ADB targets Asian fund
May 5, 2000
Chiang Mai – The Asian Development Bank would like to administer the Asian Monetary Fund if it is created, but officials said there are fears and suspicions among some regional members over the predominance of Japan, which bankrolls the development agency.
“In ADB they see a big white flag with a red dot in the middle,” said an official. “Regional members are afraid that Japan would become too powerful. And the Japanese know it. Already, Japan has a big say in the region by providing more than US$80 billion in aid during the Asia crisis.”
Today, finance ministers of the 10member Association of Southeast Asian Nations and China, Korea and Japan will be meeting for the first time to discuss the possibility of creating a regional currency swap arrangement, part of the broader Asian Monetary Fund, to forestall the next financial crisis.
Finance Minister Tarrin Nimmanahaeminda will play host to this important event which will lay the foundations for the establishment of the Asian Monetary Fund.
Dr Pisit Leeahtam, deputy finance minister, said yesterday: “Thailand is in full support of the Asian Monetary Fund because it is a regional arrangement that should help us cope with the next financial crisis.”
Under the Asian Monetary Fund, there will be regional cooperation in research, training, financing agreement and surveillance. The regional swap arrangement is part of the four pillars of the Asian Monetary Fund, which is likely to function similar to that of International Monetary Fund.
Officials said the ADB is keen to assume the responsibility of administering the Asian Monetary Fund if the fund is finally instigated. By doing so, it will increase another function on top of its present mandate to provide technical and financing support to eliminate poverty in Asia.
They added that Asean members would like to have the Asian Monetary Fund managed under an independent framework to balance the power of the large economies in the region.
The regional currency swap arrangement will be an enlargement of the existing Asean currency swap agreements, which were created in 1977 and came with a size of US$200 million. The arrangement represents a pool of liquidity with Asean members being able to draw on the foreignexchange reserves of each other in defence of their currencies in time of crisis.
Yet the scale of the arrangement has now become too small, thus the number of players will have to be expanded to include the three key regional players – Japan, China and South Korea. The countries in Asia are keen to create a regional financial framework to protect themselves from the next crisis. The Asian Monetary Fund will become a regional lender of last resort in the absence of such a source in the global financial architecture.
Il Sakong, chairman and chief executive of the Institute for Global Economics, said he would like to see more efforts aimed at closer regional cooperation to help reduce the potential systemic risks from financial crises.
“In addition to regional macroeconomic policy coordination and collaborative monitoring volatile financial flows, regional monetary facilities supplementing the role of the IMF could be well utilised,” he said. “In this regard, the recently started Aseanplusthree financial cooperation is an encouraging initiative for this region.”
Martin Wolf, the associate editor and chief economic commentator of the Financial Times, also said the regional financial cooperation is desirable but he expressed his doubts that it would be created soon giving the complexity of the issue and a need for political decisions at the top.
BY Thanong Khanthong
