AFP: IMF, APEC meetings, Jordan

[Robert Weissman <rob@essential.org>]

IMF warns Asia not to renege on reform-pledge
Date: Fri May 14 03:41:15 CDT 1999

   LANGKAWI, Malaysia, May 14 (AFP) - The International Monetary Fund (IMF)
urged crisis-hit Asian nations Friday to use the current calm in financial
markets to embrace reforms and accelerate economic recovery.
   Despite the improved situation, "it is vital that countries utilise the
current period to put in place the structural and policy reforms needed to
ensure a robust and sustainable recovery," the IMF said.
   The call came in a report presented at a meeting of Asia-Pacific Economic
Cooperation (APEC) forum officials ahead of finance ministers' talks
starting Saturday.
   Excerpts from the report, which also said global annual economic growth
was expected to bottom out at 2.5 percent in 1999 and gain momentum in 2000,
were made available to AFP.
   The report said "downsides have been diminished amid continued buoyancy
in the United States, reduced strains in financial markets and improved
sentiment to emerging markets."
   "In gist, what they are saying is that in most of the crisis-stricken
economies things should bottom out this year," said Philippine Finance
Undersecretary Solomon Cua after studying the report.
   Among the optimistic signs was Japan's effort to strive for
macro-economic stability, he said.
   "On the outlook, the IMF stressed the need to be vigilant, continue with
financial restructuring -- in other words, we should not be complacent," Cua
said.
   IMF deputy managing director Stanley Fischer said recently the Fund would
keep up its pressure on Asian countries to comply with reforms, following
perceptions that some governments were slipping into complacency amid rising
optimism in the region.
   The IMF offered huge sums of money to bail out the Thai, Indonesian and
South Korean economies among those hit by the financial crisis triggered in
mid-1997.



Canada pledges to press Jordan's case for debt forgiveness at G7
Date: Fri May 14 12:42:09 CDT 1999

   OTTAWA, May 14 (AFP) - As Jordan's new king wrapped up a visit here,
Canada pledged Friday to press Amman's case for debt forgiveness at next
month's summit meeting in Germany of the Group of Seven industrialized
nations.
   In return, King Abdullah II said his country would continue to support
Canada and NATO, with humanitarian support, in the war against Yugoslavia.
   Recalling that Jordan was already helping the United Arab Emirates run a
field hospital for Kosovar refugees, the king told journalists his country
was prepared to do more if asked.
   "We will do whatever the United Nations and NATO ask," he said at a joint
press conference with Canadian Prime Minister Jean Chretien.
   On the Jordanian debt problem, Chretien said he had taken the initiative
to have third-world debt forgiveness discussed at the G7 summit of leaders
of Britain, Canada, France, Germany, Italy, Japan and the United States, in
Cologne.
   Specifically on the Jordanian debt problem, Chretien said, "The king made
a strong case.
   "Jordan needs to be in a strong economic position to play its role in the
peace process."
   Chretien said Canada would also strongly support Jordan's efforts to join
the World Trade Organization, a move which should make it easier for that
country to export more goods with fewer restrictions.
   King Abdullah replied: "Canada has given us outstanding support."
   "On everything we have discussed in the past 24 hours," the king said,
"we have seen eye to eye."
   He said he was also happy with the reception he had received on the debt
crisis in his talks earlier in the week with British and German leaders.
King Abdullah will be in Washington next week for a meeting with US
President Bill Clinton at which he plans to raise the debt problem again.
   The king was in Ottawa for just over 24 hours, at the start of the North
American leg, of a tour of the G7 capitals.
   The king is seeking forgiveness of as much as 50 percent of Jordan's 6.8
billion dollar foreign debt with the G7 leading industrial nations.
   At the press conference with Chretien, he said Jordan had to earmark
one-third of its total budget on debt repayment.
   "We need to have some manoeuvre," he said.
   Before leaving Amman for his current tour, the king told foreign
journalists that he was not simply seeking a rescheduling of his country's
debts.
   "Rescheduling the debt will not solve our problems, what we need is debt
forgiveness," King Abdullah said in a recent meeting with the foreign press.
   Such an achievement would free up around 400 million dollars a year which
Jordan would otherwise spend on debt servicing for use on social projects as
it struggles to reduce poverty, which affects about a third of Jordan's 4.6
million population.



