Japanese envoy backs regional fund idea

Japanese envoy backs regional fund idea

BANGKOK (AFP): Japan's ambassador here has said Tokyo would back a Southeast Asian initiative to set up a regional monetary fund to bolster troubled economies, reports said yesterday.

The comments from Hiroshi Ota emerged just a day before Thai Prime Minister Chavalit Yongchaiyudh was due to leave on a crucial three-day visit to Japan aimed at drumming up support for Bangkok's battered economy.

"Japan's basic position is that we would like to respond (to) an initiative by ASEAN (Association of Southeast Asian Nations) countries," Ota said in an interview with the Nation daily.

But he stressed that although Tokyo would willingly support such a fund, it would not lead the drive to set it up.

"Japan does not have the intention of going ahead and then asking ASEAN countries to follow us," he said.

But the ambassador stressed that such a fund, while useful, was bound by limits as a regional effort alone in a financial crisis of the magnitude of Southeast Asia's "will not be sufficient."

He said basic cooperation was need from the International Monetary Fund (IMF) and "at least an understanding" from major world players such as the United States and Europe.

Ota said an Asian fund would be useful in dealing with financial turmoil battering Southeast Asia as it would provide a "degree of confidence" that if one currency got into trouble, neighbors would come to the rescue.

The region was hit by fallout from Thailand's economic and currency crises which reached a head with the July 2 effective devaluation of the baht which sent shockwaves across Southeast Asia.

The envoy also said the IMF's US$17.2 billion rescue of the Thai economy in August -- with the participation of the several Asian nations and the Asian Development Bank -- could set an example for what could evolve into a regional fund.

The baht was devalued following waves of speculative attacks, sending its value plummeting by around 30 percent. The Malaysian ringgit, Indonesian rupiah and the Philippine peso were all hit by the spreading crisis.

The idea for a regional monetary fund along the lines of the IMF was first raised at a meeting of Asian and European finance ministers here last month and again at the IMF and World Bank annual meetings in Hong Kong.

But Ota said such an Asian fund would not clash with the role of IMF which imposed strict conditions of countries rescued by standby loans.

He said Thailand's crisis could have been eased if an Asian fund had already come into existence.

He said a regional monetary fund would be the first of its sort in the world, describing its possible birth as a "historic development."

Chaowalit leaves for Tokyo on Wednesday for a visit aimed at reassuring Japanese investors here and possibly at seeking extra funds to bolster the IMF package.