Hopes fade for 'quick fix' to monetary woes

Mon, 01 Dec 1997 | Source: REUTERS

KUALA LUMPUR (Reuters): Hopes for the quick creation of an emergency rescue fund for ailing Southeast Asian economies faded yesterday as finance officials gathered in Malaysia to debate the region's financial crisis.

Ministers attending a meeting in Kuala Lumpur said the depth of the financial crisis and nagging differences over the shape of the fund would likely prevent the aid from being available until next year.

Malaysian Finance Minister Anwar Ibrahim said Asian finance ministers would discuss the proposed standby facility at two days of meetings starting today in Kuala Lumpur, but a final decision would probably be postponed.

He said there was enthusiasm for the proposed fund, but countries including South Korea needed to address daunting economic problems before being able to take a decision.

"There are difficulties faced by many member countries... They need to get their house in order," Anwar said, noting South Korea was still discussing conditions attached to a proposed bailout program under the International Monetary Fund (IMF) which was expected to exceed US$20 billion.

Asked when the facility might be approved, Anwar said: "If it can't be resolved tomorrow, we will have to defer it to the next meeting, which will probably be held in February."

South Korean Finance Minister Lim Chang-yuel had to cancel his appearance at the meetings in Kuala Lumpur at the last minute because of disagreements between negotiators over the final details of the IMF program, Malaysian officials said.

South Korea, Thailand and Indonesia have all turned to the IMF for ad hoc emergency help to stave off economic collapse.

Both Japanese Finance Minister Hiroshi Mitsuzuka and U.S. Deputy Treasury Secretary Lawrence Summers canceled their trips to the meeting in what delegates said was a reflection of the diminishing chances that a decision on a fund would be taken.

The Group of 15 developing nations also decided not to attend.

Among those due to attend the meetings was IMF managing director Michel Camdessus. The World Bank would be represented by senior vice president Joseph Stiglitz.

The proposed Asian bailout fund has been resisted by Western nations led by the United States, which have insisted the IMF play the central role in the rescue operations and any funds be used in line with stringent IMF conditions.

The U.S. fears a separate Asian bailout fund could undermine the IMF and weaken the Asian countries' willingness to adopt the tough economic policies advocated by the Fund.

But Malaysian Prime Minister Mahathir Mohamad has been pressing for a separate fund that would symbolize the region's independence and commitment to resolving its own problems.

Delegates from several ASEAN member states expressed misgivings over Mahathir's proposal, and said they would prefer to continue to tackle the region's problems on a case-by-case basis instead of creating a permanent fund outside the IMF.

ASEAN groups Brunei, Myanmar, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

"What we are saying is to come to each other's aid when required," a Philippine official said.

A Singapore official said: "It won't be an up-front amount."

Japanese Vice Finance Minister for International Affairs Eisuke Sakakibara told Reuters as he arrived he was not aware that an independent ASEAN fund would be discussed, and Tokyo favored accords reached recently in Manila.

Senior officials from Asia and the United States stopped short of endorsing the Asian rescue fund in Manila but called for a new "framework for regional cooperation" which recognized the central role of the IMF.