Japan to help Malaysia, Thailand escape crisis

Japan to help Malaysia, Thailand escape crisis

TOKYO (Agencies): Malaysia and Thailand, each rushing in opposite directions to escape Asia's financial storm, both secured promises Tuesday for Japanese support.

Malaysian Prime Minister Mahathir Mohamad has spent five days in Japan decrying free markets and the International Monetary Fund, while seeking some of the US$30 billion Tokyo has promised Asia.

Meanwhile, Thai Finance Minister Tarrin Nimmanahaeminda, who also won a promise for some of the Japanese funds, has won praise from the IMF for pursuing the same reforms Mahathir rejects.

Japanese Finance Minister Kiichi Miyazawa expressed his "firm commitment" to support Thailand, noting its progress in implementing reform, said a joint statement issued by the two ministers.

An IMF report last month praised Thailand, recipient of a $17.2 billion IMF-led bailout, for its reforms but said it required "steadfast implementation" of the program to consolidate gains.

Mahathir, meanwhile, could hardly be taking a more divergent stance for Malaysia's recovery.

Rather than opening markets and embracing tough reform, the Malaysian leader says he has turned his back on the free market to clamp down on speculators he blames for ruining Asia's economies.

Mahathir defended his clampdown on currency trading as a last- ditch defense against greedy speculators.

"When Malaysia decided to cut itself off from the new religious creed as represented by the free market, we knew that we would be regarded as heretics and we will have to face the possibility of being burnt at the stake," Mahathir told a seminar.

"But we really have no choice," he said.

"Being a heretic is better than being colonized by people who believe in greed as the sole motivation for their actions," the premier said. "Such people have no compassion."

Malaysia introduced on October 1 sweeping foreign exchange controls, including a fixed exchange rate and an end to external convertibility of the Malaysian currency.

Japan's vice finance minister Eisuke Sakakibara told the same seminar that the world was facing an economic downturn and Malaysia's currency controls no longer seemed a bad idea.

Sakakibara said the opposition of economists to currency controls was beginning to shift.

"The trend of world opinion is changing," he said.

He said Malaysia now needed to make it clear to the market that the fixed exchange rate would continue.

Both Malaysia and Thailand claim their own remedies are beginning to prove successful.

While Thailand and Malaysia follow different paths to recovery, however, both have been lured by the promise of Japanese money.

Japan's finance minister unveiled the $30 billion package at a meeting of the Group of Seven industrialized nations in Washington on October 3.

Sakakibara said it was necessary to raise the amount to lessen the impact of a credit crunch being suffered by Asia nations.

"Lessening the impact of the credit crunch on Asia is of critical importance," Sakakibara said. He said that while Japan has offered $30 billion to Asia so far, "it is necessary to increase that amount."

As the first part of Japan's package, the Export-Import Bank of Japan earlier this month signed a memorandum of understanding with South Korea's Ministry of Finance and Economy on $3 billion in loans to South Korea.

Of the offered $30 billion in financial aid, $15 billion will be targeted at medium- to long-term financial needs to promote Asian nation's economic recovery, with the rest set aside for potential short-term capital requirements.

The aid package includes extension of loans and purchases of bonds issued by Asian nations, as well as providing interest subsidies to back up their fund raising.