Learning from the experience of the 1997 Asian financial crisis,
Indonesia is closely monitoring developments in Vietnam with the latter ASEAN
member at risk of falling into a financial crisis that may drag down other
countries in the region.
President Susilo Bambang
Yudhoyono said in a press conference after the Asia-Pacific Economic
Cooperation (APEC) Summit on Sunday that he had received reports of the
situation and had consulted with his economic ministers about the problems.
“The trouble [in Vietnam] should
be a lesson for us, particularly in gauging the resilience of our economy
against a financial shock,” said Yudhoyono.
“Indonesia and other fellow ASEAN
members will be ready to help Vietnam through the crisis without the country
having to seek a bailout from the International Monetary Fund [IMF],” said
Yudhoyono.
He also said that assistance
would be given through the ASEAN+3 mechanism, in which China, Japan and South
Korea had forged a deal with ASEAN members to jointly weather the financial
crisis without having to seek multilateral funds outside the region.
The deal would allow a member
country access to a standby loan to address short-term liquidity problems in
the region and supplement existing international financial arrangements.
The ASEAN+3 countries had
prepared precautionary measures for the financial crisis by pooling a
cooperation fund worth at least US$120 billion under the Chiang Mai Initiative
framework, signed in 2000.
Vietnam risks becoming the
biggest Southeast Asian economy to seek an IMF rescue loan since the late 1997
Asian financial crisis, as it moves to support a faltering banking system,
Bloomberg reported on Thursday.
According to a report by the
economic committee of the Vietnam National Assembly, as quoted by Bloomberg,
the country may need IMF aid to recapitalize its banks and must act quickly to
clean up bad debt or risk “prolonged stagnation”.
The financial system, the
assembly suggested, would need an injection of at least $12 billion.
However, Vietnam’s central bank
deputy governor Le Minh Hung said that Vietnam had no reason to seek loans from
the IMF, given that the country’s macroeconomic situation was stable.
The concerns are unlikely to be
downplayed by most of the region’s policymakers, who are still gripped by the
trauma of the financial crisis that forced ASEAN members Indonesia, Thailand
and the Philippines to seek bailouts from the IMF. The crisis first emerged in
Thailand.
“Unless no wide-ranging measures
are put in place, it could be contagion in terms of sentiment within the
region’s financial sector. In terms of trade, our exposure with Vietnam is
small,” said Trade Minister Gita Wirjawan.
Deputy Finance Minister Mahendra
Siregar said the problems plaguing Vietnam were similar to Indonesia’s during
the 1997 crisis.
He said the trigger of the crisis
centered on a lack of prudent governance in banks, thus creating an excess of
bad debts owned by related-party shareholders and recalcitrant businessmen.
“We should not downplay the impact
of the trouble in Vietnam amid uncertainty in the global economy,” he said.
As the host of the APEC Summit in
Bali next year, Indonesia has initiated the forming of an early detection
system against financial crises in order to be better prepared for weathering
the trouble.
“With the system in place, APEC
will have the capability to absorb financial shocks. That’s why we need better
policy coordination and responses. We expect to be able to draft this mechanism
during the summit in Bali,” said Yudhoyono.
Rendi A. Witula
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