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Asean currency bid launched
19 Sep 1997
The Nation
Asean currency bid launched
...................................................................
Interest rate pact to kick off initiative
SURACHAI CHUPAKA, KULCHADA CHAIPIPAT
The Nation
THAILAND will attempt to lobby other Asean members to adopt a single currency
goal in the Asean Vision 2020 plan due to be announced in December.
"Separate currencies are unstable and vulnerable," Finance Minister Thanong
Bidaya told reporters last night. He added that while the region may consider
adopting the European Union model in managing a common monetary policy, the
goal could be achieved faster than the decades-old attempt to create the
single European currency.
But more importantly, according to a top Thai official who asked not to be
named, in pursuit of closer regional monetary cooperation Thailand will also
propose a common policy on Asean interest rates to narrow gaps in the region
as the first step towards closer cooperation in the wake of recent massive
speculative attacks on regional currencies.
The Thai initiative for Asean Vision 2020 follows a recent statement by Phisit
Pakkasem, a former chief of Thailand's National Economic and Social
Development Board, who foresaw the emergence of an Asian monetary zone.
Other regional leaders such as South Korea's finance minister and China's vice
minister for international economics also expressed support for closer
monetary cooperation in the region.
By narrowing the regional interest rate gaps, Asean countries would be able
maintain a consistent alignment of exchange rates, thus instilling more
regional currency stability.
Cooperation from Japan and China will have to be sought if Asean is to move
ahead with closer monetary cooperation, the Thai government source said.
Thailand will raise the issue with member countries shortly in preparation for
the Dec 15 Asean summit scheduled to take place in Kuala Lumpur.
There will be early negotiations with Singapore for support of the closer
monetary cooperation as Singapore is seen as the region's financial centre.
The source said an announcement for the single currency objective would be
seen positively by financial markets.
In addition to the Thai initiative for Asean to announce a commitment to the
single currency goal, the country will also seek support from member countries
to expand their existing Asean currency swap arrangement, which is currently
involved with only US$200 million.
Only five countries signed the original agreement, with each member country
contributing $40 million to the fund.
Burma has expressed interest in joining this arrangement, while Vietnam and
Brunei have yet to give their answers.
Finance Minister Thanong will urge Southeast Asian countries to make a
concerted effort against currency speculators at next week's global monetary
talks in Hong Kong. He said while Europe and North America have seen close
cooperation among countries when it comes to monetary affairs, "in Asia it has
been everyone for himself." He added that Japan could serve as a driving force
in the push toward closer Asean monetary cooperation.
Supachai Phisitvanich, permanent secretary for finance, said Asean finance
ministers are preparing the features of Asean Vision 2000, which will be
announced later this year. They will also release a report on the Asean
economic outlook for 1997-98.
Asean finance ministers will today hold talks with counterparts from Japan,
China, South Korea and Europe focusing on the currency crisis.
Although Thanong did not spell out clearly what measures should be adopted by
the region to curb speculators, he said yesterday that it is important to
adopt some mechanics and techniques to stabilise the movements of all these
currencies.
Asean is, meanwhile, expected to urge the International Monetary Fund and the
World Bank at the Hong Kong meeting to devise ways of curbing largely US-based
offshore hedge funds who led the attack.
Kyodo adds that finance ministers of Asean, in pursuit of preventing a further
plunge in regional currencies, are looking forward to adopting ways to build a
system that would prevent future crises such as the one that recently hit
Thailand and later neighbouring countries, financial sources said.
Such a system could include establishing an Asian version of the IMF, the
sources said.
But it would be difficult to establish the fund in the short term as it would
be hard to persuade countries such as Japan and China to participate, the
sources said.
In August, the IMF, Japan and a group of Asia-Pacific economies crafted a
financial package worth more than $17 billion to help Thailand out of its
currency crisis, triggered by the de facto devaluation of the baht on July 2.
The crisis has somewhat subsided but there are fears that problems could
re-emerge in view of massive non-performing loans gripping many banks and
finance companies in Thailand, the sources said.
The Asean ministers are here to attend a two-day gathering of finance chiefs
from Thursday of the Asia-Europe Meeting, an initiative launched in March 1996
to deepen links between the regions.
Currency bid launched