ASEAN states may revive currency stabilization scheme

ASEAN states may revive currency stabilization scheme

PHUKET, Thailand (Reuter): Southeast Asian finance ministry
officials yesterday discussed the possibility of reviving a
dormant scheme to stabilize regional currencies tied to the
bullish dollar.

Thai Finance Ministry permanent secretary Chatumongkol Sonakul
said the Association of Southeast Asian Nations (ASEAN) was
considering reviving the now inactive US$200 million ASEAN Swap
Arrangement first set up by the regional grouping in 1977.

The senior officials were meeting on this resort island one
day ahead of the first one-day ASEAN finance ministers'
conference Saturday, which will look at reactivating the dormant
swap arrangement.

ASEAN groups Brunei, Malaysia, Indonesia, the Philippines,
Singapore, Thailand and Vietnam.

IMF Managing Director Michel Camdessus is due to give a
keynote speech on the global economic outlook and regional
cooperation here on Saturday.

The currencies of some ASEAN member countries such as Thailand
-- whose baht is pegged to a basket of currencies dominated by
the dollar -- have been under severe pressure during the dollar's
recent bull run.

The Thai baht has come under sporadic but strong selling
pressure since early this year by speculators concerned that
Thailand may be forced to devalue its currency later this year.
The Thai baht is tied 82 percent to the surging U.S. dollar.

Chanchai Musinisakorn, a Thai finance ministry economist, said
the officials did not reach a decision on whether or when to
revive the currency-stabilizing arrangement, but agreed its size
needed to be expanded if it was to be effective.

Any decision to revive the ASEAN instrument would depend on
the extent to which its members could tap alternative emergency
funds from the International Monetary Fund's New Arrangements to
Borrow (NAB), the officials said.

The IMF executive board in January approved the NAB, a $48
billion line of credit to be used in situations that could
threaten the stability of the world monetary system.

"ASEAN countries have seen volatile regional capital flows.
Our cooperative measures will probably link to IMF's NAB but that
does not mean to say that ASEAN members are facing problems,"
another Thai official said.

Malaysian and Philippine officials added that currency
stability would be one of the macroeconomic issues on the agenda
for discussion by the ministers.