Timely to set up Asian Monetary Fund now - financial experts

 

Financial experts have lauded the proposal by Prime Minister Anwar Ibrahim for Asian countries to set up the region's own version of the International Monetary Fund (IMF) and reduce their reliance on the US dollar.

Speaking to Malaysiakini, analyst Pong Teng Siew and economist Jomo Kwame Sundaram (above) expressed their support for the idea, saying that having an Asian Monetary Fund (AMF) would provide Asian countries with a better alternative during crises.

Pong said the IMF had often given "prescription" that ended up "being worse than what the cure offers".

"An Asian version of IMF not beholden to the neoliberal prescriptive economics of the IMF offers a plausible alternative to countries unwilling to suffer the short-term pain associated with the IMF's school of thought

"The unconventional path trodden by Malaysia, post-Asian Crisis, was arguably as successful as the IMF prescribed path, (but) without the human cost and dislocations associated with standard IMF policies," Pong said.

The analyst was referring to the Asian financial crisis in 1997, which saw sharp reductions in the values of currencies and stock markets in several Asian countries and led to an increase in unemployment and poverty, among others.

It then saw the IMF lend more than US$100 billion in short-term loans to Thailand, Indonesia and South Korea. The assistance came with a list of conditions for the countries to meet.

The same was offered to Malaysia but the government had then decided against taking an IMF loan.

Instead, it took several unconventional measures, including pegging the ringgit against the US dollar. This decision was later praised by the IMF as the right move.

Prime Minister Anwar Ibrahim

Pong also claimed that solutions offered by the IMF were "politically subservient" to US corporate and financial interests, which he said were "waiting on the sidelines to swoop in on distress situation opportunities opened up by IMF prescriptions".

"Often, had funds other than those available from vulture funds been available, countries hit by crises would not have had to lose control of domestic resources on the cheap to foreign funds that ultimately do not really add any value following their seizure of control over such domestic assets."

‘Reduces our vulnerability’

Meanwhile, Jomo told Malaysiakini that setting up an AMF now would be timely, and he had always supported the idea since it was mooted following the 1997 financial crisis.

"You cannot set up such a fund in the middle of a crisis. So it is timely to think ahead.

"It reduces our vulnerability without tying up too many resources," Jomo said in a text message.

The economist added that the proposal for AMF by Anwar also showed that the prime minister was not a stooge of the IMF, as he was made out to be in 1998.

Last week, Anwar told the Parliament that there is no reason for a country like Malaysia to continue to depend on the US dollar in attracting investments into the country, and reiterated the proposal to set AMF.

He said Bank Negara has made a proposal to use the ringgit and renminbi in negotiations between Malaysia and China.

International Trade and Industry Minister Tengku Zafrul Abdul Aziz later told the US-based business news website CNBC that Anwar had mooted the idea to mitigate the effects of a strong dollar. - Mkini