Asian Nations Back Currency Plan

Patrick McDowell

Saturday, May 6, 2000 | 8:16 a.m.

CHIANG MAI, Thailand -- Thirteen Asian nations agreed today to support each other's currencies to contain any future economic crisis like the one that devastated the region in 1997 and 1998.

Economic powerhouses Japan, South Korea and China decided to take a role in the fledgling currency protection scheme adopted two months ago by the 10-member Association of Southeast Asian Nations, part of a wider project to create a more united Asia on the world economic stage.

The agreement, dubbed the Chiang Mai Initiative after this city in northern Thailand, provides for countries to swap their currencies with each other in a repurchase scheme in the event of speculative attacks or other currency problems.

The finance ministers of the Southeast Asian nations and the three Northeast Asian giants met on the sidelines of the annual meeting of the Asian Development Bank, a Manila-based institution some Asian officials would like to see become a lender of last resort in time of crisis.

Earlier, about 2,000 demonstrators pushed over crowd-control barriers and confronted riot police in a protest against the bank, which opened its three-day meeting inside a heavily guarded university conference hall.

The protesters, chanting slogans like "ADB go to hell," sat on a road outside the Chiang Mai University venue and blocked traffic. They burned an effigy of Prime Minister Chuan Leekpai when he refused to meet them.

In a statement at the end of their meeting, the ministers said that their currency-swap arrangement would help control capital flows and establish "a well-coordinated economic and financial monitoring system in East Asia."

It would complement existing international facilities, the statement said, acknowledging the likely opposition from the United States to any deal that might attempt to replace the Washington-based International Monetary Fund.

Washington shot down Japan's proposal to create an Asian Monetary Fund when the economic crisis erupted in 1997, but support for such a regional bailout mechanism stayed strong after the IMF was judged by many countries and its own experts to have responded poorly, making the regional recession far worse than it might have been.

Nearly all details of the plan remain to be filled in, including how much money will be involved and whether fixed currency trading bands will be set, said Tarrin Nimmanhaemminda, the Thai finance minister.

The currency-swap initiative, if implemented, is seen by some as the first step toward building a regional mechanism to sort out Asia's problems.

"We firmly believe that it will not end here. This is a beginning. It can evolve into something bigger," said Mustapa Mohamed, deputy finance minister of Malaysia, a country that refused the IMF's treatment and suffered less in the crisis than others.

Hundreds of riot police bearing clubs and shields kept a tense eye on the protesters, mostly representatives of non-governmental organizations or people whose land or livelihoods have been lost to ADB-funded projects like dams.

A smaller group of student demonstrators pushed against the lines of riot police, who pushed back. About 100 students managed to scale a wall around the conference center, but were quickly surrounded and staged a sit-in.

The demonstrators have taken their lead from protests at the Seattle meeting of the World Trade Organization last year and the recent meeting in Washington, D.C., of the International Monetary Fund and World Bank.

Their leaders said that they wanted to present ADB President Tadao Chino with a list of demands: that the ADB stop making loans that increase the indebtedness of poor nations, stop funding a controversial wastewater treatment project near Bangkok, and quit making loans to governments that disrupt the lives of small farmers and the poor.

Somchai Sirichai, a representative of 38 non-governmental organizations outside the conference center, said they wanted Chino to answer their demands in detail by Sunday.

"If he doesn't come out, we'll follow him to the Westin," Somchai said, referring to the hotel where the delegates are staying.

Myoung-ho Shin, an ADB vice president, went outside, received the demands and said they would require study.