Asian officials establish supplementary bailout fund

Ranjan Roy

Monday, Dec. 1, 1997 | 9:34 a.m.

KUALA LUMPUR, Malaysia -- Asian finance ministers reached an agreement today that will make billions of dollars in supplementary funding available for bailouts across Southeast Asia.

Some countries sought additional funding for International Monetary Fund-type rescue packages but wanted to ensure, as Malaysian Prime Minister Mahathir Mohamad said, that it was not "merely an appendage" to the IMF.

Insisting that bailouts be carried out under IMF auspices, the United States opposed the idea of an independent fund, worried that it would allow nations to avoid the tough reforms upon which an IMF rescue package is contingent.

Association of Southeast Asian Nations finance ministers said countries in the region could lend money to a neighbor on a case-by-case basis -- but only if the ailing country already has accepted an IMF bailout and its austerity conditions.

Richard Hu, Singapore's finance minister, said that doesn't mean a supplementary loan package would be under IMF control.

"If it is a subset, the credit risk is carried by the IMF," he said. Under today's agreement, "the risk will be bilateral."

At the same time, the agreement could make countries more willing to lend, knowing that the recipient already has agreed to reforms that would make repayment more likely.

Malaysian Deputy Prime Minister Anwar Ibrahim, who met with IMF Managing Director Michel Camdessus after the agreement was announced, said Camdessus was supportive.

"It will be a great help to the IMF," Anwar said. "There was no opposition."

The IMF already has put together multibillion-dollar rescue packages for Thailand and Indonesia and is finalizing a bailout for South Korea.

Anwar said he did not foresee any other countries in the region needing help in the near future.

Indonesian Finance Minister Mar'ie Muhamad, asked whether his country might need more money than the roughly $40 billion committed by the IMF and others, said: "That's enough. I don't think we will need any more."

The finance ministers issued a joint statement reaffirming the principles agreed upon at a high-level meeting Nov. 19 in Manila, the Philippine capital.

The statement said that if hard-hit countries "undertake strong adjustment measures, the economic situation of those member countries will recover and that confidence in the region's financial markets will be restored."

The statement also called for strengthening regional monitoring to spot potential financial problems before they spiral out of control.

The regional monitoring would be done under auspices of the Manila-based Asian Development Bank.

Asia's economic crises are partly due to a fall of more than 30 percent in the region's currencies since July. Malaysia's Mahathir today again blamed unregulated world currency traders and asked the World Trade Organization to rein them in.

"International trade is being regulated by the principles, policies and regulations agreed to in the WTO," Mahathir said. "Why should currency trade be exempted from the purview of the WTO?"

The meeting in Malaysia has brought together ASEAN finance ministers and representatives of the United States, Japan, South Korea, Australia, China and Hong Kong.

ASEAN groups Indonesia, the Philippines, Singapore, Thailand, Malaysia, Burma, Brunei, Laos and Vietnam.