ASEAN ministers to join hands to stabilize weak currencies

ASEAN ministers to join hands to stabilize weak currencies

KUALA LUMPUR (Reuters): Southeast Asian finance ministers
meeting this weekend will pledge to close ranks to stabilize
their wobbly currencies in the face of a declining yen and global
slowdown.

Thai Finance Minister Somkid Jatusripitak, who was one of the
first to arrive on Friday in Kuala Lumpur, said the ministers
will also search for a consensus to create a currency safety net
to ward off future attacks on Asian currencies.

"We are going to have cooperation among ASEAN nations to
stabilize regional currencies," Somkid told reporters ahead of
the 10-member Association of Southeast Asian Nations finance
ministers meeting on Saturday and Sunday.

Somkid said the Thai baht had been dragged down by falling
regional currencies but there was no cause for alarm. The baht
hit a 37 month low of 45.72 on Friday.

"I don't think it will be a serious one because our
fundamentals are still strong," he said.

Top Japanese finance officials on Thursday propped up the yen
from 30-month lows by saying the slide was rapid and authorities
would intervene if needed -- but it fell over one percent on
Friday on disappointment with a government economic package.

The Southeast Asian ministers hope to extract assurances from
Japan that it won't let the yen fall too far, as their currencies
are being dragged down to multi-year lows in its wake.

Indonesian Finance Minister Prijadi Praptosuhardjo backed his
Thai counterpart, saying a web of Asian currencies would provide
insurance against a future currency crisis.

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 China, South Korea and Japan.

Senior finance officials meeting ahead of the weekend
conference said the regional bloc was yet to agree on a role for
the International Monetary Fund in the Asian currency swap plan.

The initiative envisages tying disbursements under the scheme
to reforms supervised by the Washington-based IMF, a proposal
which host Malaysia staunchly objects to.

Thailand threw its support behind Malaysia on Friday. Asked if
there was any scope for IMF's participation in the bilateral
currency swap plan, Sathit Limpongpan, a senior Thai finance
ministry said: "I don't think so."

During the 1997/98 Asian financial crisis, Thailand opted to
take a IMF bailout package while Malaysia refused, instead
introducing capital controls and a currency peg.

Potential creditor nations have stressed that the swaps would
not be activated until IMF programs were already in place or were
at the point of being finalized.

Only in cases where a member country was deemed to be
suffering a passing cash crunch could the swap deal be triggered
without a link to an IMF program. In such a case, a country could
borrow no more than up to 10 percent of the swap line.

The officials set-up a panel to iron out differences and
propose alternatives to the ministers.

"We plan to set up a special committee which will submit its
report here tomorrow," Noor Fuad, secretary general of
Indonesia's Finance Ministry, told reporters.

Malaysian officials say ASEAN, the Asian Development Bank and
Southeast Central Bank Research and Training Center can be used
as alternative institutions to the IMF.

An senior IMF official said on Thursday that while it supports
the regional currency swap plan, the arrangement should be
consistent with the existing global framework.