Jockeying over initiative to color Asia fund meet

Jockeying over initiative to color Asia fund meet

TOKYO (Reuters): Asian officials and representatives from
United States and the IMF meet in Manila this week to discuss an
Asian economic emergency fund, but there may be more haggling
over who leads the initiative than how the facility would be set
up.

Asian nations, keen to craft a framework to fend off a repeat
of the recent financial upheaval, might see their idea of a
regional fund leave their hands after the U.S. and Europe made
clear they did not want to be left in the cold.

A Philippine finance ministry official said last week that
European countries, including Italy, France, Germany and Britain
have indicated their wish to attend the meeting.

U.S. Deputy Treasury Secretary Lawrence Summers will meet
European officials in Frankfurt on his way to Manila, as well as
stopping in Japan to meet Finance Minister Hiroshi Mitsuzuka.

Tokyo had mooted the idea of a fund facility separate from the
International Monetary Fund at the Group of Seven (G7) meeting in
Hong Kong in September, and had hoped to lead the initiative.

Japanese officials have said IMF financial aid, especially the
quota it sets to each country, is not enough for Asia.

"The growth and the capital flow of Asia has just been too
fast for the IMF," said a Japanese finance ministry official.

He said IMF-led rescue packages for Thailand and Indonesia
have proven that additional support was needed. In both cases, a
group of countries made financial contributions or commitments in
addition to those made by the IMF.

IMF-backed packages to rescue and reform the Thai and
Indonesian economies, plus assistance for the Philippines, have
topped US$40 billion.

"The resources of the IMF are not infinite," said another
Japanese official.

But the IMF has been lukewarm to the idea of a separate
facility, fearing it would undermine its authority.

"Whatever financing mechanism is in place, it shouldn't in any
way compete, alter...or reduce the strength of IMF policies and
conditionality," IMF Managing Director Michel Camdessus said in
Manila on Saturday.

The IMF chief has repeatedly said what is needed was a
regional surveillance forum where "peer pressure" would play a
role in monitoring each others' economies.

The U.S., hoping to retain its regional influence but cool to
the idea of another bail-out fund, has insisted that the IMF
should be at the center of any aid package. "The IMF must remain
at the heart of any international response," Summers said last
week.

International financial sources, said many European nations
also prefer the use of exceptional clauses within the IMF, rather
than to set up a separate facility.

Japan might have shifted course in the face of Western
resistance to a permanent Asian fund.

Officials now say the package for Indonesia, in which Asian
countries and the U.S. made financial commitments as a "second
line of defense," was one idea for such a facility.

Analysts said commitments of credit lines would be consistent
with U.S. thinking and may be easier for the U.S. to agree to.

"If lines of credit can be arranged, it'll be easier to
convince the U.S. Congress," Masahiro Kawai, economics professor
at the Institute of Social Science at Tokyo University told
Reuters Financial Television (RFTV) last week. Congress has
repeatedly shown reluctance to U.S. overseas aid.

There might also be wrangling in Manila on whether to expand
the fund facility to cover Asian Pacific Economic Cooperation
(APEC) forum nations, or limit it to Asian countries.

"It must be broader than just Asia...Bring in the U.S. and
Canada," said Fred Bergsten, director of the Institute of
International Economics in the U.S. "Therefore I think the APEC
format is the easiest, most natural way to do it."

But Japanese officials said they were skeptical about putting
the facility under the umbrella of APEC.

"We would have to address the issues of Latin American
countries. That's not 'Asia'," said one official.

APEC, groups Australia, Brunei, Canada, Chile, China, Hong
Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New
Zealand, Papua New Guinea, the Philippines, Singapore, Taiwan,
Thailand and the U.S.

But Tokyo seemed to lack strong backing from its Asian
neighbors.

Philippine President Fidel Ramos have said he would seek
APEC's endorsement of the facility at a summit meeting which
starts in Vancouver on November 24.

Analysts said if APEC became the forum for the Asia fund, it
would greatly undermine the influence of Japan, the region's
largest economy, or of any other nation.

"The APEC umbrella could help prevent a dominance of one
country," Mari E. Pangestu, executive director at the Center for
Strategic and International Studies in Jakarta told RFTV.