Chiang Mai swap deals by May: ADB

Chiang Mai swap deals by May: ADB

BEIJING (Dow Jones): The first bilateral currency swap
agreements under the Chiang Mai initiative are expected to be
completed before an ASEAN plus Three meeting in May, an Asian
Development Bank official said Friday.

ADB regional economic monitoring unit manager Pradumna Rana
said the Chang Mai initiative could eventually form the basis for
an Asian Monetary Fund.

But Rana warned such an Asian-oriented fund would have to
complement and supplement the International Monetary Fund if it
is to gain the support of the U.S. and Fund officials.

The Japanese-led plan for a $2.5 billion Asian network of
currency swaps is designed to head off future financial crises
and provide a quick regional response to a currency collapse. The
plan first arose at an ASEAN Plus Three meeting in the Thai city
of Chiang Mai in May last year.

The initial stage of the Chiang Mai initiative, extending
currency cooperation between all 10 ASEAN members is already
finalized, Rana told a briefing for China-based diplomats.

ASEAN Plus Three groups the South East Asian nations of
Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar,
Philippines, Singapore, Thailand and Vietnam as well as their
eastern neighbors, China, South Korea and Japan.

Finance ministers from the group gather next week in Kuala
Lumpur with another session scheduled on the sidelines of the ADB
annual meeting in Honolulu in May.

Rana said delegates at a two-day Manila Framework Group
meeting in Beijing this week were told "progress is being made in
that regard."

"And we could have some announcements at the ASEAN Plus Three
meeting to be convened in May," he said. - - 30/03/01 11-49G

Asked whether this network could be the basis for an Asian
fund, Rana said, "The bottom line is whether the policymakers
want this sort of system or not."

"In some sense the network of bilateral swaps...depending on
the size of these arrangements, should be a sizable liquidity
pool," he said.

The creation of an Asian Monetary Fund was initially proposed
by Japan in the midst of the Asian financial crisis, but faced
strong opposition from the U.S. and other industrialized nations.
But Rana said that at the meeting of the Manila Framework Group,
opposition to the concept had moderated.

"The (Asian Fund) proposal (in 1997) wasn't liked but as I
mentioned it keeps coming up at various fora, people haven't
forgotten it altogether," he said. "Just as there is hierarchy in
cooperation...similarly in the monetary cooperation area, I
suppose, you have a hierarchy so the ASEAN surveillance process
and the Chiang Mai initiative could be the early stage of more
advanced cooperation in Asia."

The Manila Framework Group comprises Australia, Brunei,
Canada, China, Hong Kong, Japan, Indonesia, Malaysia, New
Zealand, the Philippines, Singapore, South Korea, Thailand and
the U.S.

Multilateral agencies including the World Bank, the Asian
Development Bank, the Bank for International Settlements and the
International Monetary Fund also attend.

The group was established in November 1997 amid criticism of
the IMF's handling of the currency crisis then gripping Asia. The
twice-yearly framework meetings give Asian Pacific nations some
influence in discussions about the need to strengthen the
international financial system to prevent future instability.