Stable rupiah crucial for China: ADB chief

Stable rupiah crucial for China: ADB chief

HELSINKI (Reuters): Asian Development Bank (ADB) president
Mitsuo Sato said yesterday that stabilizing the Indonesian rupiah
and other Asian currencies was key to relieve devaluation
pressures in China.

"The key factor is whether we can stabilize the Indonesian
rupiah as soon as possible," Sato told a news conference in
Finland.

Sato said China was suffering from the depreciation of other
Asian currencies that was weakening competitiveness of Chinese
goods and putting pressure on the Chinese currency.

"It is important for us to stabilize the other currencies
-- the Thai baht, the Indonesian rupiah and the Korean won," Sato
said.

"If the Thai baht rises, it will help relieve pressures on
China," he said. "The key element is how the Indonesian currency
develops."

He did not elaborate on what measures would be needed to
restore stability.

Sato said some Asian economies were now experiencing a
"reverse contagion" from Indonesia, after having suffered
currency turmoil and contagion that started in Thailand last
year.

Sato said he appreciated the Chinese government's resolve not
to devalue the yuan.

"Chinese leaders have repeatedly said they would never
devalue. That is very welcome, that is a very, very good signal,"
he said.

Sato said that if China did devalue, it could spark a
disastrous round of competitive devaluations and a trade war.

"I appreciate the attitude and effort to maintain the value of
their currency," he said.

He also said he expected Hong Kong to be able to preserve its
currency board system, which pegs its currency to the U.S.
dollar.

Indonesia remained the weak spot in Asia, with any return to
recovery lagging far behind the progress seen in Thailand, South
Korea and Malaysia, Sato said.

But he praised the commitment of the new Indonesian
administration of President B.J. Habibie to proceed with
political and economic reform.

Sato said he particularly appreciated Habibie's decision to
vest real power in his Coordinating Minister for Economy, Finance
and Industry Ginandjar Kartasasmita.

Sato said that Thailand and Korea seemed to have already put
the worst phase of economic turmoil behind them and that the
Philippines and Malaysia, which had suffered much less currency
turmoil, were also on the way to recovery.

Overall, Sato said he saw the recovery in Southeast Asia
taking two to three years, but he saw chances of GDP in Thailand,
Indonesia and Korea returning to growth in 1999.

Sato's remarks came on a three-day visit to Finland, where he
signed an agreement on a new fund for Finnish economic aid to
environmental projects in Central Asia.