Summers warns world economy against 'flying on one engine'
Date: Sat May 15 09:41:22 CDT 1999

   LANGKAWI, Malaysia, May 15 (AFP) - US Deputy Treasury Secretary Lawrence
Summers warned Asia-Pacific finance ministers Saturday against relying too
much on the US as Asian nations recover from recession.
   Speaking at the sixth annual Asia Pacific Economic Cooperation (APEC)
finance ministers' meeting here, Summers was quoted as saying that member
economies should further open up their markets and continue structural
reforms to ease the pressure on Washington.
   An Asian delegate said Summers warned that downside risks in the US
economy -- the current account deficit and stock market "exuberance" --
might undermine the tentative recovery in Asian economies.
   "Summers warned against the world economy flying on one engine as this
could result in a possible backlash," the delegate told AFP.
   "He expressed concerns over the US current account deficit trend and
possible protectionist sentiment. He also talked about the need for
readjustment so that US exports can increase to counter the trend."
   Another Asian delegate said Summers was "obviously" referring to Japan,
although the first delegate noted that Summers welcomed Japanese Finance
Minister Kiichi Miyazawa's statement that Japan's recession was bottoming
out.
   Japan, however, appeared to take on a "defensive line," saying that its
recession was not a policy problem but an issue of consumer confidence which
remained weak despite various stimulus programs, the first delegate added.
   World Bank president James Wolfensohn meanwhile commended Japan, saying
it had been "remarkably vigorous in its support of the (Asian) region."
   "In terms of the Miyazawa plan, in terms of the bond guarantees, I think
they have been probably the single most generous nation in terms of
supporting recovery in the region," he told a news conference.
   "The biggest advantage that everybody hopes for ... is a turnaround in
the Japanese economy itself because that would facilitate trade and no
doubt, increase commodity prices and give a great push to the region."
   Miyazawa had earlier unveiled a 17-billion-dollar loan-guarantee scheme
for ailing regional economies.
   Thai Finance Minister Tarrin Nimmanahaemin told reporters that Asian
nations would have to turn to domestic demand if the US economy slows down.
   "The US is of course the engine of the world. Obviously we would like to
see the engine going on forever," he said.
   Tarrin said that APEC economies were "very Japanese-dependent for
investment, trade and financing" but signals coming from Tokyo over its
economic revival were "mixed."
   "The private sector in Japan, however, is a little more confident which I
think is a good sign," he said. "We get the vibration for positive attitude
among businessmen which is actually what is driving the economy."
   Summers and Miyazawa held talks earlier Saturday for about 30 minutes.
   A US treasury official said Miyazawa "congratulated Summers on his
nomination and looks forward to working with him," referring to last week's
announcement that Summers is to succeed secretary Robert Rubin.
   Summers agreed with Miyazawa that "the strong relationship between the
two countries and continued cooperation on international economic issues is
important for the global economy," the official said, adding they also
reviewed recent economic developments.
   "They stressed that the United States would maintain policies to support
its strong economic performance and that Japan would continue its efforts to
strengthen its economy and financial system until growth is restored, and
implement structural reforms to enhance the economy's efficiency and
competition."
   Summers flew into this Malaysian tropical island resort Saturday nearly
two hours late for the APEC meeting, delaying the traditional group
photograph.


IMF chief meeting with Mahathir called off
Date: Fri May 14 06:41:17 CDT 1999

   LANGKAWI, Malaysia, May 14 (AFP) - A proposed meeting between IMF chief
Michel Camdessus and Malaysian Prime Minister Mahathir Mohamad has been
called off, Second Finance Minister Mustapa Mohamed said Friday.
   Mustapa, speaking ahead of an annual meeting of Asia-Pacific finance
ministers, said Camdessus "expressed interest to see the prime minister and
the prime minister has given a time.
   "Unfortunately, due to scheduling conflicts, Mr. Camdessus is not free
for the time proposed," he told reporters.
   Mahathir has been "very busy" and was visiting the eastern state of Sabah
on Friday, the finance minister said.
   He added that the managing director of the International Monetary Fund,
due to arrive here Saturday, also had his hands tied as he was presenting a
paper to ministers attending the weekend meeting of the Asia-Pacific
Economic Cooperation (APEC) forum.
   In a report to APEC officials earlier Friday, the IMF urged crisis-hit
Asian nations to use the current calm in financial markets to embrace
reforms and accelerate economic recovery.
   Mahathir has been a vocal critic of IMF recipes for recovery in Asia,
notably the initial advice to tighten monetary policy to support local
currencies.
-=-=-


Summers arrives late for APEC meeting; US says not a snub
Date: Sat May 15 08:37:52 CDT 1999

