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To: IQBAL LATIF who wrote (16987)	2/16/1998 4:01:00 AM
From: IQBAL LATIF	Respond to of 50167

Summary of today's top stories - 1. BANKERS SEEK MECHANISM TO EASE DEBT WOES. Asean move to wean itself off US dollar gathers pace. Southeast Asian central bank governors ended annual talks in Bali Saturday with an urgent call for a framework to ease mounting private sector debts in the region and agreed to step up efforts to use their own currencies in trade among themselves. "In efforts to promote stability in financial markets, governors emphasized the urgent need to evolve a framework for an early resolution of the private sector debt problem," a press communiqu‚ said after the meeting. The communiqu‚ also said that the governors exchanged views on the economic and banking developments in their respective countries in the wake of financial turmoil which arises from a regional currency crisis triggered off in mid-1997 which have sent debt levels in the private sector ballooning. The regional currency crisis has affected most Southeast Asian economies and also spread to South Korea whose central Bank of Korea governor Kyung Shik-Lee also attended the talks which began on Friday. Economists say only South Korea has so far succeeded in carrying out a structured approach to rolling over its short-term private sector debts, with Indonesia and Thailand still in negotiations. Thai officials said Japanese financial institutions have agreed to roll over 80-90% of the debts owed by the Thai private sector. Press reports said that in Indonesia, which has 74 billion dollars in private debts, Japanese bankers have come up with a proposal to funnel as much as 15 billion dollars to keep them from defaulting on loan payments. An Asean proposal to cut dependence on the US dollar gathered pace at the weekend, as Southeast Asian central bank governors decided to set up a task force to promote the use of their own currencies for intra-regional trade. The central bank chiefs of Indonesia, Malaysia, the Philippines, Singapore and Thailand explored "alternative mechanisms" to achieve the objective after Singapore rejected the use of its own unit as the invoicing currency. According to their statement, the task force is expected to meet in Kuala Lumpur at the end of this month. The Association of Southeast Asian Nations, also comprising Brunei, Laos, Myanmar and Vietnam, is in the midst of tearing down tariffs in the region to achieve free trade by 2003. The move by five of the key Asean economies to promote the use of their own currencies came a day after Singapore Finance Minister Richard Hu effectively rejected suggestions that Singapore dollar be used as a peg for trade among Asean members. Hu was quoted as saying to reporters that theirs was a small economy and there aren't enough Singapore dollars to go around. Some had thought the Singapore dollar should be used as the common trading currency as it was the strongest and most stable unit and backed by the largest foreign exchange reserves in the region. Analysts say the proposed use of Asean currencies was largely to wean off the robust US dollar which had appreciated rapidly against the regional units since mid-1997 when Thailand's de facto devaluation of its baht triggered a currency crisis. 2. JAKARTA FACES POTENTIAL CUTOFF - Clinton phones Suharto on bailout: President Clinton spoke with Indonesian President Suharto for about 30 minutes by telephone on Friday night, a White House official said on Saturday, amid reports a bailout for Indonesia faced potential cutoff because of a disagreement about economic policy. Clinton telephoned Suharto "to go over the current situation with respect ot Indonesia," the official said without providing any details about the substance of their conversation. 3. CHINA YAN HAS BIG DOMESTIC CUSHION - Capital flow boosts investment: China's currency is overvalued but the sheer size of its economy gives Beijing room to delay a devaluation that analysts have warned could rekindle Asia's financial turmoil, Merrill Lynch global strategist Charles Clough, who travelled to Beijing after meeting with Clients in Taiwan on Friday, said. He was quoted as saying that if the renminbi devalues, it's not a near-term thing. It's not part of this crisis. It's part of a future crisis. Also, he says the increased capital flows supply rejuvenating investment, while transparency is the best guarantee against the kind of misuse of capital that has undermined the financial systems of southeast Asia, South Korea and even Japan. As for further reform in China, Clough said he believed Beijing would have to muddle through the current turmoil before taking new strides toward globalisation. Beijing has made vague pledges to free the yuan on the current account after 2000. Clough said the communist leadership, which has repeatedly insisted that it has no intention to devalue the yuan, was fortunate to have a powerful weapon in its fight for currency stability - China's own vast economy. 4. CRISIS UNLEASH EXODUS OF EXPATS - Costello, Australian Treasurer, warns Jakarta to stick to IMF conditions: Indonesia's economic meltdown has unleashed a massive exodus of expatriates many saying they are leaving for fear violent riots rocking the country could lead to the government's fall. Labor ministry statistics published Sunday said two-thirds of Indonesia's expats are expected to have quit country by the end of February. Of the 48,417 expatriates employed in Indonesia at the end of December, fewer than 16000 remaining by the beginning of March, according to official figures published by Jakarta Post. Expatriates concerned were highly trained professionals with skills not locally available and whose positions cannot be filled by an Indonesian. More than 17,000 left in January and 15,000 more are expected to leave by the end of this month. Most have left because of the economic situation or because of the instability of the rupiah and their employers' inability to pay them in US dollars. Meanwhile, Australia's contribution to an economic rescue package for Indonesia depends on all the conditions imposed by the IMF being met, Treasurer Peter Costello said Sunday. Costello said the best way to stabilize the rupiah would be for Indonesia to stick to the IMF terms. The IMF and the United States have criticised Indonesia's plan to set up a currency board to maintain a fixed exchange rate for the rupiah against the US dollar. Since the economic upheavals in east Asia began last July, the rupiah has lost up to 80% of its value against the US dollar. Costello said that to stabilise the rupiah Indonesia should be cleaning up its banking system, ensuring good budget policy and adopting the currency policy discussed with the IMF. .continued.

