Asian policymakers have renewed calls to establish a monetary fund to help them deal with a financial crisis similar to the one that hobbled the region a decade ago.
Current and former economics ministers speaking at a forum on Monday organised by the Asian Development Bank, urged the creation of a regional fund to move quickly and decisively to help stabilise Asian currencies in the event of another meltdown. Many said they had been disappointed with the performance of the International Monetary Fund in 1997-98. It was widely criticised for doing too little too late, and for imposing harsh conditions.
“The IMF failed to make precise reforms [while] the US was ill-positioned to take swift action,” said Duck-Koo Chung, South Korean finance vice-minister at the time of the crisis. “Instead of waiting for a fire department across the world to act, the region needs a voluntary, community fire brigade.”
The crisis began when Thailand devalued the baht on July 2 1997, and rapidly spread to Indonesia, the Philippines, Malaysia and South Korea. Japan proposed an Asian bail-out fund in late 1997, but the idea failed to take off amid strong US resistance.
Mr Chung said international opinion had become more receptive to the idea of creating an Asian Monetary Fund. “Ten years before ... the environment was not so positive. But now we have support from international society,” he said.
The Thai finance minister, Chalongphob Sussangkarn, said the balance of power in the global financial system had shifted in favour of Asia, making the idea more feasible. He said Asian central banks had accumulated trillions of dollars in foreign exchange reserves invested mostly in US Treasuries.
“We cannot let debtor nations manage the global financial system,” he said. “The IMF is more like a debtor monetary organisation. We need a creditor monetary organisation.”
However, it may be a while before Asian countries set up such a fund. Chief sources of money have yet to agree on how the mechanism should be managed.