ASEAN and Financial Crisis: Arroyo Confuses, ASEAN Ponders

Updated On: Oct 21, 2008

Philippines President Gloria Macapagal Arroyo’s announcement on 16 Nov that the World Bank has committed to initially provide $10 billion to buy toxic debt and recapitalise banks in the region hit by the financial crisis has left people puzzled. Other countries have said in response that they were unaware of a plan. The World Bank also denied it had made any such commitment.

On Thursday 17 Nov, Philippine Economic Planning Secretary Ralph Recto said it was the International Monetary Fund, and not the World Bank, which floated the possibility of a $10 billion credit facility during the IMF/World Bank annual meeting in Washington.

Despite the mix-up, analysts in Manila said Arroyo appeared to have jumped the gun on what was essentially a scenario exercise. ASEAN Secretary-General Surin Pitsuwan said in Indonesia that Arroyo may have made the announcement because her Finance Secretary, Margarito Teves, had made the initial proposal.

The Asian Development Bank said it was too early to talk of contributions because the region was economically sound and in no imminent danger from global turmoil.

Though Arroyo may have been premature in announcing a regional rescue fund, discussions have been taking place across Asia over finding common approaches to a financial storm that originated in First World financial centres but which is buffeting emerging economies.

In Seoul, South Korean President Lee Myung-bak suggested a new international organisation mandated to address cross-border economic issues such as the current financial crisis.

But he, too, left analysts scratching their heads over whether he was proposing an alternative to the International Monetary Fund, which arranged a $58 billion bailout for South Korea in the 1997/98 financial crisis that came with onerous conditions.

ASEAN and its three dialogue partners will have an opportunity to discuss various ideas floating around at the Asia-Europe summit on Oct 24-25 in Beijing. Arroyo and Indonesian President Susilo Bambang Yudhoyono have proposed an ASEAN summit on the sidelines along with China, Japan and South Korea.

Source: Reuters Alertnet, 16 Oct, “Arroyo's Asia crisis fund confusion deepens” http://www.alertnet.org/thenews/newsdesk/SP376984.htm

ABS News, Manila, “Recto: IMF putting up the $10B crisis fund not WB”,  http://www.abs-cbnnews.com/business/10/16/08/recto-imf-putting-10b-fund-...

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