ASEAN calls for help as currencies plunge

AS their currencies took yet another nosedive, Southeast Asian leaders called today for a more concerted international drive by the world's economic powerhouses -- the United States, Europe and Japan -- to help stem a financial crisis that has wreaked havoc on the region's economies.

A statement issued after a summit of the Association of Southeast Asian Nations here did not specify what action they believe is needed to avert further economic meltdown. The three hardest-hit countries have already accepted international bailout packages totaling more than $100 billion.

But the cry for help was an official acknowledgment that the money seen so far, released in small disbursements and tied to specific belt-tightening economic reforms, has done little to solve what is now essentially a crisis of confidence.

"Despite the economic fundamentals of the regional economies being corrected and improved through the support and advice" of the International Monetary Fund, the ASEAN statement said, "the depreciation of the currencies has continued unabated."

The statement said leaders of the nine member states of the organization "called for greater national, regional and international efforts, including by the major economies such as the European Union, Japan and the United States, and international financial institutions, to overcome this situation as soon as possible and address the systemic issues underlying it."

In Washington, the IMF considered two steps aimed at enhancing its ability to respond to future crises. The organisation's board, representing its 181 member countries, was close to approving creation of a new type of lending facility that would provide large loans quickly to countries struck by a loss of investor confidence, IMF officials said.

The officials said the Fund's managing director, Michel Camdessus, will inform the board on Wednesday that to make up for $32 billion pledged in bailouts for South Korea and Indonesia, he will ask the members to increase the Fund's resources by 70 to 80 percent, which would roughly double its usable funds to about $100 billion. A 45 percent increase approved only two months ago already seems insufficient, according to the officials, who said Camdessus's view is that "the world has changed" since then.

But there was no sign that either the IMF or the world's leading economic powers are considering changing their fundamental approach toward the financially strapped Asian economies or rushing new funds to them. Indeed, officials of both the United States and Germany expressed reservations about the idea of an additional boost in IMF resources and stressed that the most important thing Asian countries can do is regain investor confidence by taking the painful steps the IMF has urged to restructure their economies.

German Finance Minister Theo Waigel, who was in South Carolina today to receive an honorary degree before a scheduled trip to Washington, said "it makes no sense to speak about increasing" IMF funding. Referring to South Korea, he said that revamping the nation's financial system according to IMF dictates would be far more effective than additional aid.

Clinton administration officials -- who are acutely aware of the mounting criticism of big international bailouts in Congress -- also reacted negatively to the idea of boosting IMF resources beyond increases already in the pipeline.

Lawrence H. Summers, the deputy secretary of the treasury, said over the weekend in response to press reports about the proposal that the IMF already "has substantial resources" and that "the priority is for the Congress to act" on existing requests for more.

But in Southeast Asia, evidence of the situation's urgency was provided by the region's currency markets, which continued a staggering downward spiral that accelerated last week. The fall in the value of local currencies has wiped out savings and drastically increased the debt burden of companies that borrowed heavily in dollars, rendering many of them virtually insolvent.

Here in Malaysia, the local currency, the ringgit, dropped to an all-time low of 3.86 to the dollar. The government has responded to the economic crisis by slashing its budget 18 percent and postponing a number of major infrastructure projects. It is also exhorting citizens to accept austerity measures -- such as using only one spoonful of sugar, instead of two or three, in their tea or coffee -- to cut down on sugar imports.

Next door in Singapore, the Singapore dollar, once considered the most stable currency in the region, dropped to an exchange rate of 1.68 to the US dollar -- a loss of 5 percent of its value since Dec. 1. The Philippine peso also plunged, ending the day at 37.9 to the dollar.

In Thailand, the baht reached a record low, ending at 45.15 to the dollar. The Indonesian rupiah sank to an all-time low of 5,550 to the dollar, following rumors that President Suharto, 76, is ill. Aides have reported he is suffering from a cold and needs 10 days' rest. A weekend television appearance by the president, shown on Indonesian television looking tired but gesturing animatedly, only added to fears that he may be more seriously ill than is being acknowledged. He skipped the summit here, convened to mark the 30th anniversary of ASEAN's creation, despite the fact that he is the group's only founding member still in office.

The new lending facility being planned by the IMF is supposed to be tailor-made to help countries facing sudden withdrawals of capital by investors. It would provide large amounts of cash quickly but would require quicker paybacks by the borrowing country -- within two to three years -- than traditional IMF loans. The interest charge would also be higher than the usual subsidised IMF rate, which is currently about 4.7 percent.

The facility would not increase IMF resources, however. After the Thai, Indonesian and South Korean bailouts, the Fund has about $44 billion in U.S. dollars, Japanese yen, German marks and other currencies that can be lent to countries facing payments crises, and IMF officials have said publicly that they are concerned that more big rescues would deplete their resources to dangerously low levels.

But administration requests to Congress to fund additional U.S. contributions have run into trouble. A proposed $3.5 billion U.S. contribution to a $25 billion special international line of credit for the IMF was removed from a foreign aid appropriations bill in October because of a dispute over the use of aid money for family planning programs.

While the Kuala Lumpur summit was dominated by concern over the region's economic woes, Suharto's absence underscored some new political uncertainties in a gathering that was meant to commemorate three decades of stability -- and to bring together for the first time the nine Southeast Asian leaders in an official forum along with the leaders of China, Japan and South Korea.

There are worries too about the political succession in the Philippines, where President Fidel Ramos is constitutionally barred from seeking a new term. The man he is supporting to succeed him, House Speaker Jose De Venecia, is ranked near the bottom of most public preference polls, and the popular vice president, Joseph Estrada, is favored. Many in the Manila business community fear an Estrada win could mean a reversal of Ramos's economic liberalization measures.

Elections are also due in Thailand -- the center of the current economic crisis -- under a new constitution, following months of political turmoil. It will be Thailand's third election since 1995. For politicians and voters throughout the region, there are concerns that the currency and stock-market sell-offs, the IMF bailout and new austerity measures could lead to higher unemployment, increased bankruptcies and possibly political turmoil.

Staff writer Paul Blustein in Washington contributed to this report.