Asian Monetary Fund May Be Needed to Deal with Future Shocks

MANILA, Philippines ~ Asia may need to establish its own monetary fund if it is to cope with future financial shocks similar to that which rocked the region 10 years ago, a regional forum was told here this week.

An Asian Monetary Fund may be essential as the International Monetary Fund (IMF) was unable to cope adequately with the Asian crisis when it started in July, 1997, the forum hosted by the Asian Development Bank (ADB) was told.

“The IMF failed to make precise reforms (while) the US was ill-positioned to take swift action” when the crisis broke, said Duck-Koo Chung, former South Korean commerce minister.

“Instead of waiting for a fire department across the world to act, the region needs a voluntary, community fire brigade,” he added, warning that “a sense of complacency may bring about another crisis.”

Chung said the Asian crisis, triggered on July 2, 1997, when Thailand conceded defeat and allowed the baht to float freely, had been the worst faced by his country since the Korean war in the early 1950s.

Dorodjatun Kuntjoro Jakti, former Indonesian minister of economic affairs, said IMF conditions imposed to get Jakarta out of the crisis “created continuous tensions within the body politic of Indonesia,” contributing to the downfall of president Suharto in 1998 and leading to years of political turmoil.

Former Philippine finance secretary Roberto de Ocampo said that when Asian nations first proposed an Asian Monetary Fund to deal with the crisis, it was immediately shot down by “the wise men” from the other countries.

He argued that said “the Asian financial crisis ended sooner than everyone expected,” and linked it to increased inter-Asian trade that many countries promoted in its aftermath.

“The time has come for Asian (countries) to figure out, in their own way, what to do with their financial resources,” de Ocampo said.

“Further Asian financial integration is the best antidote for Asian future financial crises.”

He said that Asia had a huge surplus of savings that was invested mostly in US dollar-denominated instruments.

The IMF was “a debtors’ monetary organisztion (and) we need a creditors’ monetary organization,” he said.

Thai Finance Minister Chalongphob Sussangkarn said that since the 1997 crisis, there had been “a small step towards an Asian monetary system.”

The ASEAN-plus-three forum, bringing together 10 Southeast Asian countries and their key trading partners, China, Japan and South Korea, were all discussing “multilateral pooling of reserves” to prevent a repeat of the crisis.

“Once we have some kind of agreement, it is natural that we have some kind of organization to coordinate this,” he said, adding that if such a body was created, “initially, it should not be too independent of the IMF.”

“We should have some division of labur between the Asian Fund and the IMF,” Chung added.

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