SE Asian finance chiefs to explore common strategy

SE Asian finance chiefs to explore common strategy

BANGKOK (AFP): Southeast Asian finance ministers will attempt
here to forge a united front ahead of the global monetary talks
in Hong Kong, officials said, as the region reels from an
unprecedented financial crisis.

Ministers from the region are to meet Thursday on the
sidelines of an Asia-Europe conclave hosted by Bangkok, before
flying to Hong Kong at the weekend for the International Monetary
Fund (IMF)-World Bank annual talks.

"They are already in agreement that they should have a kind of
a common position on monetary and finance matters," an Indonesian
diplomat said, citing recent contacts between Southeast Asian
authorities.

The diplomat, who requested anonymity, said the Bangkok
meeting came as a timely opportunity for regional policy-makers
to firm up a joint strategy going into the IMF-World Bank talks.

"I think they will focus on ways to bring the turbulent
currency markets back to stability and of course what more the
IMF and the World Bank could do to solve this situation," he
said.

The Asia-Europe meeting will be attended by seven members of
the Association of Southeast Asian Nations (ASEAN) -- Brunei,
Indonesia, Malaysia, the Philippines, Singapore, Thailand and
Vietnam.

Also present will be economic chiefs from 15 European
countries and the finance ministers of Japan, China and South
Korea for the inaugural meeting.

Analysts said a common Southeast Asian approach could include
a call for steps to rein in offshore speculators blamed for the
regional financial crisis sparked by the Thai baht's float on
July 2.

"The kind of domino effect which has happened after the forced
devaluation of the baht should in theory be a strong common
ground," said Gerard Kruithof, economist at Deutsche Morgan
Grenfell in Bangkok.

He noted that Malaysia has been especially vocal in attacking
hedge funds and was playing "such a big role in steering this
common approach."

But Kruithof said: "If they want to press the IMF to prevent
the hedge funds from doing their business, they are on the wrong
path."

"If you want to commit yourself to open financial markets,
that is the game you have to play," he said. "You have to admit
that speculators are there (as a part of the system)."

Analysts said regional authorities could also seek press the
global monetary agencies to institute a common pool of funds as a
source of liquidity in times of financial crisis.

Southeast Asian currency and stock market have gone through
non-stop turbulence since Thailand floated the baht, with its
economy in deep crisis amid bad debt fears surrounding its
beleaguered finance sector.

The Philippine peso, the Indonesian rupiah and the Malaysian
ringgit have all hit all-time lows under speculative attacks
while even the normally robust Singapore dollar has not been
spared from the regional contagion.

Central banks have abandoned expensive currency defense after
suffering a hefty depletion of their foreign exchange reserves.
Stock prices, meanwhile, have plunged sharply wiping billions of
dollars off regional bourses with foreign funds fleeing the
region amid a crisis of confidence in Southeast Asian economies.

Some officials have criticized the IMF and the World Bank for
failing to prevent the crisis from snowballing.

But economists say that the crisis only reflects weak economic
fundamentals such as heavy current account deficits which were
masked by years of heady growth.

"They should look in the mirror and they would know whom to
blame," an economist with a European investment bank here said.
"If you want to become a financial power, then you have to take
into account that capital will flow in and out and you have to
take measures to (weather) the impact of that on your economy,"
he said. "They never did that."

World Bank president James Wolfensohn called in Tokyo Tuesday
for the development of financial markets to accommodate
investment in Asian countries to avert similar crises.

Wolfensohn said the development of capital markets was also
important for infrastructure investment and avoiding heavy
dependence on foreign capital inflows.

With capital markets functioning effectively, savings "can be
directed to infrastructure investment through various investment
instruments," he said.