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.