Asian reforms 'hurt by financial flaws'

Asian reforms 'hurt by financial flaws'

KUALA LUMPUR (Bloomberg): Malaysian Finance Minister Anwar
Ibrahim reiterated yesterday that the international financial
system is flawed and would be the main stumbling block to Asia's
recovery efforts.

"The sudden surge in capital flows show how currency traders
and international hedge funds can drastically create real havoc"
to countries' currencies, he said at a Muslim Rulers' conference.
The system "is lop-sided and bent on favoring the rich economies
and needs to be re-adjusted."

Countries such as Indonesia and Thailand are struggling with
recessions as a plunge in their currencies sparked higher
interest rates and forced companies to the brink of bankruptcy.
Malaysia, too, is caught in Asia's economic downturn and is set
to slide to its first recession in 13 years.

This is the second time that Anwar -- who today described
Malaysia's economic troubles as the "worst in its history" -- has
drawn attention to problems in the international financial
system. He made his first remarks in New York in April at a
conference on the Asian economic crisis.

While Asia's economies have been called upon to raise interest
rates, open up their economies and provide more disclosure, the
"same treatment" should be leveled on "hedge funds and currency
trading," Anwar said. "You want disclosure (from us), you
disclose," such as "where the funds are from."

Still, he doesn't expect the international financial system to
change anytime soon. If "the rich benefits, don't expect the
ground rules to change, to them it's not a moral issue, it's the
dollar issue."

Anwar also echoed views of Prime Minister Mahathir Mohamad, a
critic of the International Monetary Fund, that IMF conditions
for giving loans to countries such as Indonesia are too tough and
did more harm than good.

International financial institutions shouldn't make the
prescriptions "into a new theology" that must be "implemented at
all costs without understanding the complexities and
peculiarities of each country," said Anwar.

While he acknowledged that there were problems in Indonesia,
"fundamentals alone could not have resulted in such destruction"
on Indonesia, he said. "You don't condemn the whole society to
abject poverty."

The World Bank said in July that Indonesia's economy is
expected to shrink as much as 15 percent this year, inflation
will skyrocket to 80 percent and the number of Indonesians living
in poverty could double.

Indonesia's turmoil culminated in riots which broke out in May
and forced Soeharto to resign as president.

Separately, Anwar said more measures to boost the economy will
be "announced later." He didn't elaborate. His statement comes
after Mahathir said during the weekend that Malaysia may
implement measures that "appear drastic" in a bid to revive the
country's economy.