ADB backs Asia fund, readies new loans

ADB backs Asia fund, readies new loans

TOKYO (Reuters): The Asian Development Bank (ADB) is preparing
to help underwrite between US$2 billion and $3 billion in new
loans to the Asian economies most directly hit by the regional
crisis, a senior official at the bank said on Monday.

The official said an Asia-specific monetary fund of the kind
proposed by Japan could play an important role in leveraging more
private-sector financing for the region.

"The magnitude is extremely large, in terms of liquidity gaps,
so additional funds are always welcome," Yoshihiro Iwasaki, a
strategy and policy officer at the ADB, told Reuters Television
in an interview.

For its part, the ADB is preparing to help underwrite loans
under Japan's Miyazawa Plan. Those funds will be available by
mid-1999 and will be disbursed over 18 months or so, he said.

"The focus is now not on macroeconomic stability but on
structural reform, especially in the financial and corporate
sectors," Iwasaki said by telephone from ADB headquarters in
Manila.

Japan has set aside $30 billion in financing for the rest of
the region in a facility named after its chief architect, Finance
Minister Kiichi Miyazawa.

The ADB's co-financing under the plan will be directed
initially at Thailand, Indonesia, Malaysia, the Philippines and
South Korea, Iwasaki said.

In addition to the already approved funds, Miyazawa has given
his support for a kind of Asian monetary fund to complement the
IMF -- an idea that was floated and dropped in 1997 after it met
with opposition from the United States and Europe.

But the nature of the Asian financial crisis and the response
to it are both better understood now than they were earlier and
that could soften opposition this time, Iwasaki said.

The Asian financial crisis was primarily driven by capital
account flows, not chronic current account imbalances, Iwasaki
said. And the crisis was "highly regionalized", despite Asia's
high domestic savings, he said.

Those factors support the case for a new approach to regional
support, including consideration of some kind of Asia fund, he
said.

"The existing international framework, particularly the supply
of short-term credit such as the IMF, I think could be usefully
supplemented by such a regional fund," he said.

But Iwasaki said he sees no need now for the development bank
to expand its own borrowing program for 1999.

"I think the situation in some of our member countries has
been improving quite significantly, so I don't see any
significant increase in the need to go to market by the bank," he
said.