ASEAN fears yen slide may hit region's growth

By Amit Baruah

SINGAPORE, APRIL 8. A weakening yen has the potential of undermining growth prospects in South-East Asia, a joint statement issued by Finance Ministers of the 10-member Association of Southeast Asian Nations (ASEAN) in Kuala Lumpur said today.

According to the Ministers, who concluded their two- day meeting today, the weakening Japanese currency ``has created uncertainty and instability in regional financial markets and could adversely affect the prospects for continued growth of ASEAN economies''.

The Ministers, who meet periodically to discuss the economic prospects for the region, also discussed the slowdown of the U.S. economy and its impact on exports from the region.

``The outlook for the ASEAN economies will be less favourable... export growth in the ASEAN economies has moderated since last year and foreign direct investment is expected to remain subdued,'' the statement said.

An AFP report from Kuala Lumpur said the Finance Ministers had ``made little headway'' in expanding a regional currency swap plan to deal with future financial crises.

The news agency claimed that the issue of International Monetary Fund (IMF) supervision of disbursements was creating problems in implementing what has been termed the Chiang Mai initiative formulated in the Thai city in May 2000.

(Under the bilateral swap arrangements, the idea is to provide short-term financial assistance in the form of swaps to a country, which is need of balance of payment support or short- term liquidity from China, Japan and South Korea).

``Malaysia, which is deeply suspicious of IMF prescriptions and refused to help in 1997-98, has led objections... in the end, Ministers agreed only that there should be no agreement, saying that individual countries should be left to negotiate their own terms with each other,'' the report added.

As per the discussions that took place during the ASEAN plus 3 summit in Singapore in November 2000, several bilateral arrangements were to be in place by the next ASEAN plus 3 (the ASEAN-10 plus China, Japan and South Korea) Finance Ministers meeting in Honolulu in May 2001.

The ASEAN Finance Ministers, in their joint statement, stressed that the bilateral swap arrangements would be ``complementary and supplementary'' to IMF facilities.

``To be beneficial to the individual ASEAN countries, the terms and modalities of the bilateral swap arrangements should take into account the differing economic fundamentals, specific circumstances and financing needs of individual countries,'' the statement said.

The Malaysian Finance Minister, Mr. Daim Zainuddin, said the swap scheme must offer a better deal than existing IMF arrangements, which had been felt to be inadequate in the wake of the 1997-98 economic crisis.

``We are not under IMF. Our view is that the facilities must be better than IMF. If it is the same as IMF, then we might as well go to IMF,'' he said at a press conference in Kuala Lumpur.

``We are dealing with friends in Asia and we expect the facility to be far better than what is offered by the IMF''.

To a question if the bilateral swap arrangements would be negotiated by the time the ASEAN plus 3 Finance Ministers meet in Honolulu, the Malaysian Minister said: ``It would be too soon because each country has to negotiate its own conditions with Japan, China and South Korea.''

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