RI's request for IMF aid to spur Asia fund

RI's request for IMF aid to spur Asia fund

TOKYO (Reuter): An Indonesian request for aid to cope with a
currency crash will spur momentum for the creation of an Asian
fund to help troubled economies in the region, but opposition
from key players in the debate won't fade quickly.

"Indonesia's request will bolster those who say we need an
additional fund, but I don't think it will change anyone's mind
if they are against such a facility, especially if this can be
handled within the current structure," one diplomat here said.

Indonesia, seeking to repair shattered confidence in its
economy, said on Wednesday it would seek help from the
International Monetary Fund (IMF) and other agencies to help keep
foreign exchange reserves at safe levels.

Officials did not say how much aid would be sought, or in what
form. Analysts said any package would be far less than the $17.2
billion package for Thailand and a monetary source in Washington
said Jakarta might not even need to use IMF cash once it agreed
on an IMF loan program.

Southeast Asian nations, supported by Japan, have been urging
the creation of a special fund to help countries in trouble.
"What happened in Indonesia has underlined the need to create a
regional facility to take care of the financial problems in this
region," said Som Jatusititak, an adviser to Thai Finance
Minister Thanong Bidaya.

The IMF and United States are wary of the concept and Germany
is strongly opposed, fearing a regional facility would disperse
funds without demanding the strict -- some Asians say too strict
-- policy adjustments required by the IMF.

Japan, meanwhile, wants to assume a higher profile in regional
affairs while some of its neighbors hope Tokyo, whose funds would
be vital for an regional facility, will lead the way in
persuading reluctant players the idea's time has come.

"How fast the idea can be put into reality would depend on how
fast Japan can dispel the reservations that the IMF and G-7
nations might have about the proposal," Thailand's Som said.

Leery of angering Washington, Tokyo has denied taking the lead
and emphasized that an Asian fund would complement, not conflict
with, the IMF. "Any facility in the region would never undermine
the function of the IMF," a senior Japanese Finance Ministry
official told reporters last week.

Others in the region also appear anxious to reassure
detractors that a new fund would have policy strings attached and
not insure authorities against fallout from their mistakes.

Malaysian Finance Minister Anwar Ibrahim said yesterday that a
proposed Asian fund would need $100 billion and that it would
only be used to help economies that had run into trouble by
accident. "There will be some regulation to ensure that
recipients have genuine economic problems which they need help
for. Those who have created their own economic fiasco cannot be
beneficiaries of this fund," Anwar told reporters.

Japan will contribute $50 billion toward the establishment of
an Asian fund to help troubled economies in the region, the daily
Sankei Shimbun, quoting international financial sources, reported
yesterday.

The conservative Japanese daily said that Japan will foot the
bill for half of the planned $100 billion regional fund, which
will be used to supplement the activities by the International
Monetary Fund (IMF).

A senior IMF official in Tokyo said the debate would go on,
but that Indonesia's request was a "completely separate issue".
"My understanding is the debate will continue and there is
agreement among key players concerned to hold a meeting as soon
as possible," Kunio Saito, director of the IMF's regional office
for Asia and the Pacific, told Reuters. "Officials are exploring
mutually agreeable timing."

"The amount involved in the context of Indonesia is relatively
small, so I don't think anyone can argue on that basis...for a
new fund," Saito said. "At the same time, unfortunately, the
situation (in the region) remains fragile...so some may say some
kind of arrangement is needed. But please note, the IMF is there,
with resources."

Discussions could well heat up further when leaders of Asia-
Pacific nations gather in Vancouver late next month.

"The purpose of the Asia fund is to round up the funding
requirements and the contributions of Asian countries in case of
a crisis, and it is a good idea," Thailand's Thanong said. "But
somehow it has been delayed. Why not put it in the APEC (Asia-
Pacific Economic Cooperation) forum? Why just keep it within
Asia? The IMF will not have enough to deal with any crises by
itself, and (the Asian Fund) is an effort to prepare something
more solid," Thanong, in Tokyo with Prime Minister Chavalit
Yongchaiyudh, told reporters yesterday.