Asian fund not remedy for currency crisis: LGT

Asian fund not remedy for currency crisis: LGT

SINGAPORE (Reuters): Setting up an Asian fund to help economies in trouble is not the best solution to the crisis facing the region's financial markets, LGT Asset Management chief economist John Greenwood said yesterday.

"I think it's a second best solution," Greenwood told reporters after addressing a conference in Singapore.

"The first policy is for the ASEAN countries to adopt appropriate domestic fiscal and monetary policies. Particularly with the banking system, to ensure sound banking," he said.

ASEAN, the Association of South East Asian Nations, groups the Singapore, Malaysia, Brunei, Thailand, Indonesia, the Philippines, Vietnam, Burma and Laos.

"Setting up a fund now, it would not be utilized very effectively," said Greenwood, the architect of Hong Kong's peg of its dollar against the U.S. dollar now under attack.

One of the main problem facing such a setup is that the fund would lack the conditionality that an International Monetary Fund (IMF) scheme has, Greenwood said.

"Under the IMF lending program, a country is under the obligation to fulfill the certain conditions. I doubt whether an APEC fund would have the same kind of conditionality," he said.

APEC, the Asia-Pacific Economic Cooperation forum, groups 18 nations, including the United States and Japan.

"The right way to solve the problem is to solve the cause, not to set up a fund," Greenwood said.

Finance ministers from Japan and ASEAN will meet in Manila next month to discuss a proposed Asia fund. No date has been formally set for the meeting.

There has been strong opposition from most industrial countries and the IMF to any type of fund which would usurp the IMF's role or discourage countries in the region from further economic reforms.