   LANGKAWI, Malaysia, May 15 (AFP) - US Deputy Treasury Secretary Lawrence
Summers arrived two hours late for annual talks among APEC finance ministers
Saturday, delaying the traditional group photograph.
   A US official said Summers, who is to take over from resigning Treasury
Secretary Robert Rubin, was caught up with engagements at home and dismissed
any suggestion that the delay was an insult to hosts Malaysia.
   "It is not a snub," the official said as the sixth APEC finance
ministers' meeting started without Summers. "There have been important
developments in Washington and this has nothing to do with Malaysia.
   "It would be a snub if he doesn't come," he said.
   A Malaysian liaison officer said he was informed that Summers had to
appear before a Senate meeting in Washington.
   Summers joined the ministerial talks at the island resort of Langkawi two
hours after it was opened by Malaysian Finance Minister Daim Zainuddin.
   Japanese Finance Minister Kiichi Miyazawa and China's Finance Minister
Xiang Huaicheng were among ministers from the 21 economies of the Asia
Pacific Economic Cooperation (APEC) forum attending the meeting.
   The "family" photograph, scheduled to be taken before Daim opened the
meeting, was eventually taken after the end of the morning session.
   But Summers and the other ministers were forced to shield themselves with
blue and white umbrellas as a light tropical shower fell on the tropical
resort facing the Andaman Sea.



APEC asks IMF to devise guide for free capital flows
Date: Sun May 16 05:01:11 CDT 1999

   LANGKAWI, Malaysia, May 16 (AFP) - APEC finance ministers urged the
International Monetary Fund (IMF) Sunday to devise "guiding principles" for
economies that wanted to liberalise and open their capital accounts.
   They also sought a report from their deputies on the role of hedge
funds -- blamed by some for the regional financial turmoil which erupted in
mid-1997 -- for submission to APEC leaders at their summit in September.
   The ministers said in a joint statement issued after their annual talks
here that the guiding principles should be in line with specific conditions
of economies concerned to minimise risks associated with sudden shifts in
capital flows.
   "The recent experience of a number of economies has underscored the
importance of strengthening financial systems to meet the challenges of
capital account liberalisation," the statement said.
   Many crisis-hit Asian economies have complained they succumbed to
financial turmoil because of their open capital accounts, which are part of
a country's balance of payments and capture both short and long-term capital
flows.
   The ministers said major emphasis should be placed on sound
debt-management practices and on avoiding policy biases that
encouraged short-term over long-term capital.
   "We see the need for the IMF to work further in this area, including
developing guiding principles for economies that are liberalising and
opening their capital accounts, in line with the economies' special
circumstances," ministers said.
   The Asia-Pacific Economic Cooperations (APEC) forum comprises 21
economies, including the United States, Japan, China, Russia, Mexico,
Australia and key Southeast Asian nations.
   The finance ministers also directed their deputies to compile a report on
highly-leveraged institutions, which include hedge funds, offshore centres
and short-term capital flows.
   The report was to be studied by the APEC leaders meeting in New Zealand
in September.
   Hedge funds have been blamed by several Asian economies for attacking
vulnerable currencies and causing the financial storm in the region.
   The deputies were also urged by the ministers to survey the codes of
conduct and practices currently in use by various credit rating agencies,
which some crisis-hit economies blamed for aggravating their financial
problems.
   Ratings agencies Standard and Poor's and Moody's Investors Service have
downgraded the credit ratings of economies during the financial turmoil and
making it difficult for them to raise funds overseas at reasonable rates.
   The ministers also stressed the need for "momentum to be maintained" on
work on the new international financial architecture nothwithstanding the
recent return of stability to financial markets.


Malaysia laments APEC's failure to agree on hedge funds regulation
Date: Sun May 16 07:41:07 CDT 1999

