What anxious Asian currency swaps could challenge IMF
What anxious Asian currency swaps could challenge IMF
HONOLULU, Hawaii (AFP): Japan's efforts to forge a network of currency swap arrangements with neighbors are being carefully monitored by Western countries anxious they do not become a regional rival to the International Monetary Fund (IMF).
Tokyo announced on Wednesday it was signing six billion dollars' worth of foreign exchange reserve bilateral swaps with South Korea, Malaysia and Thailand as part of a plan to prevent future Asian currency crises.
The West is closely monitoring progress of the effort, which evoked memories of an aborted Japanese initiative in 1998 to set up an Asian Monetary Fund (AMF).
This was intended as a lender of last resort that would enable crisis-hit Asian countries to tap urgent financing.
The idea of linking foreign exchange reserves to defend individual currencies from speculative attacks took off among the Association of Southeast Asian Nations (ASEAN), some of whose members were hard hit by the 1997 Asian economic crisis.
In the ASEAN swap arrangement members lend dollars against collateralized swaps of local currencies. The facility is now worth a billion dollars and all 10 ASEAN members are participants, their finance ministers said here.
Last year ASEAN decided at a meeting in Chiang Mai, Thailand to expand the initiative with a series of bilateral swaps with "dialogue partners" China, Japan and South Korea.
ASEAN links Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
The United States had vetoed Japan's earlier AMF initiative because it would pose a threat to the role of the IMF.
But this week U.S. Treasury Secretary Paul O'Neill said Washington would not stand in the way of the Chiang Mai agreement as long as the existing order was maintained and the deals "make sense to the participants".
Bruno Bezard, France's deputy assistant finance secretary, stressed during the Asian Development Bank (ADB) annual meeting here that the process must be "harmoniously incorporated" within the existing international financial framework.
"Given the international nature of capital movements, only the worldwide network provided by the IMF is in my view capable of offering a solution to the prevention and handling of financial crises," he said.
Japan's Deputy Finance Minister Seiichiro Murakami said it was "essential to strengthen monetary cooperation in the region to prevent a future currency crisis and to ensure stability in the international monetary and financial system."
The swap deals Tokyo made in Honolulu "confirms the progress we are making toward the building of a support network for monetary stability in the region," he said.
While the parties declined to provide the terms of the deals, Malaysian Finance Minister Daim Zainuddin said an initial 10 percent of its one billion-dollar-ringgit swap with Japan "can be disbursed without IMF conditionalities".
Japan and South Korea also announced that negotiations were ongoing for similar bilateral swaps involving China and the Philippines, among others.
ADB president Tadao Chino of Japan sought Friday to play down the idea of a fund that would rival the IMF,
"The idea of an AMF may not be a very urgent issue at this time," he said, noting that even with the global slowdown, "recovery is going on and Asian countries are much more resilient than before."