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.