Strict checks advised for Asian rescue fund
Strict checks advised for Asian rescue fund
TOKYO (Reuters): Japan's US$30 billion plan aimed at restoring
stability in crisis-hit Asia will be effective if accompanied by
a strict surveillance mechanism, analysts and traders said on
Monday.
Japanese Finance Minister Kiichi Miyazawa announced the
"Miyazawa Plan" at Saturday's meeting in Washington of the
finance ministers of South Korea, Malaysia, the Philippines,
Singapore, Thailand and Indonesia.
Under the $30 billion plan, $15 billion will be set aside for
medium- to long-term financial needs to promote economic recovery
in Asia, with the rest for potential short-term capital
requirements as the countries implement economic reforms.
The Miyazawa Plan was welcomed by the United States and Asian
nations, but analysts suggested it should be implemented
carefully.
"Chances are that the plan may develop into a new financial
institution in the region," said Fumiyuki Sasaki, economist at
Nomura Research Institute (NRI).
"But its success largely depends on the conditions attached to
each piece of financing," he said.
Daisuke Hiratsuka, senior research fellow at the Institute of
Developing Economies, said: "The package could be very effective
in a situation where the nations are struggling to recover, even
by export-led growth."
Takashi Nobehara, general manager of the Centre for Asian
Research at the Japan Research Institute, said: "It may be
problematic if most money in the plan is used to clean up bad
loans, as it is not clear how much in bad loans actually exists
in the would-be recipient countries. A $30 billion fund might not
be enough.
"Debt guarantees can be risky as there is always a possibility
of default, particularly in countries like Indonesia. Defaults
will have a substantial impact on the fiscal positions of
creditor countries," Nobehara said.
He said that because of the default possibility, there needed
to be a consensus on rules governing the fund, and there needed
to be the ability to check the situation in each country before
any funds were provided.
"The impression we got was that Japan hastily drew up this
package without first building this much-needed consensus. That
is a cause for concern," he added.
But the analysts said the formation of such an aid package
could clearly have an impact and help pave the way to
stabilization of the economic situation in the region.