Asia still needs monetary fund despite end of crisis: Banker
Asia still needs monetary fund despite end of crisis: Banker
SINGAPORE (AFP): Despite the end of the Asian crisis, a regional monetary fund is vital to avert future turmoil and could be realized in five years if Japan took a more aggressive role, a senior regional banker said on Tuesday.
Korea Exchange Bank chairman Yung-Chul Park said East Asia should create its own defense mechanism and not rely on a new global financial architecture being mapped out by the Group of Seven (G-7) developed countries.
"The ongoing upswing does not necessarily mean that East Asian countries are out of the danger zone," he told the Asia Development Forum organized by Singapore, Japan, the World Bank and the Asian Development Bank.
"We cannot rely on this new international financial architecture because it's not going anywhere... We simply cannot wait because nobody is going to come and rescue us in case we run into another round of crisis. It is going to be in our own interest to defend ourselves."
Park hailed plans by the Association of Southeast Asian Nations (ASEAN) last month to widen an existing regional currency swap network to include Japan, China and South Korea as a good start and said the process would be "irreversible."
East Asian nations have international reserves of close to one trillion US dollars to develop an Asian Monetary Fund (AMF) but he said its development would be a gradual process.
"First, we have to make these swap arrangements functional and then we have to develop the network of bilateral swap arrangements into a multilateral arrangement," he said.
"Then we have to move towards creating a regional fund" he said.
Later, the region could look at exchange regimes, a common currency and other links between financial markets and financial institutions.
"That's the way we should go and that's the experience we learn from the European monetary integration," he added.
The AMF was first mooted by Japan in 1997 to help East Asian economies as they were ravaged by currency turmoil and to check financial contagion in the region. The idea was shot down by the United States, Europe and the International Monetary Fund (IMF).
At their meeting in Chiangmai last month, finance ministers from ASEAN, China, Japan and South Korea said there was a need to build a regional financing arrangement to supplement international facilities.
They said the swap arrangement would be a first step in establishing a "well coordinated economic and financial monitoring system in East Asia." The move could potentially arm the region with billions of dollars to deter speculators and check financial contagion.
The IMF's new managing director Horst Koehler last month welcomed discussions about an AMF, while Washington was more cautious, saying it wanted to hear more details.
Park urged Japan to play a more "active leadership" role and be more forthcoming in supporting the AMF.
"I am sure it will come in a matter of five years but there are many, many differences among East Asian countries. We have China on one hand, and Japan and other ASEAN members on the other," he said.
"The negotiation process is going to be very time-consuming and it's going to be very difficult."
Roberto de Ocampo, a former Philippines secretary of finance, said the AMF was rejected previously on grounds of "moral hazard" -- a banking term referring to the danger of encouraging irresponsible behavior by creating a bailout mechanism.
But Ocampo, who now heads the Asian Institute of Management, said the idea should now be pursued as such an arrangement could complement the IMF.
Anwar Nasution, Bank Indonesia senior deputy governor, said Indonesia was supportive of the need to create an AMF.
Tharman Shanmugaratnam, Monetary Authority of Singapore's deputy managing director, said the proposal should be explored but warned that Asian nations must first strengthen their domestic institutions.