Regional fund proposed to support IMF in Asia
Regional fund proposed to support IMF in Asia
CHIANG MAI, Thailand (Dow Jones): Thailand Friday tried to build support for a regional fund to work alongside the International Monetary Fund to combat future financial crises in Asia.
Speaking to reporters on the sidelines of the Asian Development Bank's annual meeting, Thailand's Deputy Finance Minister Pisit Leeahtam said he believes such a facility will get the backing of other countries in the region if it has the clear support of Japan.
"If Japan really wants to be big brother, I think the others would like to follow as well," Pisit said.
However, Pisit and other senior officials from across the region made clear that such a facility mustn't replace the Washington-based IMF in Asia.
Even so, Pisit's support for a regional fund appears to dust off moves to create an Asian Monetary Fund - albeit now one with limited functions - which were abandoned shortly after the outbreak of Asia's 1997 currency crisis due to opposition from the U.S. and other western governments.
Over the weekend, and on the sidelines of the ADB gathering, finance and monetary officials from the 10-member Association of Southeast Asian Nations are expected to discuss measures to deepen monetary cooperation. Specifically they will discuss establishing a currency-swap facility to fend off speculative currency attacks.
ASEAN wants the economic powerhouses of Japan, China, South Korea - all non-ASEAN members - to participate in the plan and is due to hold talks with this group during the ADB gathering.
Philippine National Treasurer Leonor Briones said she privately supports such a facility. "As we have learned from experience during the crisis, Asia has to take care of itself," she told Dow Jones Newswires.
On paper, at least, the plan would enable participating central banks to draw on each others' foreign exchange reserves to repel speculative currency attacks.
Japan's former Vice Minister of Finance for International Affairs Eisuke Sakakibara told delegates at the ADB's meeting that if the function of the AMF is "very narrowly defined" to relieve liquidity crises, it could complement the existing function of the IMF.
To be sure, some officials see the currency-swap plan as the first step of a process leading to the creation of an AMF to work alongside the IMF in Asia.
"I think this is a sort of lead-in to the final solution of an AMF," said Thailand's Deputy Prime Minister and Commerce Minister Supachai Panitchpakdi.
However, analysts said that the political implications of creating such a fund mean that it will be a long and complicated process before it gets of the ground.
"Countries shouldn't rely on it at the moment," said one delegate at the ADB gathering.
While Japan's Finance Minister Kiichi Miyazawa has reportedly said the multilateral-swap system could be a "significant defense" against currency attacks, it is by no means certain that he will propose setting it up during his visit over the weekend to the ADB meeting.
Indeed, a senior Tokyo monetary official said while Japan would be willing to consider ASEAN's proposal for a multilateral currency pact, Tokyo itself has nothing concrete in mind at present.
The official added that such a facility would be highly complex to set up and require a web of bilateral currency agreements between the participating countries.