Political hurdles still blocking Asian fund<\/p>\n
TOKYO (Reuters): Political hurdles still need to be cleared to
\nenable the successful launch of an Asian emergency financial
\nfacility to help address financial crises in the region, senior
\nanalysts in Japan say.<\/p>\n
\"The Asian region is gradually transforming itself from pro-
\nnational to market-orientated economies, and a region-wide
\nfacility, if crafted carefully, would prevent this transition
\nfrom being reversed,\" said Mitsuru Toida, chief economist of the
\nstatistical research department of the Institute of Developing
\nEconomies (IDE), a Japanese government affiliated think-tank.<\/p>\n
Southeast Asian nations, backed by Japan, have urged the
\ncreation of the Asia fund in the wake of regional currency
\nupheaval.<\/p>\n
But the idea has been greeted with strong opposition by the
\nUnited States, Europe and the International Monetary Fund (IMF)
\nout of fears that it would disburse cash without demanding the
\nstrict policy adjustments often required by the IMF.<\/p>\n
Deputy U.S. Treasury Secretary Lawrence Summers said on
\nWednesday there had been no agreement yet between the U.S., Japan
\nand other countries on the proposed fund.<\/p>\n
Takashi Hosomi, chairman of NLI Research Institute, the
\nresearch arm of Nippon Life Insurance, said the idea of a fund
\nwas timely and pooling capital would not be difficult.<\/p>\n
\"But,\" he added, \"Asia must be understanding to America's need
\nto stay informed about any regional movement to keep their global
\ninfluence intact.\"<\/p>\n
Hosomi, a former vice finance minister for international
\naffairs, said the fund should have a framework allowing certain
\ninvolvement by the United States, which worries it might weaken
\nU.S. presence in the region.<\/p>\n
Senior U.S. officials have called the creation of such a fund
\ndangerous, arguing it would discourage the kind of policy
\ndiscipline needed to get some of the economies back on course.<\/p>\n
Summers said financial regionalism based on notions of
\nregional reliance in times of crises carried real risks of
\nreducing the resources available for future crisis and
\nencouraging the emergence of blocs.<\/p>\n
\"This is an important part of why we believe it to be
\nessential that the IMF should play a central role,\" he said.<\/p>\n
Responding to such worries, Asian countries have repeatedly
\nmade clear that the Asia fund, which some Asian officials say
\ncould amount to $100 billion, will supplement rather than
\nsupersede the IMF.<\/p>\n
\"It's not as of now a big war chest designed for interventions
\nto prop up depreciating currencies, nor is it designed for a new
\nIMF for Asia,\" Philippine Finance Secretary Roberto de Ocampo
\nsaid late last month.<\/p>\n
Japanese officials, sensing that Washington's main concern is
\nof losing control in the region rather than the risks of the fund
\nspoiling members' policy discipline, are now trying to find a
\nrole for the United States and the IMF in the Asia fund by
\nattaching a new operational facility.<\/p>\n
They have suggested that the fund should provide assistance to
\nupgrade mutual surveillance of regional macroeconomies and to
\nensure transparency of information in the financial arena.<\/p>\n
The fund will be discussed at a meeting of deputy finance
\nministers from the Association of South East Asian Nations, the
\nUnited State and Japan in Manila on November 18 and 19.
\nSome Asian nations remain wary of heavy U.S. involvement in the fund.<\/p>\n
\"The general feeling is that the U.S. has provided Asia with
\nlittle financial support but only a loud voice, thus its
\ninvolvement in the fund is unwelcome,\" said an Asian diplomat.<\/p>\n
Hosomi said a more complex issue would be how China would deal
\nwith the fund.<\/p>\n
\"The fund would boost Japan's influence over the region and
\nthey have to think how to deal with the membership of China, Hong
\nKong and Taiwan,\" he said.<\/p>\n
De Ocampo said last week there was a growing belief that China
\nshould participate in the fund to help out those countries in the
\nregion hit by financial turmoil.<\/p>\n
If the fund were to be established as a supplementary facility
\nto the IMF, Taiwan could end up being excluded as it is not an
\nIMF member, said the IDE's Toida. \"But China is unlikely to have
\nan aversion to Taipei's membership because it (China) may be the
\nmain beneficiary of the Asia fund,\" he said.<\/p>\n
Toida said China's balance of payments surplus of the past 2-
\nyears could shrink rapidly in light of its recent moves to delay
\neconomic deregulation and protect national companies. Also,
\nChina's competitive edge, sharpened by the yuan's 33 percent
\ndevaluation in 1994, is now being blunted by steep devaluations
\nof other Asian currencies, he said.<\/p>",
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