ASEAN states to expand money swap arrangement

ASEAN states to expand money swap arrangement

BANDAR SERI BEGAWAN (Reuters): Southeast Asian finance ministers on Saturday watered down their plans to create a regional support fund and instead focussed on expanding an existing facility to tackle future balance of payments crisis.

Plans to create an Asian Monetary Fund failed to take off in absence of adequate support from major economic powers, said officials meeting in the oil-rich sultanate.

Thailand Finance Minister Tarrin Nimmanahaeminda said the meeting of the ASEAN finance ministers agreed on expanding the existing currency swap arrangement among their central banks and include Japan, China and South Korea to enlarge the kitty.

"ASEAN finance ministers did not have any signals from major countries on proposals on AMF (Asian Monetary Fund). So we mainly discussed an augmentation to the currency swap arrangements among the central banks," Tarrin said.

Officials said that ASEAN's international reserves along with the three other economic powerhouses of Asia -- China, Korea and Japan -- can be used to bail out economies facing balance of payments crisis.

Asked what would be the size of the new swap arrangement, Tarrin said: "That's difficult to say now".

ASEAN central banks in January renewed an agreement on currency swaps which provides short-term liquidity financing to ease temporary balance of payments needs.

Some have suggested making the $30 billion Miyazawa plan, set up to help Asian economies through the region's economic crisis, a permanent facility.

"But that would depend upon the Japanese. They have to take the initiative," said Rodolfo Certeza Severino, secretary general of ASEAN.

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

Senior finance officials and central bank deputies, who met ahead of the weekend finance ministers conference, unanimously agreed on Friday to re-open a two-year debate on setting up a regional financial support fund to aid economies in distress.

But the finance ministers barely touched on the vexed issue of an Asian Monetary Fund, which has drawn sharp criticism from the United States and other Western nations.

Officials said that the ministers could take up the AMF issue at their next meeting in Chiang Mai in Thailand.

They allayed the fears of the U.S. and other Western nations by saying that the proposed fund would be consistent with, and not duplicate, the activities of the International Monetary Fund (IMF).

The U.S. fears that a separate Asian financial facility could undermine IMF and weaken Asian countries's willingness to adopt tough reforms advocated by the IMF.

The IMF extended large fiscal and monetary bail-out packages to Thailand, Indonesia and South Korea in the wake of the Asian economic crisis.

But Malaysia, a strong proponent of the regional financial facility, has voiced resentment at tough economic reforms demanded by the IMF as part of the rescue packages.

ASEAN finance ministers pledged to sustain their fledgling regional economic recovery by stimulating domestic demand, inducing more private investment and carry out economic reforms.

"I guess it (crisis) tells us to increase regional cooperation, boost domestic demand and reinforce each other," said Philippines Finance Secretary Jose Pardo.

The ministers also discussed a report on the exchange of economic data as part of an effort to set up an early-warning mechanism to detect structural weaknesses in the region.