To: IQBAL LATIF who wrote (16987)	2/16/1998 4:35:00 AM
From: IQBAL LATIF	Respond to of 50167

5. JAPAN PRESSURED TO EASE ASIA FALLOUT, VOWS TO REVIVE ECONOMY - Tokyo's direct investment totals $10b in '97: Japan goes into a G7 meeting in London this week under increasing pressure to ease the deepening Asian crisis while it is struggling to revive its own economy. Although Japan has given the most to IMF deals to rescue its troubled neighbours, it is still under pressure to boost demand at home and help mop up in the cheap Asian exports brought on by the crisis. Despite lending about $20 billion to IMF rescues for South Korea, Indonesia and Thailand analysts say it has failed to match the US role. But Tokyo has been reluctant to agree to the strident demands of the West, particularly its long-time sparring partner in the trade, the United States, to do more to revive its stalled domestic growth. Japan's vice finance minister Eisuke Sakakihara admitted at the recent World Economic Forum in Davos, Switzerland that they have a problem of the stability of the financial sector, of fiscal drag and that it is true they did lack the political will to address those issues squarely one or two months ago but now, he insisted, the political will exists. The Diet, or parliament, is expected to pass into law this week a long-awaited financial stabilisation package which could see the injection of up to 30 trillion yen ($240) to rescue the banking sector. A one-off two trillion yen taxcut has already been passed. Already the stockmarket dealers here say they are looking ahead to another financial package due to be unveiled by the ruling Liberal Democratic Party late this month. Although the figures involved are impressive, the efforts fail far short of what is needed, analysts say. Japan's stake in the region is massive. Its direct investment in Asia totaled 1,308.8 billion yen ($10 billion) during the fiscal year to March last year alone, and has amounted to $76.2 billion since 1951, according to the finance ministry. Cameron Unetsu, chief economist at UBS Securities was quoted as saying that Japan needs to do it for its own purposes and everything else will follow in its place. Japan certainly recognises it is a big part iof solving the puzzle but it doesn't want to bear the entire burden of bailing out the rest of Asia. The task ahead is indeed tough. Figures released Friday showed December household spending in Japan was 5% down on a year earlier, the biggest drop for more than 23 years. The government had cut its gross domestic product growth forecast for the year to March 1998 to just 0.1%. Analysts accept the unspeakable here: Japan is in virtual recession. US Deputy Treasury Secretary Lawrence Summers insisted Thursday Japan was critical in helping shore up ailing Asian economies. "The most important contribution Japan could make.is to strengthen its domestic demand, deregulate its economy and open up to imports, and resolve its financial problems," he said in Washington. Meanwhile, combined parent pre-tax profits of major Japanese manufacturers are likely to drop 1.5 per cent from a year earlier in the year to March, a daily said Sunday. Other headlines: 1. Parliament passes reform bills, Korea to lure foreign investment - Workers vow life-and-death fight for jobs: South Korea's parliament has passed a package of economic reform bills legalising mass layoffs and allowing hostile takeovers of local firms by foreigners. The layoff bill, passed by a National Assembly session at midnight Saturday, allows the mass dismissal of workers for corporate restructuring such as mergers and acquisitions. Other bills passed covered bankruptcy, corporate liquidation and employment insurance, all aimed at speeding up reforms in industry and financial markets as the economic crisis bites. The militant Korean Confederation of Trade (KCTU) unions called off a planned strike set to have begun on Friday due to concern over the economic crisis. But the KCTU, which claims 600,000 members, refused to endorse the legalisation of layoffs, a measure which deprives South Koreans of the previous practice of lifetime employment. They warned that they would take "more powerful" action unless the country's giant family-run conglomerates, known here as chaebols, undertake drastic reforms. The lay-off pact allows redundancies only "through reasonable and fair procedures" when warranted for "emergency management reasons." In return, the government agreed to set up a five trillion won ($3.1 billion) fund to compensate laid-off workers. 2. Markets could face renewed volatility - Indonesia currency peg: Asian foreign exchange and stock markets could face renewed volatility this week amid fears of a standoff between Indonesia and its creditors over Jakarta's plans to peg its currency, economists say. Concerns over racial riots triggered by rising food prices in Indonesia, as President Suharto awaits confirmation for a seventh five-year term, also undermined since early February a strong recovery in Asian financial markets. The main worry is that Jakarta will impose a Hong Kong-style peg despite insufficient monetary safeguards and monetary reserves - reported at $17 billion - and stern warnings from IMF and US officials. Daniel Lian, head of Asian markets research at ANZ Investment Bank in Singapore said that there was "no credible opposing force" within Indonesia to stop the plan adding that Suharto his family and some of their "corporate cronies" were keen to pursue the idea of a peg which is opposed by the IMF, the World Bank and the US Treasury. Lian gave Indonesia only a 50% chance of convincing its creditors to allow a pegged-rate system before or right after a special assembly packed with Suharto backers convenes early March to elect the president and vice president. 3. Pakistan strikes second gasfield: For the second time this month the prospectors have struck a major gas reserve in Pakistan's southern Sindh province, officials said Sunday. The two discoveries will substantially reduce Pakistan's import bill and case a domestic shortage of gas, officials of the state-owned Oil and Gas Development Corporation said. An OGDC offical said the reserves in Tando Allah Yar district, 210 kms northeast of Karachi were estimated at 38 billion cubic feet of gas. Earlier this month a consortium of Pakistan Petroleum Limited, Austria-based OMV Oil and Hardy Company of Britain found a gasfield with potential reserves of one trillion cubic feet at Sawan in the Miano area, 305 miles southwest of Karachi.