ASEAN committed to strengthen finance system

By Devi M. Asmarani

KUALA LUMPUR (JP): Asia-Pacific finance ministers ended a two-day meeting on the monetary turmoil here yesterday with a strong commitment to strengthen financial systems and to restore the ailing economies in the region.

The two-day meeting also approved the proposal of the Association of Southeast Asian Nations's finance ministers to create a short-term financing facility to support the International Monetary Fund's resources in supplying aid to economies in need.

ASEAN finance ministers said their proposed emergency funds would be used to restore market confidence, and not to bail out the ailing private sector as feared by their counterparts in the meeting.

Malaysia's finance minister Anwar Ibrahim said the facility, often referred to as the ASEAN Fund, would in no way be given to the private sector.

"We do not want to preclude a reasonable proposal (for emergency funds), but the use of 'bail out' has certain connotations," Anwar said in a joint press conference after the meeting.

Ministers of the nine-member Association of Southeast Asian Nations (ASEAN) and counterparts from Australia, China, Hong Kong, Japan, South Korea and the United States took part in the meeting.

Anwar said the ASEAN Fund would be a supplement to the IMF bailout program and would be given to countries which have already received an IMF financial package, but which needed more funds in a short time.

The ASEAN ministers said yesterday the United States and Japan had agreed to contribute to the fund.

IMF's managing director Michel Camdessus said yesterday the IMF was now open to the ASEAN Fund after long deliberation.

Camdessus said the origin of the ASEAN Fund had been shown by the support of Asian countries such as Japan, in supporting the crisis in Indonesia and Korea.

Yesterday, the finance ministers also urged the IMF to provide a new quick-disbursing short-term facility in addition to its financial packages.

Indonesian Finance Minister Mar'ie Mohamad said the proposed fund could be used to handle a balance of payments crisis of an economy before it receives the financial assistance from the IMF.

"The fund would be used during an emergency by the country before it completes negotiations with the IMF," Mar'ie said.

Thailand's finance minister Tarrin Nimmanahaeminda said the short-term loan would restore the confidence of investors in a crisis-plagued market.

Responding to the grouping's desire to regulate hedge fund activities in the region, Camdessus said regulating the activities would be a tough job.

"If there were changes to introduce as far as the hedge fund activities are concerned, it must not stop them from doing the good that they do," he said, adding that the hedge funds were supposed to increase savings.

Camdessus again reaffirmed his optimism that countries in the region affected badly by the financial crisis would cope soon.

"I talk very frankly about the Philippines, Thailand, Indonesia and Korea. I believe that all these countries will, after the slow down of their economic activities, get out of the crisis much stronger," he said.

In a joint statement produced yesterday, the ministers of the nine countries also urged the IMF members for early ratification of the new arrangements to borrow and the agreement to increase IMF quotas reached in Hong Kong and China.

They agreed to support measures to strengthen the financial resources and institutional capabilities of the IMF, the World Bank and the Asian Development Bank.

They pledged to work with the international regulatory bodies particularly in the areas of strengthening banking and financial systems and deepening capital markets.