Economic observers are warning that Vietnam’s financial crisis may bode
ill for the economies of ASEAN member nations, although it is unlikely to
trigger a severe financial crisis as happened in 1997 and 1998.
Bank Danamon economist Anton
Gunawan said that the banking crisis currently engulfing Vietnam was “very
different” from the one that hit Thailand in late 1997.
At that time, the Thai baht
plunged due to massive speculative attacks that eventually struck the
currencies of other Southeast Asian countries, including Indonesia.
Fallout from Vietnam would create
“negative sentiment among investors toward Indonesia’s capital markets,” Anton
said on Tuesday. “But I don’t think that it will be considerable.”
Anton said that many people had
been similarly concerned when a financial crisis struck the US in 2008,
although Indonesia managed to muddle through successfully.
The economic committee of
Vietnam’s National Assembly suggested that the Vietnamese government seek a
bailout of at least US$12 billion from the International Monetary Fund (IMF) to
clean up bad debts in that nation’s banking sector.
The State Bank of Vietnam, the
country’s central bank, has denied that it needs IMF support, describing
Vietnam’s macroeconomic situation as “stable”.
Atma Jaya Catholic University
economist A. Prasetyantoko also downplayed fears that the bleak outlook for
Vietnam’s economy might prompt massive foreign fund outflows in Indonesia or
the region as happened in 1997 and 1998.
“It’s true that foreign investors
account for 60 percent of the assets in our capital market. But I think there
is no place that offers a higher return of investment than Indonesia at the
moment, given the fact that Europe is still tottering and the US still faces
uncertainty in its economy,” Prasetyantoko said.
“Our economy is also stronger
fundamentally. Even though Indonesia suffered an identical shock [in 1997], we
are relatively more resistant today,” Prasetyantoko added.
Echoing Prasetyantoko, Finance
Ministry interim fiscal agency chief Bambang Brodjonegoro said that Indonesia’s
economy was currently “tougher” than in 1997, although the government would
continue to monitor developments in Vietnam.
“We must be cautious with what
happens, but the economic defense in Indonesia nowadays is stronger than back
in 1997-1998,” he told The Jakarta Post in a text message.
Bambang said that Indonesia
currently had a number of financing schemes that could be used to protect
Southeast Asia’s largest economy from another crisis.
Such schemes include the crisis
management protocol (CMP), which has been upgraded to deal with systemic risks
resulting from a bank failures, as well as the Bond Stabilization Framework
(BSF), according to Bambang.
Bambang said that Indonesia,
along with other ASEAN+3 nations, previously signed the Chiang Mai Initiative
Multilateralization (CMIM) agreement in 2009, which offers emergency balance
support via bilateral swap arrangements (BSAs) for any member country hit by
extreme devaluation and capital flight. (sat/asa)
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