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.