   LANGKAWI, Malaysia, May 16 (AFP) - Host country Malaysia expressed
disappointment Sunday over APEC finance ministers' failure to reach a
consensus on regulating hedge funds amid strong US protests.
   "We are quite disappointed on a national viewpoint, that we have not
moved towards regulation which (for) the US is not agreeable," Second
Finance Minister Mustapa Mohamed told a joint news conference at the end of
a two-day Asia-Pacific Economic Cooperation (APEC) forum finance ministers
meeting here.
   "But at least there is now recognition that ... highly leveraged
institutions and short-term capital flows are very important issues."
   Malaysia and some other economies, including Hong Kong, have blamed hedge
funds for sparking Asia's worst financial turmoil in 50 years, which ended
years of rapid growth in the region.
   At a separate briefing, Mustapa said the United States opposed regulating
hedge funds on the grounds that currency speculation stabilises rather than
undermines the global financial system.
   "The US is of the opinion that currency speculation is stabilising. With
currency speculation, it will help to stabilise the international financial
system," Mustapa said. But he added: "We don't believe so.
   "We believe very strongly that speculation is destabilising and we will
keep on pushing this agenda," he said.
   Mustapa said it had been proven that short-term capital flows had damaged
regional economies including Malaysia and Hong Kong.
    He said, however, that the United States had recently changed its
perception of hedge funds, agreeing that they should be subjected to
transparency and disclosure requirements.
   "As we move from disclosure and transparency, to some kind of rules and
procedures (for hedge funds), that's where we have problems," he said.
   Mustapa said Malaysia would continue to voice its views on various
platforms, including a working group on short-term capital flows in the
global Financial Stability Forum on highly leveraged institutions.
   The nine-member Association of Southeast Asian Nations (ASEAN) was
another grouping which now has "one voice" on the matter, he said.
   "We are practical. Unless you have some of the major developed economies
on your side, it is not going to be an easy task reforming the international
financial architecture in line with our own stand."
   Mustapa said Malaysia's sweeping capital controls imposed in September
last year had received support from various countries such as Japan, Taiwan
and China.
   He said the APEC finance ministers had "recognised that there is no one
single (exchange rate) policy appropriate for all countries, they recognise
the diversity and flexibility."
   They viewed the measures as effective in "shielding the (Malaysian)
economy from going further into recession" and in providing a breathing
space to strengthen its banking sector, he added.



APEC warns of 'significant risks' despite signs of recovery
Date: Sun May 16 08:31:26 CDT 1999

   LANGKAWI, Malaysia, May 16 (AFP) - APEC finance ministers warned Sunday
of "significant risks" despite signs of regional economic recovery at their
annual talks here which failed to resolve differences on the contentious
issue of short-term capital flows.
   In a joint statement, the ministers also warned of "serious challenges"
especially in financial and corporate restructuring and dealing with poverty
in crisis-hit economies, notably Indonesia, South Korea, Malaysia, the
Philippines and Thailand.
   "The financial crisis in the region has abated and there are signs of a
return in investor confidence" since they met in Canada last year, the
statement said, concluding two days of talks.
   "As a result, the economic outlook in the region has improved. There are
however, significant risks to the outlook.
   "Serious challenges remain, particularly in restructuring the financial
and corporate sectors and in dealing with the effects of the crisis on the
poor and vulnerable," it added.
   The ministers were divided over the raging issue of hedge funds and
whether short-term capital flows should be regulated.
   Several Asian nations, including Malaysia and Hong Kong, have blamed
hedge funds for sparking Asia's worst financial turmoil in 50 years, which
ended years of rapid growth in the region. The US rejects this notion.
   After two days of debate, ministers only agreed to direct their deputies
to prepare a report on hedge funds for submission to and study at the APEC
summit meeting in September in New Zealand.
   Host nation Malaysia expressed disappointment.
   "We are quite disappointed on a national viewpoint, that we have not
moved towards regulation which (for) the US is not agreeable," Second
Finance Minister Mustapa Mohamed said.
   But APEC ministers urged the International Monetary Fund (IMF) to devise
"guiding principles" for economies that wanted to liberalise and open their
capital accounts which came under pressure during the regional turmoil.
   The highlight of the two-day meeting was an announcement by Japanese
Finance Minister Kiichi Miyazawa of a two trillion yen (17 billion dollar)
credit guarantee scheme for crisis-hit countries seeking funds to
restructure companies and develop resources.
   Miyazawa said the "partial" guarantee scheme, due to start in October and
last about two years, would "accelerate the return of private money" to
Asian economies battered by financial turmoil which erupted in mid-1997.
   At the same time, he said the scheme should help develop Asian bond
markets which "need to be enhanced" in the areas of transparency and
disclosure while developing the infrastructure of regional debt markets.
   The APEC finance ministers addressed the issue, ordering their deputies
to undertake more work with the private sector to address the shortcomings
of Asian bond markets and improve their efficiency.
   Speaking at the joint news conference at the end of meeting, US Deputy
Treasury Secretary Lawrence Summers said the United States was able to draw
"some satisfaction" from the talks with other ministers.
   "While very large challenges remain, there has certainly been some repair
in the financial situation by a number of Asian economies," he said.
   "We have seen growth in excess of what has been forecast. We have seen
upward rather than downward revisions in forecasts."    IMF managing
director Michel Camdessus, who also took part in the meeting, said there was
an "extremely open discussion" on efforts to develop a new international
financial architecture "and the problem of associating the private sector to
avoidance of crises and resolution of them."
   APEC, accounting for about 60 percent of the world economy, groups
Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South
Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the
Philippines, Russia, Singapore, Taiwan, Thailand, the United States and
Vietnam.



