SE Asia welcomes U.S. stance on new fund

SE Asia welcomes U.S. stance on new fund

HONG KONG (AFP): Southeast Asian nations yesterday welcomed U.S. willingness to set aside earlier reservations and engage in a dialog on a proposed regional fund to deal with financial emergencies.

Economists hailed the initiative to set up a standby support facility to complement the International Monetary Fund as a means of dealing quickly financial unrest.

Thai Finance Minister Thanong Bidaya said the fund could eventually total as much as US$100 billion.

"What we are glad about is that the issue is not a closed one and that the United States is prepared to engage in a continuing dialog in order for us to arrive at a consensus," Philippine Finance Secretary Roberto de Ocampo said.

A meeting of regional finance chiefs with U.S. Treasury Secretary Robert Rubin and Federal Reserve Chairman Alan Greenspan resulted in an agreement to launch a dialog on the Japanese-backed Southeast Asian initiative.

Finance ministers and central bank governors of Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam took part in the talks on the sidelines of annual World Bank-International Monetary Fund meetings.

Singapore Finance Minister Richard Hu said the discussions were "very good" and his Indonesian counterpart Mar'ie Muhammad described them as "very constructive."

Rubin said at least nine countries, including Japan and China, would take part in a meeting "sooner than later" to discuss how to proceed after the regional currency crisis.

De Ocampo said Tuesday's session focused on the Southeast Asian initiative to have "some kind of a common facility or fund," a proposal on which the United States and its western partners have expressed reservations.

But de Ocampo told reporters the United States had "not really rejected it" and was "open to continuing the dialog in order to have an appropriate mode of assistance" for ailing regional economies.

The next meeting would be able to "clarify what the possible pooled assistance will be, its relation with the IMF, and ... its modalities and conditionalities."

He said it would also focus on the "longer-term problem of the phenomenon of capital flows, how this is to be addressed, particularly in relation to countries with thinner capital markets."

Southeast Asian countries have been swept by financial market turmoil since the July 2 flotation of the Thai baht, which has since lost a third of its value against the U.S. dollar under fierce speculative attacks.

The Malaysian ringgit, the Indonesian rupiah and the Philippine peso have all hit record lows while regional stock markets have dived.

The United States and some European countries have reacted coolly to the regional fund proposal amid suspicion that it was being promoted as a rival to the IMF.

"They were reacting to an idea which had not been really detailed yet," de Ocampo said, adding that the future dialog would take into account "the roles of the IMF and the roles that are to be undertaken by other countries."

He said Southeast Asian ministers made clear to Rubin and Greenspan that "we are not looking for the establishment of an Asian fund which rivals the IMF but in an Asian mode."

"The model I guess that came to our mind was the observation of the Mexican case where U.S. assistance was combined with IMF assistance in order to have a quick response to the problem," he said citing the Mexican peso crisis.

"That brought us to the conclusion that perhaps a similar self-help mode within this region could be arrived at. I think that will be the starting point of our discussions."

He said the proposed fund will not "circumvent conditionalities" that are attached to IMF assistance or "excuse any country from the hard decisions" required to put their economies back on track.

Analysts said the initiative would help regional economies combat financial market turmoil and augment the resources of the IMF.