ASEM meeting sparks talk of forging more stability

ASEM meeting sparks talk of forging more stability

SINGAPORE (Reuters): Finance ministers from Asia and Europe
get together for the second time on Friday, and with the advent
of the euro are getting more focused on the idea of a single
Asian currency.

The birth of the euro on Jan. 1 has sparked a fresh debate
about a single currency unit for the region, although analysts
say this germ of an idea will take many years to come to
fruition.

But the meeting may be overshadowed by Brazil's devaluation of
its real currency, which sent stock markets plunging around the
world. The country's central bank scrapped a mini-band in which
the currency had traded, allowing it to fall more than 8 percent
against the dollar.

Joseph Yam, head of Hong Kong's de facto central bank, said
last week that Asian countries may eventually have to consider
creating a common currency to help defend the region from future
financial shocks.

"The time may come when we might want to consider the
possibility of our own Asian currency -- perhaps something along
the lines of an Asian Currency Unit -- that would form an anchor
currency for our region," said Yam, head of the Hong Kong
Monetary Authority.

Finance Ministers from 25 nations in Europe and Asia are due
to attend the annual two day Asia-Europe Meeting (ASEM) in
Frankfurt as well as European Commissioner Yves-Thibault de
Silguy and other representatives from the European Commission.

Analysts said it is not surprising that Asian leaders are
looking at the euro as a future model for a common currency in
Asia, which could create more stability and help cure some of the
region's economic and social ills.

But many analysts say Asian authorities might spend their time
better focusing on nearer-term problems, of which there are many.

"It's good to set targets but a common currency for Asia is a
long, long way off," said Tommy Koh, director of the Asia-Europe
Foundation in Singapore.

"What you need to do before that is to try and encourage more
cooperation between our finance ministers, central banks and you
need more cooperation on macroeconomic policy...Those need to be
the first steps."

There are also siren calls among beleaguered Asian nations,
still grappling with the aftermath of the 1997 collapse of fixed
and semi-fixed currency regimes, for more controls on flows.

Malaysia last year went the whole hog and imposed wide-ranging
controls on capital. Other countries must be eying the apparent
success of the move.

Japanese financial sources were quoted in a Japanese newspaper
recently as saying the ASEM meeting would be looking for ways to
prevent hedge funds from disrupting global financial markets.

These would include a requirement that financial institutions
lending to hedge funds, to help them leverage speculative trades,
disclose the amount of the loans.

"The idea from Asian central banks will be that the whole
crisis stemmed from the lack of controls of hedge funds...but
what's good for Asia may not be exactly what the Americans or the
Europeans want," said Jacqueline Ong, senior regional economist
at I.D.E.A. in Singapore.

"I don't think we can expect anything concrete to come from
this meeting with regards to forex controls because there will be
conflicting interests."

ASEM groups the 15 members of the European Union plus Brunei,
Indonesia, Malaysia, the Philippines, Thailand, Singapore,
Vietnam, China, Japan and South Korea.

IMF Managing Director Michel Camdessus and European Central
Bank President Wim Duisenberg will address the two-day gathering.