SEMANTICS? WB, IMF DID NOT PLEDGE $10-B FUND FOR ASIAN BANKS
MANILA, OCTOBER 21, 2008 (STAR) By Des Ferriols - Neither the World Bank nor the International Monetary Fund has pledged $10 billion for the setting up of a standby fund for troubled banks in Southeast Asia.
The World Bank never offered to help build up a special regional bailout facility but is ready to assist in drawing up a mechanism for a “preparedness plan” being worked out by Southeast Asian countries, Finance Secretary Margarito Teves said in a press conference yesterday.
The International Monetary Fund, in a statement sent to The STAR, said “the IMF supports the efforts of the ASEAN countries to strengthen regional cooperation to promote economic and financial stability.”
IMF resident representative Reza Baqir said, “While we see Asian economies as being well positioned to weather the current turmoil in financial markets, the IMF stands ready to provide funding quickly on a bilateral basis to its members who might need liquidity support… The Fund will also be closely engaged in the ongoing discussions among the countries and multilateral institutions on the crisis response.”
Teves issued the clarification in the wake of confusion sparked by President Arroyo’s announcement that the World Bank (WB) had offered to provide $10 billion to help the Association of Southeast Asian nations (ASEAN) set up a bailout facility for banks that might be badly affected by the global financial crisis.
“Commitment… well, perhaps we should have been more cautious with the use of the word because there was no commitment,” Teves said. “The WB had already explained that it can’t handle a regional facility.”
Following a World Bank denial of Mrs. Arroyo’s announcement, Socioeconomic Planning Secretary Ralph Recto and Trade Secretary Peter Favila said it was the IMF which made the offer. IMF’s mandate is to help developing countries.
Teves told a press conference yesterday that during an informal meeting of ASEAN leaders, it was agreed that a regional standby facility would be useful in case the US crisis spilled over and threatened banks in the region.
If approved by the ASEAN heads of state, Teves said the facility would be called the ASEAN Preparedness Plan or APP.
He said a technical working group meeting has already been scheduled in Manila before the Leaders’ Meeting in Bangkok on Dec. 18.
Funding, according to Teves, would come from the members of the ASEAN +3 – China, South Korea and Japan.
Teves explained that while the World Bank has no part in the plan, it indicated the existence of $10 billion that countries across the globe may tap in response to the financial crisis.
Teves said Michael Klein of the International Finance Corp. represented the World Bank Group during the meeting. IFC is the group’s investment arm. He said it was Klein who said the WB Group should be ready with at least $10 billion.
But Teves said this was only an indicative amount and that it would have to be approved by the WB Group, if ever.
Teves defended President Arroyo for her wrong statement, saying it did not contradict the WB’s position since the WB said it was willing to assist on a bilateral basis.
But he admitted that since the meeting was largely informal, everything discussed would have to be agreed upon at a higher level. He said the WB assistance that Klein was talking about was “worldwide” in scope and not exclusively to ASEAN.
APP ‘convergence of ideas’ If approved by the ASEAN heads of state, Teves said the proposed APP would have nothing to do with the World Bank, the IMF or the Chiang Mai Initiative.
According to central bank deputy governor Diwa Guinigundo, the APP would be set up specifically as a facility that would help countries in the region deal with effects of the US financial meltdown.
“It will be used to give banks liquidity assistance, for a start,” Guinigundo said. “The fund could also be used to recapitalize banks as well as to buy up toxic assets.”
Guinigundo said it was this specific objective that made the creation of another regional fund necessary instead of just relying on the Chiang Mai Initiative which was already up and running.
“The CMI was set up specifically to assist countries having balance of payments problems and it is not structured to do what this other facility is intending to do, which is to rescue troubled financial institutions,” Guinigundo explained.
The details of the APP, according to Teves and Guinigundo, would be discussed in the technical working group meeting to be held in Manila and then presented to the ASEAN +3 Leaders’ Meeting in Bangkok in December.
“But on the whole there was a convergence of ideas on pursuing the establishment of a regional facility to assist ASEAN countries that may be experiencing liquidity problems arising from the global financial turmoil,” Teves said.
The APP stands to become the first facility of its kind to successfully emerge out of complex negotiations among nations. The European Union has been having similar discussions but has not come up with a unified response to the crisis.
Multilateral funding agencies, however, have resisted these regional initiatives from the start and the IMF, in particular, has given CMI a cold shoulder.
Chief News Editor: Sol Jose Vanzi
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