ASEAN to link currency swap to IMF

ASEAN to link currency swap to IMF

KUALA LUMPUR, Malaysia (AP): Overcoming opposition from Malaysia, Southeast Asian countries agreed Saturday that planned currency swap arrangements with China, Japan and South Korea would complement International Monetary Fund programs.

Amid growing gloom about how badly the U.S. economic downturn and Japan's financial woes will hit their export-driven economies, ministers of the Association of Southeast Asian Nations, or ASEAN, resumed work Saturday on currency swap agreements which aim to safeguard them against a repeat of the 1997-98 financial crisis with plunged the region into recession.

Under a plan agreed to in May last year, ASEAN countries will set up a US$1 billion currency swap arrangement which will allow members to draw on support "in the event of temporary balance of payments difficulties."

They are also pursuing consensus on a separate network of bilateral currency swap agreements with Japan, China and South Korea, but have had difficulty agreeing on the details.

Before ASEAN finance ministers began meeting in Kuala Lumpur Saturday, Malaysia opposed the swap agreements with the northern Asian countries being subject to IMF conditions because it is not a member of the fund.

But a statement released at the end of the first day of talks said: "There was consensus that the bilateral swap agreement would be complementary and supplementary to IMF facilities."

Malaysia's Finance Minister Daim Zainuddin told reporters after the meeting that his government had "never objected to an IMF role" in the currency swaps. This appeared to contradict Daim's statement to reporters in March that, "We are not under the IMF, so why do they impose these conditions?"

Officials said before Saturday's meeting that ASEAN ministers wanted consensus on the issue before discussing it with the northern Asian countries. The ministers will meet with officials from Japan, China and South Korea on Sunday.

The meeting comes as most countries, apart from Malaysia, are grappling with currency weakness against the U.S. dollar, plunging exports and manufacturing output growth, as well as political leadership scuffles in the region. Malaysia imposed capital controls during the Asian crisis which effectively pegs the ringgit to the U.S. dollar.

In remarks to open the meeting, Daim said the U.S. slowdown and Japan's problems were of concern to ASEAN countries. The United States and Japan are Southeast Asia's two biggest export markets.

"At the global level, we are all bracing ourselves for the slowing down of the world economy following the already moderating U.S. economy," he said. "What remains uncertain at this point is the magnitude, duration and severity of the slowdown."

Many governments in the region have in recent weeks revised downward their forecast growth rates for 2001, blaming declining U.S. demand for electronics and other exports.

Daim said ASEAN's task was to sustain the growth of individual economies to secure economic stability and resilience and to "remain focussed on the longer term issues including preventing the recurrence of the currency and financial crisis."

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