/p>\n
President Soeharto said at the meeting of the ASEAN Inter
\nParliamentary Organization in Bali last month in the wake of the
\ncurrency turmoil in Thailand, Malaysia, Indonesia and the
\nPhilippines that ASEAN needed to set up a safety net to cope with
\na currency crisis.<\/p>\n
The President further broached the idea at a meeting with the
\nchief of Japan's Overseas Economic Cooperation Fund (OECF) in
\nJakarta.<\/p>\n
Governor of Indonesia's central bank Soedradjad Djiwandono
\ntold AFP here Saturday that Southeast Asian economies were to
\nnegotiate with the IMF the setting up of a mechanism to deal with
\nthe region's currency crisis.<\/p>\n
But Soedradjad declined to elaborate.<\/p>\n
Minister Strauss-Kahn told a news conference after the G-7
\nmeeting that the idea provoked major reservations among the
\ndeveloped economies as such a scheme could be seen by the market
\nas an automatic bail out mechanism.<\/p>\n
\"The ministers (G-7) saw more drawbacks than advantages in
\nsuch a scheme,\" the French minister said.<\/p>\n
Chairman of the IMF's top policy making body, the Interim
\nCommittee, Philippe Maystadt, confirmed the existence of
\nproposals to set up a regional fund in case of financial crisis.<\/p>\n
\"But the proposal came from Asia and not the IMF... the IMF
\nwill not become involved in it,\" Maystadt said.<\/p>\n
Maystadt said such a fund should be managed so that the
\nmarkets would not get the wrong signal that countries in
\nfinancial difficulty would automatically be bailed out.<\/p>\n
American and European financial officials here understand
\nJapan's enthusiasm about the Asian fund plan in view of its
\nleading role in the region's economy.<\/p>\n
Strauss-Kahn compared Japan's relationship with Asia to that
\nof the U.S. and Mexico which was shocked by a financial crisis in
\nlate 1994.<\/p>\n
European Commissioner for Finance Yves-Thibault de Silguy said
\nSunday that a regional fund should not interfere with the work of
\nthe IMF.<\/p>\n
\"The creation of a fund must not be an excuse not to take the
\nnecessary reforms,\" Silguy added.<\/p>\n
Nonetheless, ASEAN countries, with the support of Japan,
\nseemed determined to push ahead with the idea.<\/p>\n
Thailand's Finance Minister Thanong Bidaya said Sunday that
\nthe concept of setting up an ASEAN currency fund remains intact.<\/p>\n
The IMF previously signaled its opposition to a fund scheme,
\ncautioning that a permanent regional financing mechanism
\nto tackle currency crises could encourage speculators to take
\nrisks.<\/p>\n
IMF First Deputy Managing Director Stanley Fischer argued
\nagainst such a financing scheme not only because it tended to
\nincrease what he called \"moral hazard\" but also because it could
\nreduce the conditionality attached to IMF-led recovery programs.<\/p>\n
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