ASEAN puts monetary fund plan on ice

ASEAN puts monetary fund plan on ice

By Anil Penna

BANGKOK (AFP): In an abrupt about-face after just an hour of talks, Southeast Asian finance ministers put on ice an ambitious plan to set up a regional version of the International Monetary Fund (IMF) to rescue crisis-ridden economies.

Thai Finance Minister Thanong Bidaya, who enthusiastically touted the proposal going into the talks late Thursday, came out saying regional economies lacked the wherewithal to institute such a fund.

He said members of the Association of Southeast Asian Nations (ASEAN) would help each other in times of crisis, but added that it was too early to talk about setting up an "ASEAN Monetary Fund."

Just an hour earlier, Thanong and Philippine Finance Secretary Roberto de Ocampo had outlined to reporters the plan for an AMF, with Japan as a key contributor.

De Ocampo said the regional fund would be a counterpart to the IMF, as the Asian Development Bank was to the World Bank, for members to draw on in times of financial crisis.

He conceded that details of the proposed fund were still to be worked out, "but in general we can begin discussing the possibility of an ASEAN Fund" which could later be enlarged into an Asian Fund.

Thanong said it could be used to defend regional currencies, which have come under a wave of speculative attacks since the float of the Thai baht on July 2.

"Japan will be a big brother to help us in this, particularly with the currency problems in the region," he said after a meeting with Japanese Finance Minister Hiroshi Mitsuzuka here.

He said Japan had "a huge amount of investment" in Southeast Asia that it was keen to protect from devaluation through local currency depreciation and devaluation.

There was no word on the reason for the abrupt turnaround, and it was not known whether any ASEAN member had blocked the proposal.

But a conference source said speculators alone could not be blamed for the crisis, with poor economic fundamentals such as hefty current account deficits overhanging many regional economies equally to blame.

The source said it was counter-productive to fight market forces, noting that even a powerful currency like the German mark had declined some 20 percent against the U.S. dollar over the past year.

Analysts say that the regional market contagion also made any kind of sustained cooperation difficult, with each government busy guarding its own patch.

The proposed fund would have institutionalized cooperation among ASEAN economies in times of a financial crisis of the kind presently battering regional markets.

Southeast Asian countries have been assailed by non-stop financial market turmoil since the Thai baht's de facto devaluation.

Regional central banks have abandoned futile efforts to prop up their currencies after suffering a sizable depletion of precious foreign exchange reserves.

With its economy in deep crisis, Thailand went cap in hand to the IMF which arranged a $17.2 billion credit line that came with a strict program of austerity.

Thanong said ASEAN lacked the expertise and the technical know-how to organize a regional monetary fund, but added that the spirit of cooperation was alive and kicking.

"We just know that when one of us is in trouble, the others pack together to help."

Thanong said the IMF would continue to be "the center of the rescue from any financial crisis of any country in the world." He said the IMF had "all the expertise, the leadership" to bail out troubled economies with credit lines accompanied by prescriptions on how to nurse them back to health.

Thanong noted that ASEAN countries contributed a sizable portion of the IMF-brokered credit line for Thailand.

"Whatever will happen, we have to stick together and help each other to the end."

"I think that's the most important thing," he added.

ASEAN officials met on the sidelines of an Asia-Europe Meeting (ASEM) of finance chiefs from the two continents, ahead of next week's IMF-World Bank meetings in Hong Kong.

ASEAN groups Brunei, Myanmar, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Myanmar and Laos, which joined the regional grouping only in July, are not part of the ASEM dialog.