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.