Hopes fade for 'quick fix' to monetary woes

Mon, 01 Dec 1997, 00:00 WIB | 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.