World Bank denies committing $10 bln. for S.E. Asia standby facility

Asian Economic News, Oct 20, 2008

WASHINGTON, Oct. 16 Kyodo

The World Bank on Wednesday denied it has committed $10 billion for a standby facility specifically to assist Southeast Asian countries facing severe liquidity problems amid the global financial crisis, as Philippine President Gloria Macapagal-Arroyo had suggested earlier the same day.

''We do not anticipate the establishment of a regional facility and have not discussed commitments of funds at the regional level,'' the bank's East Asia and Pacific regional vice president Jim Adams said in a statement.

He was responding to Arroyo's remarks in Manila that the World Bank recently committed an initial $10 billion for the establishment of a standby facility for members of the Association of Southeast Asian Nations that could be used to purchase toxic assets and recapitalize troubled financial institutions and private companies.

While denying that, Adams said the bank nevertheless stands ''ready to support all of our member countries across East Asia to deal with the challenges arising from the financial crisis.''

According to the statement, the bank is ''committed to helping governments and the private sector manage the impacts of the global financial crisis by providing increased lending, equity investments, innovative new tools, and safety net programs.''

It said the bank has the capacity to greatly increase its lending to developing countries and is considering a special fund to provide equity to recapitalize small to medium-sized banks in poor countries.

Arroyo had claimed the establishment of a standby facility was agreed upon in a recent meeting of finance ministers from ASEAN, Japan, South Korea and China with senior officials of the World Bank, the International Monetary Fund and the Asian Development Bank in Washington.

''They have reached an understanding to establish a standby facility to assist ASEAN countries which have severe liquidity problems,'' she said.

Arroyo said the World Bank and the IMF would draft the implementing mechanisms of the standby facility as soon as possible, in consultation with ASEAN finance ministers and central bank governors, and then ''convene another meeting to discuss the guidelines for the standby facility.

''With the WB's $10-billion initial commitment, the president is hopeful that the IMF, ADB, Japan, China and the rest of ASEAN, will also contribute an equivalent or even larger amount,'' the presidential office said in a statement Wednesday.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Adams said numerous discussions with individual governments were held during the recent annual meetings of the World Bank and IMF in Washington on the impacts of the financial crisis ''and possible ways we might be able to provide support at the country level.''

But he pointed out that East Asian economies continue to perform strongly and have made significant changes since the 1997 Asian financial crisis, making them more resilient to the impacts of the current global turbulence.