APEC Calls for Rich-Poor Dialogue
Date: Sun May 16 14:12:05 CDT 1999

        LANGKAWI, Malaysia (AP) -- Pacific Rim finance ministers suggested
on Sunday the establishment of an international body to study ways of
improving the global financial system while reducing the risks associated
with volatile short-term capital flows.
        Ministers from the 21-member Asia-Pacific Economic Cooperation forum
called on their deputies to study whether some rules could be imposed on
currency traders and hedge fund operators. They were to present their
findings to heads of state at their annual summit in
New Zealand in September.
        The 16-page statement fell short of calling for the regulation of
capital markets, as demanded by host Malaysia.
        ``While we recognize that efforts to reform the international
financial architecture will take time, we see the need for the momentum to
be maintained, notwithstanding the recent return of stability to financial
markets,'' the communique read.
        ``There is now greater consensus that these issues need to be
addressed,'' Malaysia's junior finance minister, Mustapa Mohamed, said at a
news conference closing the two-day meeting.
        U.S. Treasury Secretary-designate Lawrence Summers said the
communique reflected several issues the United States considered important,
including more transparency and the need for a dialogue between rich and
poor countries.
        ``I am encouraged by the recognition of the importance of this kind
of dialogue between emerging markets and developed economies,'' Summers
said.
        Since Saturday, the finance ministers have been discussing
strategies to prevent the kind of crisis which crippled many Asian economies
in the past two years. Ministers believe that the worst may be over for many
of their economies, while recognizing that serious challenges lie ahead.
        A senior U.S. Treasury official, who spoke on condition of
anonymity, said ministers focused on both the reassuring economic picture
and upon aspects of the global financial system, ranging from currency
regimes to capital controls.
        Malaysia last year imposed curbs on short-term capital flight and a
pegged exchange rate, ending offshore trading of its currency, the ringgit.
        On Saturday, Malaysian Finance Minister Daim Zainuddin called on
APEC to take up the challenge of drafting international standards and
regulations for hedge-fund operators and currency traders, whom Malaysia
blames for much of the Asian economic crisis.
        The Group of Seven industrialized nations, through the
Switzerland-based Bank for International Settlements, last year agreed to
study the possible regulation of currency speculators.
        The United States opposes restrictions on the free flow of capital
between markets, believing curbs increase the chances of future crises. But
more recently, it has become acutely aware of the dangers of unchecked
hedge-fund operations because of the near-collapse of prominent hedge-fund
Long Term Capital Management.
        Kiichi Miyazawa, Japan's minister of finance, who offered support to
Asian economies by helping win new confidence in capital markets through a
system of debt guarantees, has suggested that developing countries consider
pegging their currency to a basket of other currencies, the U.S. official
said.
        Summers has previously expressed support for Japan's debt guarantee
initiative, but indicated that Washington still has reservations about any
kind of pegged exchange rate system.
        Miyazawa said at the news conference that Japan intended its
initiative to help recovering nations raise money on their own.
        ``We will be able to facilitate the second stage of their
reconstruction,'' Miyazawa said.
        APEC comprises Australia, Brunei, Canada, Chile, China, Hong Kong,
Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the
Philippines, Russia, Singapore, South Korea, Taiwan, Thailand, the United
States and Vietnam.
-=-=-


Camdessus says openness the "golden rule" of new financial system
Date: Mon May 17 04:01:28 CDT 1999

