Thursday, May 08, 2008
Asians told to rein in prices
Moody=92s: $80-B Asean fund too unwieldy
Asian economies should make a priority the immediate implementation of
measures to contain high inflation, instead of setting up a foreign-
reserve pool, the US-based credit rating firm Moody=92s Investors
Service said.
Member-countries of the Association of Southeast Asian Nations (Asean)
are in talks for an $80-billion foreign-reserve pool with China,
Japan, and South Korea, with the three larger Asian economies expected
to make bigger contributions.
Asean groups the Philippines with Brunei Darrusalam, Cambodia,
Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, and Vietnam.
The multibillion fund aims to prevent future currency turmoils, with
any Asean member-countries at risk of financial crisis allowed to
access funds from the reserve pool without seeking assistance from
organizations such as the International Monetary Fund.
The scheme would replace existing arrangements that involve bilateral
currency swaps.
Difficult task
According to Moody=92s economist Sherman Chan, details regarding the use
of the foreign-reserve fund will be difficult to work out.
In a Moody=92s report released recently, Chan said talks among the Asean
member-countries to put up a foreign-reserve pool will take long. But,
he added, the more pressing problem over the short term that needs to
be addressed is inflation across the region.
=93If Asean [member-countries] are keen to strengthen cooperation, a
higher priority on their agenda might be to contain food price
inflation caused by soaring grain prices,=94 Chan said.
The Philippines, the world=92s largest rice importer, recently canceled
a tender to buy rice due to poor response from suppliers.
As a result, it has called for an emergency meeting with its Asean
peers and larger Asian nations to address the reported food shortage
in the region.
In recent months, several nations restricted exports of food staples
over concerns with shortage in domestic supply and high prices.
Thailand, the largest rice exporter in the world, though, said it will
not ban rice exports. It has backed off from a proposed Asian rice
cartel with Cambodia, Laos, Myanmar, and Vietnam.
Moodys said Thailand=92s pledge to entertain importers could lead to
higher global grain prices.
In the Philippines, inflation, or the increase of prices of goods and
services, in April rose at its fastest pace in three years, because of
costlier food, including rice, and electricity.
The National Statistics Office said the inflation rate rose 8.3
percent in April, from 6.4 percent in March.
This rate exceeded the estimates of the Bangko Sentral ng Pilipinas of
6.4 percent and 7 percent.
The Bangko Sentral ng Pilipinas, however, said price movements are
likely to return to =93manageable levels=94 as a result of expected higher
food production.
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