'Asia Facility' urged for ailing economies

'Asia Facility' urged for ailing economies

HONG KONG (AFP): Southeast Asian nations are taking their proposal for a regional fund to rescue ailing economies to the International Monetary Fund, officials said yesterday.

"Yes, we are pursuing this," Malaysian Deputy Premier Anwar Ibrahim said. "We call it Asia Facility."

"We are now having discussions with the IMF," Anwar said after an informal meeting of Japanese and Southeast Asian finance ministers ahead of annual meetings of the World Bank and the International Monetary Fund (IMF) this week.

"It is at a very, very preliminary stage," Anwar stressed. "The name of the fund, the conditions imposed, the countries involved, the relation to the IMF -- all these are going to be studied."

The proposal was debated by Southeast Asian ministers in Bangkok on Friday, but Thai Finance Minister Thanong Bidaya suggested after those talks that the plan had been shelved for the time being.

Thanong said then that the Association of Southeast Asian Nations (ASEAN) lacked the expertise to put together such a fund, which had been envisaged as a regional version of the IMF.

Philippine Finance Secretary Robert de Ocampo said Japan would be urged to be a major contributor to the facility, variously called the ASEAN Fund and the Asian Fund before its current reincarnation as Asia Facility.

Several rich economies are opposed to the setting up of such a fund they believe could be a rival to the IMF, which has its own reservations over the proposal.

Japan outlined the plan to its partners in the Group of Seven developed countries here Saturday where it met with a lukewarm response.

Japanese Finance Minister Hiroshi Mitsuzuka said his discussions with ASEAN counterparts were "very good," adding: "Talks went smoothly and our ideas are getting closer."

Thai Finance Minister Thanong said the proposed regional fund would complement the IMF, adding it "should be conceived and should be materialized whenever possible."

"The meeting has concluded that we will try to do our best to explain to the G7 that this is a clear, innocent idea to try to help each other," he said.

IMF first deputy managing director Stanley Fischer said Friday the establishment of permanent regional funds to deal with such crises could increase a "moral hazard" by letting speculators know such funds were available in times of crisis.

"We see an important role for regional groups in the prevention of crises, by improving surveillance," he told the seminar, held ahead of annual meetings of the World Bank and IMF.

But "we are more skeptical about the establishment of large regional funds for crisis financing, especially when their creation runs the risk of reducing the conditionality attached to crisis financing."

The Asian rescue fund plan was raised after upheaval in regional financial markets triggered by the de facto devaluation of the Thai baht on July 2 which shaved off more than a third of the currency's value.