   HONG KONG, May 17 (AFP) - IMF chief Michel Camdessus said Monday greater
openness was emerging as the "golden rule" of a new global financial regime,
blaming a lack of transparency for recurring market crises.
   In a speech to regional business leaders here, Camdessus spelled out the
essential elements of a new international financial architecture taking
shape in the aftermath of the Asian crisis.
   "There is a strong consensus for making transparency the golden rule of
the new international financial system," the International Monetary Fund's
managing director said..
   He said openness was "absolutely central to the task of civilising
globalisation."
   "A lack of transparency has been found at the origin of the recurring
crises in the emerging markets, and it has been a pernicious feature of the
'crony capitalism' that has plagued most of the crisis countries."
   Tight links between the ruling establishment and chosen business leaders,
who were offered state favours and heavy bank loans to build up their
empires, have been blamed in part for the crisis that engulfed much of Asia
in 1997.
   Camdessus said open, competitive markets "function only where
transparency exists."
   "But the world was very far removed from this. So it may seem like a very
tall order to change the culture and attitudes of many decades," the IMF
chief said.
   He said reform to the financial system must be based on a "mature
partnership between governments and market players."
   "In normal times, it means establishing an arm's length relationship
between governments and markets, neither too close, nor too distant."
   The Asian meltdown has led to growing calls for a revamp of the
international financial system put in place after World War II and for
reining in the markets which felled the region's economies.
   Camdessus said a consensus was building on the need to establish
discipline, standards and codes of good practice in the international
markets as an essential pillar of the emerging
financial order.
   He said a "tremendous effort" was under way to establish standards and
codes of good practice for markets at the international level, with the IMF
and the World Bank working to
promote stronger financial systems.
   Camdessus also called for governments and the private sectors to join
hands to prevent and resolve crises.
   "Just as the public sector is being asked to adapt its culture, so too
the private sector will have, I think, to increase its own transparency, to
use internationally accepted standards, to promote an arm's length
relationship with government."
   Financial institutions should be more careful in evaluating and managing
risks, he said, calling it a lesson learned from the crisis that struck down
countries such as South Korea, Thailand, Indonesia and Brazil.
   Camdessus, whose organisation has come under attack for allegedly
ignoring the plight of the poor in its bailouts of individual economies,
said urgent work was needed to add a "social
pillar" to the new financial architecture.
   "The Asian crisis laid bare the surprisingly underdeveloped state of the
formal social welfare systems of the countries affected," he said.
   And Camdessus stressed the need to ensure institutions such as the IMF
evolve with the changing global economy.
   The IMF managing director compared the emerging international financial
architecture to French cathedrals.
   "They were never completed, they were utilised when still under
construction, and many artists from the most diverse schools contributed to
them," he said.


Camdessus warns of premature euphoria over Asia recovery
Date: Mon May 17 04:21:42 CDT 1999

   HONG KONG, May 17 (AFP) - IMF chief Michel Camdessus warned Monday that
while there had been moments of excessive pessimism during the worst of the
Asian crisis, current exuberance over the region's recovery was premature.
   "People were talking about a deep recession in the making for Asia ...
Now we are possibly at a turning point, or even possibly after the turning
point," the International Monetary Fund managing director told a news
conference here.
   "But I am a little bit concerned that after instances of excessive
pessimism, we are now in a phase ... of a degree of irrational euphoria. So
we must be careful in our judgement."
   Camdessus said, however, that signs of a resurgence in regional stock and
property markets did not indicate a new economic bubble was emerging.
   "My judgement is that possibly the recovery is a little bit rapid, a
little bit exuberant, but nevertheless the direction of the stock market is
definitely appropriate," he said.
   "IMF staff believe markets are respectable observers."
    Camdessus said leaders of the nations worst affected by the Asian
contagion had entered into far-reaching reform programmes, but their full
implementation was far from complete.
   "We at the IMF believe that the worst of the crisis is over but that
there is still a very heavy agenda of reforms to be implemented," he said.
   In the longer term, he said there was an even more demanding task in
implementing measures called for by the "discussions about a new
architecture of the international financial system."
   Camdessus was speaking after giving an address to the Pacific Basin
Economic Council, an association of business leaders from Pacific-Rim
economies.
   He told delegates that a full-scale liberalisation of capital movements
was vital despite the Asian crisis, but cautioned countries to take care in
opening up their markets.
   On the Hong Kong economy, Camdessus told reporters that the IMF believed
the territory was approaching a turning point, even though unemployment
continued to rise.
   He endorsed the government's decision to stick with the Hong Kong
dollar's peg to its US counterpart, which he said was "more a solution than
a problem" in the territory's case.
   Other regional economies had run into trouble by sticking with currency
pegs long after their fiscal circumstances had ceased to justify the rate,
he noted.
   Camdessus singled out South Korea and Thailand for special praise, saying
they were now "in a positive trend" with economic growth expected this year.
   "I would like to confess with possibly unusual humility in the IMF that
we have been frequently wrong by being too pessimistic about the speed of
recovery in these countries," he said.
   "I like to be wrong when our forecasts are below what these countries
eventually achieve."
   An improvement in the Philippines, Malaysia and even Indonesia "shows
that when a country implements steadily the reforms the confidence starts
again, capital comes back and activity starts," he said.


