IMF urges Asia to focus on surveillance

IMF urges Asia to focus on surveillance

SINGAPORE (AFP): IMF managing director Michel Camdessus urged Asian countries yesterday to focus on promoting a regional surveillance scheme to prevent another financial crisis rather than setting up a new bailout fund.

The managing director of the International Monetary Fund (IMF) also told a news conference that any regional scheme should not directly or indirectly weaken the IMF's hand in working out reform programs for troubled economies.

This point is accepted by all Asian countries and whatever formula will be adopted will respect this principle, "without which the scheme will not fly," he said ahead of high-level Asian financial meetings to discuss the crisis.

Camdessus is scheduled to attend the Dec. 1-2 meeting of Asia- Pacific finance ministers in Kuala Lumpur. Deputy finance ministers will hold preliminary talks in Manila next week.

Among the proposals mentioned is a new Asian fund that would provide additional emergency support for countries undergoing financial turmoil, on top of IMF-led packages. US and IMF officials fear such a fund might hamper the IMF's capacity to impose discipline on crisis-ridden countries.

Commenting on proposals for the Asian fund, Camdessus said regional initiatives should focus on trying to prevent crises arising, rather than providing funding for affected countries.

"What has been obviously missing is not the financing," said Camdessus, who cited the speed with which billions of dollars was raised by donors to support Indonesia.

"What is distinctly missing here is the kind of regional surveillance to complement the already strengthened IMF surveillance by developing among the countries of the region a club spirit through which neighboring countries can exert some peer pressure to pursue certain policies," he said.

"If this kind of regional surveillance could take place in an Asian context, many potential crises could be avoided," he said, adding that while not all crises would be avoided, the risk would be significantly reduced.

Camdessus indicated that the IMF was open to suggestions.

"I trust the very fertile imaginations of technocrats in Asia to provide us with a variety of different schemes. We will see all of them. We will discuss their merits and we will decide," Camdessus said of the coming talks.

Camdessus said he would share with Asia-Pacific finance ministers the preliminary findings of an ongoing IMF study into the regional crisis.

The study is looking into "what effectively took place to see if everything was normal and if the magnitude of these pressures reveals something wrong in the institutional and prudential control setting."

Camdessus cited the value of peer pressure in making Asian countries aware of the effects of their policies on their neighbors, citing the example of the European Union and the Group of Seven industrial powers.

Meanwhile, prospects of the so-called Asian Fund to help countries in financial distress remain uncertain one week ahead of a meeting in Manila among Asia-Pacific deputy finance ministers.