Rubin softens his stand on regional fund
HONG KONG Robert Rubin, the US treasury secretary, yesterday softened his stand on a proposal spearheaded by the Japanese and Asean Finance Ministers to set up a regional fund to protect countries in this part of the world from future financial turmoil.
This followed a bilateral meeting between Rubin and Asean Finance Ministers to discuss the need for a regional crisis fund to deal with any future financial crises.
Thanong Bidaya, the Thai finance minister, indicated that after initial reservations about the regional facility and after listening to the plight of the Asean countries, Rubin appears to have softened his earlier tough stance and agreed to discuss the issue further.
On Sunday, ahead of the World Bank-IMF meeting, Hirishi Mitsuzuka, the Japanese finance minister, discussed the regional fund with his G-7 counterparts, but it was reported that Rubin was not enthusiastic about the idea. He believed that it would overlap with the International Monetary Fund's stabilisation fund programme.
However, Thanong has pointed out that the regional fund should be complementary to the IMF because it could rehabilitate the health of the region's financial sector.
The regional fund gained some momentum last week at a meeting of the Asia-Europe Finance Ministers in Bangkok, when Anwar Ibrahim, the Malaysian Finance Minister, indicated the fund should be established to protect countries in the region from future currency attacks.
The crisis in Thailand broke out on July 2 when the Bank of Thailand floated the baht, sending regional currencies and capital markets into a tailspin.
Anwar also stressed that Malaysia would not accept a global agreement on financial services liberalisation under the auspices of the World Trade Organisation unless rules or measures are put in place to curb currency speculators.
The Asean finance ministers told Rubin the emerging capital and foreign exchange markets in Asia are not as strong as the US thinks, as evidenced by the contagious effect of the Thai crisis.
Following the meeting with Rubin and his change of heart, Anwar said: ''I think it is a good start."
However, there has been no discussion as yet about the size of the fund, which Japan fully endorses because it has a huge investment stake in the Asean region. However there was an unconfirmed report that the fund could be as big as US$100 billion.
Japan has also called for support from Hong Kong over possible cooperation in the case of a currency crisis. China and South Korea will also be invited to participate. Questioned about why the US is reluctant to support the regional fund, Thanong said perhaps the US feels uneasy that the fund will be operated outside the framework of the Asia-Pacific Economic Cooperation agreement, of which it sees itself as a leader.
Speaking at the annual World Bank-IMF meeting yesterday, Michel Camdessus, the IMF's managing director, praised Thanong and Chaiyawat Wibulswasdi, the central bank's governor, for their courage in tackling the crisis by launching, in a few weeks, a comprehensive programme to tackle the large external deficits and troubled finance companies.
''Thanks to their efforts, the budget is moving back into surplus and a comprehensive restructuring of the financial sector is getting under way," he said.
BY THANONG KHANTHONG