Japan has toed the IMF line with its offer of aid to help boost confidence in Indonesias battered economy, and analysts hope the same holds true as Tokyo promotes an Asian rescue fund.
The concern about conditionality (for Indonesian aid) has been allayed, said Bill Belchere, head of fixed income and economic research at Merrill Lynch in Singapore.
I would hope that any Asian monetary fund would be set up so as to be clearly conditional.
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Indonesia, seeking to repair shattered confidence in its economy and cope with a steep slide in its currency, announced on October 8 that it was seeking help from the IMF, the World Bank and the Asian Development Bank (ADB).
Singapore has already offered a credit of $5.0 billion and more if needed, Malaysia has offered $1.0 billion and Japan and Australia have also pledged support.
Initial signals from Jakarta prompted fears that Indonesia was trying to soften tough IMF conditions for reform that would accompany aid from the Fund. But Japan and Singapore as well as
Sydney have all made clear their two-way aid would materialis only if Indonesia agreed to IMF terms for economic reforms.
Japan has played a lower-profile role in Indonesias rescue than in forging the Thai package, largely due to the smaller exposure of its banks to Indonesia, economists said.
For Thailand, the rollover of Japanese bank loans was critical to the packages success, said a Nomura Research economist. For Indonesia, Japan played a more distant role. okyo is aggressively campaigning for the creation of an
Asia fund, however, to help stabilise regional markets.
Vice Finance Minister Eisuke Sakakibara, widely seen as a key architect of the Asian fund idea, began a round of visits on Friday, first to Indonesia and later to the United States, where he will likely meet Treasury officials.
Japan wants to take the initiative to help clear up the current confusion in Asia and to boost its influence in the region, the Nomura Research economist said.
But U.S. and IMF worries that a regional facility would provide loans without seeking the strict policy adjustments demanded by the IMF have prompted Japan and others in the region to issue assurances that a new regional facility would respect IMF principles and programmes.
We are talking about a self-help, quick-response mechanism, Philippine Finance Secretary Roberto de Ocampo told
Reuters Financial Television on Thursday. We do not intend this to be a contradictory scheme to the IMF but to be closely coordinated with IMF programmes...
Talks on the Asian fund will likely gather steam in coming weeks. Southeast Asian and other Asian deputy finance ministers will discuss the topic in Manila in mid-November. Asia-Pacific finance ministers may meet separately thereafter and the issu is likely to be on the agenda at an Asia-Pacific leaders summit in Vancouver in late November.
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