Asia shelves IMF challenge

South-east Asian finance ministers yesterday succumbed to international pressure and suspended plans to create a regional crisis management fund. They agreed instead to expand existing currency swap facilities to bolster economies experiencing balance of payment difficulties.

However, ministers from the Association of South-East Asian Nations (Asean) said after two days of talks in the oil-rich sultanate of Brunei that they were still considering establishing an asian monetary fund, and would discuss it again later in the year.

Recognising the need for the availability of financial resources in times of crisis, the ministers agreed to "conduct a study on the modalities of a mechanism for a regional fi nancing arrangement to supplement the existing international facilities".

Asean secretary general Rodolfo Severino said that the plan was shelved following a presentation by the International Monetary Fund to the ministers. "The IMF and several western nations have expressed opposition to the creation of an AMF," he said. "They feel we are not yet ready for such an institution."

Mr Severino also said the 10 Asean ministers were not united on the mechanisms for setting up an AMF.

Malaysia is the driving force behind the scheme. In 1998 its prime minister, Mahathir Muhammad, ignored IMF prescriptions for his country's economy and imposed hefty currency controls.

Asean comprises Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philip pines, Singapore, Thailand and Vietnam. The proposals for an AMF would also include South Korea and Asian powerhouses Japan and China.

South-east Asia is still struggling to recover from the economic collapse that started in Thailand in July 1997 and rapidly spread around the region. Official regional growth for the year 2000 is predicted at 4.5% to 5.0%. That is a far cry from pre-crisis levels but still considered optimistic by many western officials.

Analysts believe IMF opposition to an AMF is driven by selfish motives. "The west, and the IMF in particular, is worried about losing influence and leverage in the region if an AMF is established," a senior Singaporean banker said yesterday. "They want to be able to continue to dictate to governments over how to handle monetary crises."