Thailand, South Korea, Japan plan swap deals

Thailand, South Korea, Japan plan swap deals

TOKYO (Reuters): A plan to create an Asia-wide currency safety net will take a big step forward when Japan signs bilateral deals with Thailand and South Korea next month, a year after the ambitious scheme was launched.

The Chiang Mai Initiative, named after the Thai city where it was conceived last May, aims to avert a repeat of Asia's 1997 balance-of-payments crisis by creating a network of central bank currency swaps among the 10-strong Association of Southeast Asian Nations plus Japan, China, and South Korea (ASEAN+3).

Japanese Finance Ministry officials said this week that Tokyo should be ready to announce details of bilateral swap deals with Thailand and South Korea when ASEAN+3 finance ministers meet on the sidelines of the Asian Development Bank's annual meeting in Honolulu in early May.

Japan, the driving force behind the plan, is also negotiating actively with China and the Philippines, but the officials said final wrinkles were unlikely to be ironed out in time for the Honolulu meeting.

The officials said Japan was also resuming talks with Malaysia, which has objected to the surveillance role envisaged in the scheme for the International Monetary Fund (IMF).

"I think we can wrap up deals with Thailand and South Korea by the meeting, while we are likely to announce at the meeting that negotiations are in progress with China and the Philippines," a senior finance ministry official close to the negotiations told Reuters.

Keen to drive the initiative ahead, Japan's top financial diplomat, Haruhiko Kuroda, has recently visited various Asian nations including Thailand and the Philippines.

He met Thai Finance Minister Somkid Jatusripitak in early April and discussed the swap deal, which a Thai finance ministry official said was about 95 percent complete.

The Thai official said the size of the agreement would be quite close to an existing $2.5 billion deal that Japan has with Malaysia outside the framework of the Chiang Mai initiative.

Unlike Thailand, Malaysia has not been happy with plans to tie activation of the swap scheme to IMF-monitored reforms.

But Japanese officials said the weight of opinion might be gradually tilting within ASEAN against Malaysia's hard line against the IMF, which Kuala Lumpur blames for prescribing poor policy advice to Asia at the time of the 1997 crisis.

The officials said Japan would not water down its insistence on IMF conditionality even if Malaysia sticks to the letter of an agreement among ASEAN finance ministers earlier this month that the swap deals should take account of each country's specific circumstances.

Tokyo plans to send senior officials to Malaysia later this week to try to bridge the differences.

With Korea, Japan's new swap line is expected to add more than $1 billion to an existing $5 billion swap line set up following the 1997 crisis as part of the Miyazawa Initiative.

Named after Finance Minister Kiichi Miyazawa, the initiative provided a total of $30 billion in loans and other financial support to Japan's neighbors after the financial meltdown.

Singapore has shown little interest in pursuing a bilateral deal with Japan as it thinks a $1 billion swap plan among ASEAN nations will be sufficient, Japanese officials said.

Indonesia, beset by political and economic turmoil, has enough on its plate trying to wrap up a deal with the IMF for badly needed fresh loans before considering the Chiang Mai Initiative, they added.