ASEAN to increase reserve fund to fight speculators
ASEAN to increase reserve fund to fight speculators
KUALA LUMPUR (AFP): The Association of South East Asian Nations (ASEAN) plans to increase its financial reserves fund later this year to fight future currency speculators, reports said yesterday.
ASEAN secretariat deputy secretary-general Suthad Setboonsarng said it was vital to increase the fund to minimize damage from the currency woes, set off by the July 2 flotation of the Thai baht.
"It is not an issue ASEAN has ignored. We have been trying to look at various arrangements to take care of the financial and capital markets," Suthad was quoted as saying by the Business Times daily.
"...this experience is showing the magnitude of what these arrangements should be because the (present) swap arrangement is not big enough," he added.
The present five-party arrangement between Singapore, Indonesia, Malaysia, Thailand and Philippines allows for a drawdown cap of $80 million, with each signatory providing $40 million to the fund.
The accord was introduced in 1987 and updated in 1992.
The five countries had agreed at an East Asian and Pacific central banks conference late July to extend the accord by renewing a dormant $200 million swap agreement by one year, effective from Aug. 5.
The agreement provides short-term liquidity financing to ease the temporary balance of payment needs. A member country in need of liquidity can exchange its local currency for U.S. dollars provided by other members.
Suthad described the present currency woes as a "temporary blip."
"I think when ASEAN is moving at this pace ... at an average of seven percent for the past decade ... of course, the engine will start to heat up a bit and all these mechanisms will have to be set up to take care of developments," he said.
ASEAN needed such arrangements among its nine members as it could not rely on the International Monetary Fund, which had helped broker a $16.7 billion rescue package, to solve all its economic problems, he added.
ASEAN groups Brunei, Myanmar, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Meanwhile, Indonesian Finance Minister Mar'ie Muhammad said ASEAN finance ministers may separately discuss the currency issue with their European counterparts during the Asia-Europe finance ministers' meeting in Bangkok on Sept. 19.
"While southeast Asian countries were recently shaken by a currency crisis, one that does not reflect the economic fundamentals of this nation, we should not allow ourselves to be unduly swayed by these events which I am convinced are of a temporary nature," he was quoted as saying.
"However, we must realize that the volatility in the international currency markets is rapidly approaching the level of fluctuations that have traditionally been more characteristic of capital markets," he added.
Mar'ie said a final assessment or judgment on the current currency turmoil should not be made, as "we expect more developments to come in the future."
Since July, the baht has lost more than a quarter of its value while the Indonesian rupiah has plunged by almost 20 percent. The Philippine and Malaysian currencies have lost more than 10 percent each of their value while the Singapore dollar has dropped by about six percent.