Manila: Asian countries said on Monday, 2 July, they were in a better position now to deal with the sort of financial meltdown that crippled the region 10 years ago, but warned against complacency.
Taking a swipe at the powerful Western-dominated global lenders, such as the International Monetary Fund (IMF), Thailand’s finance minister, Chalongphob Sussangkarn, called for Asia to take more control of its financial destiny by setting up a monetary fund to promote exchange rate stability.
Since the crisis, Asian central banks have built up trillions of dollars in foreign exchange reserves, much of it invested in Western assets such as US government debt, putting it in pole position to lead the international financial community, said Sussangkarn. “Looking ahead, we need to take responsibility. Asia now needs to be the one to manage the global financial system,” he said.
“We cannot let debtor nations manage the global financial system. The International Monetary Fund is more like a debtor monetary organization, we need a creditor monetary organization,” he said.
Economic chiefs past and present struck a defiant note at a forum in Manila to mark the 10th anniversary of the crisis, triggered when a huge flight of capital toppled the overvalued Thai baht in July 1997.
Firm hand: Thai finance minister Chalongphob Sussangkarn says Asia ought to take more control of its financial destiny by setting up a monetary fund to promote exchange rate stability.
The crisis spread rapidly from Thailand to South Korea, Indonesia, Malaysia and the Philippines. Asset prices plummeted, companies collapsed under a weight of debt, governments fell and millions were pushed into poverty as investors withdrew their investments.
Analysts say Asia’s economies are now in much better shape. Most countries have competitive currencies and a big surplus in their current accounts, which measure their trade in goods and services with the rest of the world.
That has made the region a huge exporter of capital, bankrolling consumption and borrowing in rich nations.
Haruhiko Kuroda, president of the Asian Development Bank, said this global economic imbalance could provide the ingredients for market volatility. “We have the potential for more bouts of financial market volatility,” the host of the forum said. “Capital flows have ramped up significantly over the past several years as increased global liquidity, Asia’s economic resurgence and dynamism, along with the search for yield has drawn in and out large amounts of investment capital.”
The IMF stepped in with multi-billion dollar rescue packages to keep some of these economies afloat. But the policies it imposed in exchange for the rescues were heavily criticised by Asian policy makers as excessive. Within a year of the meltdown, Indonesia’s long-ruling President Suharto was out of power after the crisis sparked widespread rioting in his nation.
Governments changed in South Korea and Thailand.
Chalongphob says an East Asian monetary fund would help promote further stability in the region. In an interview with Reuters on Sunday, he suggested such a fund would be established within five years to coordinate a self-managed regional system of foreign exchange reserves that was agreed upon in May.
Duck-Koo Chung, a former minister of commerce, industry and energy in South Korea, agreed the region needed a monetary organization but cautioned that the question of which country should lead such a fund still had to be ironed out. “We need some political agreement first,” Chung said.
Asia is booming once again, but investment and growth are largely centred on China and India. Economic growth rates in many of the erstwhile “Tiger Economies” lag their pre-crisis levels. Roberto de Ocampo, a former Philippine finance secretary, said.
Rosemarie Francisco contributed to this story.