Miyazawa Initiative wraps up, providing $21 bil

Asian Economic News, March 6, 2000

BANGKOK, Feb. 28 Kyodo

The Miyazawa Initiative announced by Japanese Finance Minister Kiichi Miyazawa in October 1998 has pledged or provided five Asian countries with $21 billion, completing its initially stated role in giving financial assistance following the 1997 Asian financial crisis, Japanese Finance Ministry officials said Monday.

"Although we're not going to say that the door has already been closed, there will be no further requirement for assistance to Asian nations unless a sudden deterioration in their economies reoccurs," a Finance Ministry official told Kyodo News.

The official added that providing additional yen loans worth $150 million to Indonesia, which were pledged by Japan at a meeting of donors held in Jakarta on Feb. 1 and 2, will be the final lending under the initiative.

The $21 billion in pledges to the five countries -- Indonesia, South Korea, Malaysia, the Philippines and Thailand -- is a little over two-thirds of the $30 billion originally prepared. Officials said $5.28 billion has been disbursed so far.

South Korea, which suffered severely from the currency crisis in late 1997, is the biggest recipient, receiving $8.35 billion, with $2.09 billion having been disbursed. Malaysia has been pledged $4.35 billion, Indonesia $2.93 billion, Thailand $2.87 billion and the Philippines $2.50 billion.

"We believe the Miyazawa Initiative has contributed not only to a quick recovery of Asian economies, but to strengthening cooperation between the Association of Southeast Asian Nations (ASEAN) and Japan," another Finance Ministry official said.

The official also stressed that the objectives of the initiative have been achieved.

Japanese support through the initiative, which was used to replenish foreign reserves damaged by the currency crisis and to finance each country's fiscal deficit, has been highly praised by various countries in the region.

During a press conference at last November's ASEAN summit in Manila, then Philippine Finance Secretary Edgardo Espiritu said, "Without the Miyazawa fund, we could not have overcome the crisis."

When Japanese Prime Minister Keizo Obuchi visited Bangkok on Feb. 19 to attend the U.N. Conference on Trade and Development, Singapore Prime Minister Goh Chok Tong also expressed gratitude, saying that while the United States' role was "words more than action," Japan's was "action more than words," according to a Japanese Embassy official who was present at their bilateral meeting.

"The Miyazawa Initiative was politically motivated assistance rather than pure economic assistance because the notion to provide liquidity to countries under the International Monetary Fund's strict fiscal and monetary policy was completely different from our orthodox aid policy -- project financing," a Finance Ministry official said.

"In that sense, we have succeeded in consolidating confidence among ASEAN members that Japan is a real friend of theirs," he said.

But challenges remain.

Having received the Miyazawa money, the external public debt of Asian countries has swelled dramatically. In particular, Indonesia, with its $70 billion in foreign debt amounting to more than half of its gross domestic product, risks default unless its government succeeds in managing the economy under the leadership of President Abdurrahman Wahid.

"Considering the status quo of both Indonesia and Japan, in which the latter has huge exposure to the former, Japan will not be able to help Indonesia with new money any more," a Japanese official said. "Our challenge is that we have to support political and social stability in Indonesia to achieve sustainable growth while reducing its debt burden."