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.