New initiatives under way to help crisis resolution: Camdessus
Date: Mon May 17 05:23:56 CDT 1999

   HONG KONG, May 17 (AFP) - New initiatives are under way to resolve debt
problems that could stem from future financial shocks, International
Monetary Fund (IMF) managing director Michel Camdessus said here Monday.
   "This could entail introduction of collective negotiation clauses in bond
contracts and definition of appropriate arrangements in extreme situations
for allowing a stay to be organized to help creditors to arrange orderly
workouts in their mutual interest," he said.
   Camdessus did not elaborate on the new initiatives he outlined in a
speech at a gathering of Pacific Rim business leaders here.
   Thousands of Asian firms have filed for debt relief since 1997 when the
region slipped into an unprecedented economic crisis. Many corporate bond
issuers have defaulted on bond and debt repayments.
   Painstaking talks on restructuring and rescheduling tens of billions of
dollars in corporate debt are under way between debtors and creditors.
   The new initiatives come in the wake of a new credit line approved by the
IMF last month to help countries threatened by financial crisis pull back
from the brink.
   Camdessus said the new mechanism, the so-called contingent credit lines
(CCL), represented a substantial change in the way in which the IMF
interacted with the global financial community.
   "It shifts the emphasis from curative medicine to preventive medicine,"
he said.
   Existing IMF facilities help countries that are in a weak condition and
experiencing a balance-of-payments problem.
   "By contrast, the CCL is designed to help countries that are strong --
with sound macroeconomic management, strong financial systems, applying
internationally recognised standards and having established responsible
relationships with their international
creditors," Camdessus said.
   The new credit line would help countries withstand financial pressure
that may arise from a sudden loss of confidence caused by contagion from
external crises, he said.
   "The past two years have confronted countries with situations where
contagion is such that they can encounter severe external financing
pressure, even when they have basically sound economies," Camdessus said.
   The IMF has arranged bailout packages worth some 120 billion dollars for
the three Asian economies worst hit by the 1997 economic crisis: Thailand,
Indonesia and South Korea.
   Under the new credit line, there would be virtually no limit on the
amount of money the IMF could lend provided the recipient met the
conditions.
   There has been much talk since the Asian crisis erupted of setting up a
credit line that would be available to help countries threatened by the
spillover effects of a financial crisis elsewhere before they succumb to
turmoil themselves.
   But it has taken some time to put together, partly because many
industrialised countries feared the availability of such credit would cause
countries, and investors, to get lax in their economic and lending policies.
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Camdessus says capital freedom necessary but urges caution
Date: Mon May 17 06:31:34 CDT 1999

   HONG KONG, May 17 (AFP) - IMF chief Michel Camdessus on Monday urged a
full-scale liberalisation of capital movements despite the Asian crisis, but
cautioned countries to take care in opening up their markets.
   "Full liberalisation of capital movements should be promoted in a prudent
and well-sequenced fashion, taking into careful consideration the strengths
and weaknesses of each country," Camdessus said.
   In a speech here, the International Monetary Fund managing director
warned against "a haphazard, piecemeal and potentially volatile" capital
account liberalisation.
   He also said a consensus appeared to be emerging that capital controls
may be necessary in some cases to avert potential financial shocks but
warned such measures should ony be temporary.
   The comments came after calls by several countries for regulation of
volatile short-term capital flows they blame for the Asian financial
contagion.
   Some 100 billion dollars' worth of so-called "hot money" stampeded out of
Asia after Thailand floated its baht currency in July 1997, crushing
currencies and stock markets across the region.
   Philippine President Joseph Estrada told a Pacific Basin Economic Council
conference here that the crisis had exposed the inadequacy of the
international financial system to deal with the movement of capital flows.
   "The fact that so many external creditors could pull their money out at
short notice was one of the main reasons why the crisis began and spread so
fast," he said.
   Hong Kong Chief Executive Tung Chee-hwa told Camdessus at a meeting
Monday that "the urgency to better coordinate cross-border monetary policy
... and supervision of short-term capital flow still exists," a statement
said.
   In his speech to the Pacific Basin Economic Council, Camdessus said a
balance must be struck between capital freedom and financial stability.
   "The emerging markets exposed themselves to great volatility, often
unintentionally, by allowing the rapid but poorly managed liberalisation of
short-term flows," Camdessus said.
   "It became too easy for banks and corporations to incur short-term debt
without adequate prudential safeguards and, in many cases, they were
encouraged by the implicit guarantees of long-term exchange rate pegs."
   He said debtor nations for their part should put in place a consistent
economic framework, build a robust financial system with sound institutions
and regulatory and supervisory mechanisms.
   "It is easy to imagine that these conditions cannot be met overnight in
many countries," Camdessus said. "This means that creditor nations and
institutions need to pay attention to assessing and managing risk."
   Investors have the primary responsibility for assessing risk, but
regulators in industrial countries need to ensure financial institutions
playing on global markets are subject to safeguards, he said.
   Camdessus, IMF chief since 1987, said the Asian crisis had made the world
"think twice" before proceeding with capital liberalisation.
   He called for restoring the momentum of liberalisation as confidence
returns to world markets and financial flows start to grow again.
   "We need a constructive means of helping countries that wish to access
capital markets, do so in a way that protects their stability and economic
security," he said. "This is the work we will try to advance this summer."
   Some countries have argued in favour of capital controls after the Asian
crisis struck. Malaysia in September imposed such controls, pegging its
currency at a fixed rate against the dollar and making it non-convertible
overseas.
   Camdessus said a consensus seemed to be growing that controls may have a
place when there is risk of a crisis "but only to allow a breathing space
for other fundamental measures to take effect."
   He added that other measures such as sound economic policies and a
strengthening and restructuring of a country's banking sector held the key
to success rather than capital controls.


