ASEAN ministers expect region's growth to slow

ASEAN ministers expect region's growth to slow

KUALA LUMPUR (Reuters): Stung by sagging U.S. demand for their
exports and worried by a falling yen, Southeast Asian countries
said on Sunday they expect the region's growth to slow to 3 to 5
percent this year from 5.3 percent in 2000.

The 10 members of the Association of Southeast Asian Nations
(ASEAN) made the bearish forecast in a communique issued at the
end of their finance ministers' two-day meeting in Kuala Lumpur.

"In view of the expected slowdown in the global economy, the
outlook for the ASEAN countries will be less favourable," the
communique said.

"Export growth in the ASEAN economies has moderated since late
last year and foreign direct investment are expected to remain
subdued in the near term."

Fast-dropping U.S. demand for goods like computer and
electronic equipment have hit the region's export-oriented
economies hard.

The benefits of making their products cheaper by weakening
their currencies will be offset if the overall market for their
goods is shrinking, and southeast Asia will be hoping the
American consumer will come to its rescue by the year-end.

Meantime, the yen's recent weakness, which has dragged down
their currencies in its wake and dulled Japanese demand for their
goods, has added to worries.

"We noted with concern the recent volatility of financial
markets and the major currencies, particularly the depreciation
of the Japanese yen, which has created uncertainty and
instability in regional financial markets and could adversely
affect the prospects for continued growth of ASEAN countries,"
the finance ministers said in their communique.

Thailand is one country which has felt the fallout from the
yen's recent falls, as its baht currency has come under pressure.

But Finance Minister Somkid Jatusripitak told reporters here
he did not think the baht's volatility would last long.

The main purpose of this meeting had been to knit a safety
net, through a web of bilateral currency swap agreements, for
member countries' currencies in case they run into balance of
payments or liquidity problems.

Unable to agree on a common model for operating an Asian
currency support scheme, the ministers decided each country could
negotiate terms individually with lender countries.

The currency swap plan envisages linking the international
reserves of ASEAN countries -- Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand and
Vietnam -- with those of Japan, South Korea and China.

Initiative

The scheme, known as the Chiang Mai initiative after the Thai
city where it was first proposed, will be set up as a series of
bilateral swap arrangements (BSA).

The ASEAN+3 group hopes to wrap up and sign the BSA on the
sidelines of the Asian Development Bank's (ADB) annual meeting in
Honolulu next month.

The hope is that speedy support will nip any future problem in
the bud and prevent a repetition of the contagion effect that
made the Asian crisis of the late 1990s so virulent.

Key issues for the likely borrowers are how much and how fast
money would be released, and who would conduct the surveillance
of economic reforms tied to the release of funds.

Malaysia, which shunned International Monetary Fund support
and advice during the Asian crisis, is keen to keep the
Washington-based multilateral agency out of its affairs.

Kuala Lumpur wants any surveillance to be carried out by an
Asian agency, more sensitive to local conditions.

Malaysia also wants a larger initial disbursement from the
agreed credit line than the 10 percent limit envisaged earlier.

It points out the IMF's emergency loan facility, the
Contingent Credit Line, allows for the release of one-third of
the total credit line of pre-set credit without conditions, and
has argued that the BSA could have similar terms.

Malaysian Finance Minister Daim Zainuddin told reporters it
was up to each country to secure its own terms.

The likely creditor nations, China, Japan, Korea and
Singapore, can be expected to attach their own conditions.

Representatives of Japan, Korea and China will join
discussions later on Sunday.

"I am sure Japan, Korea and China will set their own
conditions as part of their (bilateral) agreements," ASEAN
Secretary-General Rodolfo Severino told Reuters on Saturday.

The finance ministers also agreed to expand the scope of the
regional currency swap arrangement to include all 10 members of
ASEAN, and increased the group's total commitment to one billion
dollars.