Official says Australia's financial links to Asia weak

Official says Australia's financial links to Asia weak

CANBERRA (Dow Jones): Australia's financial policy links with
Asia have reached a low point and must be rebuilt, Reserve Bank
of Australia Deputy Governor Stephen Grenville said Monday.

In particular, Australia should make clear its willingness to
be part of discussions between ASEAN nations, Japan, China and
South Korea on currency arrangements - discussions that so far it
hasn't been invited to attend, he said.

"The important thing Australia needs to do, while we are
waiting to see whether we are wanted in that club, is to go on
demonstrating goodwill and competence," Grenvilled said.

"Then...sooner or later, at some point, these countries would
see it is in their own advantage to have us there."

His comments are the first of their kind from an Australian
policy-maker, who have in the past trumpeted Australia's ability
to use its economic strength during the regional economic crisis
as a basis for increased influence.

Since the Asian financial crisis began in mid-1997, Australia
has boosted international policy links through its participation
in the Group of 20 and the Financial Stability Forum.

But Grenville said the nation's financial links within the
region have dissipated.

"Some real progress was made coming out of the Asian crisis in
terms of improving the multilateral arrangements, with the G20,"
he said during a conference on financial markets and policies in
East Asia.

"We have made progress with the Financial Stability Forum and
the Bank for International Settlements has now admitted a number
of Asian countries to its membership," he said.

"But for Australia, the regional crisis represented, I think a
setback for the mundane task of building regional institutions,
(and) regional links."

"If we look at it from a narrow Australian point of view...I
would have to say that it is in some ways a low point in our
relationship."

Grenville said Australia has formed relationships through
regional groups but these links have deteriorated as many of the
people involved have moved on.

He singled out Indonesian central bank governor Sjahril
Sabirin who is in jail after being arrested in June on accusation
of facilitating a transfer of funds in a banking and political
scandal.

"We got to know each other through forums such as Emeap and
the Manila Framework but I would have to say that those people
who we got to know to a very large extent dispersed as a result
of the Asian crisis," Grenville said.

Emeap is a grouping of 11 central bank governors known as the
Executives' Meeting of East Asia and Pacific Central Banks. The
Manila Framework group was formed in 1997 with an aim of giving
Asian nations more say in the running of the IMF and in shaping
global debate on financial issues.

Still, Grenville said Australia didn't do things badly during
the crisis.

The country was "quick to join" financial support packages for
three Asian countries in 1997.

"And I think we had a better assessment than anyone...on what
was happening as the Asian crisis unfolded," he said.

But attempts by Foreign Minister Alexander Downer and Reserve
Bank Governor Ian Macfarlane to outline that assessment during a
trip to the U.S. in 1998 failed, he said.

"I would have to say that it wasn't loud enough to be heard,"
he said.

Also, "Australia's own performance during the Asian crisis has
been sufficiently good to maybe act as a positive example,"
Grenville said.

"But I think that there is a real danger, and this may have
happened, that this good performance and the times we have
mentioned it might be mistaken by our Asian neighbors as being
boastful...at a time of their own misfortune."

"Souring of the relationship between Australian and Indonesia
over Timor has blocked off a very important (entry) to the ASEAN
arrangements," he added.

Joined by Japan, China and South Korea, the 10 members of the
Association of Southeast Asia Nations said in May they will work
toward a regional financing mechanism that could head off
currency crises.

As a first step, they will try to write bilateral arrangements
to swap foreign exchange reserves should their currencies face
sudden turbulence.