IMF Chief Praises Progress in Asia
Date: Mon May 17 07:41:49 CDT 1999

        HONG KONG (AP) - The worst of Asia's financial crisis appears to be
over, but the region must not allow ``irrational euphoria'' to delay needed
reforms or leave it unprepared for a possible slowdown in the U.S. economy,
the head of the IMF said today.
        Michel Camdessus, the managing director of the International
Monetary Fund, told businessmen today that Asian financial markets are now
headed in the right direction. He said South Korea's gross domestic product
could expand 4 percent and that Thailand could
post gross domestic product growth this year, too.
        Camdessus also said the Philippines, Malaysia and ``even possibly''
Indonesia could show some growth this year.
        However, he said he is concerned about the financial markets, noting
they may have moved ``possibly to a degree of irrational euphoria or
premature euphoria.''
        ``The worst of this crisis is over, but there is still a very heavy
agenda of reforms,'' Camdessus said.
        He said markets should be ready for a possible slowdown in the U.S.
economy or inflationary pressures there, even though no one is sure yet
whether that is about to happen.
        ``I will not conclude that this moment has come on the basis of the
figures published recently,'' said Camdessus.
        Camdessus was commenting about a report Friday that U.S. consumer
prices rose 0.7 percent in April, the largest monthly gain in nine years.
        The IMF leader also discussed Asia's nearly two-year-old economic
crisis during an interview over the weekend with CNBC, a cable TV business
channel, and Dow Jones New Wires in Malaysia, where Asia-Pacific finance
ministers were meeting.
        He said Malaysia has taken advantage of its capital controls to
restructure its banking sector, but the Southeast Asian nation still needs
to do more to restructure its major companies.
        Camdessus said while capital controls do have a short-term cost in
terms of loss of international standing, Malaysia had done a good job at
softening their impact.
        ``The IMF has not condemned capital controls. We have simply
reminded Malaysia that exchange controls have an international cost,''
Camdessus said.
        Prime Minister Mahathir Mohamad of Malaysia, who turned his back on
Western prescriptions for mending its economy, imposed sweeping capital
controls in an effort to prevent the kind of investor flight that wreaked
havoc in other Asian nations. The controls
locked in portfolio capital of $10 billion.
        Camdessus said he welcomed efforts by Asian countries to transfer
their short-term debt into debt with longer maturities, noting in particular
a plan announced by Japan over the weekend. Japan said during the APEC
meeting in Malaysia that it would guarantee new Asian sovereign bonds,
hoping the money that would be raised would be used to restructure regional
banking systems.
        ``We vigorously encourage this kind of initiative,'' he said.
        During the interview, Camdessus also was upbeat on the return of
capital flows to Indonesia.
        ``There's no miracle here, markets have observed the underlying
improvement,'' he said, adding he wasn't concerned about the slow pace of
recapitalizing banks. ``The business of recapitalizing banks is complicated,
particularly in countries like Indonesia, which has had an agitated
financial history for the past few years.''
-=-=-