Some things, like the extinct Dodo bird of Mauritius, are poorly designed for flight. Such is the plight of the Asian Monetary Fund (AMF). Both are dead. The Dodo differs from the AMF in that it once had life, now known only from its stuffings, while the AMF cannot be made to breathe no matter how much the huffing and puffing.

The first acronymic letter says most of it. The "I" in the IMF is for 'International'. It is the International Monetary Fund. Much like the World Bank, it also seeks to meet the monetary needs of the entire world. The composition of both the World Bank and International Monetary Fund includes among its lenders and borrowers the haves and the have-nots among the nations of the world. Historically, the haves are the depositors, and the have-nots are the borrowers.

Serving as a bank to countries seeking funding for difficult projects, and in sums too large for the average depositor, both the IMF and the World Bank are lenders of last resort. Very often they are approached for loans when the prospects for repayment are neither visible nor realistic. Making loans under these circumstances is tantamount to funding for humanitarian reasons.

Neither the IMF nor the World Bank is new to banking, and has made many loans under difficult circumstances. Both have learnt a thing or two about how money disappears shortly after it is transferred to the outstretched hands of ministers. Based on this experience they have become more wary. In order that the loan proceeds actually be applied to the projected ends of the loan, they demand oversight. To improve the chance of repayment they often insist that certain financial reforms be put into place.

Recently the policies of the lenders have been criticised as being too stringent. Specifically, the declaration of non-performing loans after three months is thought to be too short, forcing distressed companies into premature bankruptcy. Once declared bankrupt, the assets can then be sold to the highest bidder, and often this bidder is from one of the developed countries. The fear that strong Western interests would gain important assets in developing countries at fire-sale prices is a real one. This is especially objectionable to politicians whose personal financial interests are threatened.

Banking on the Asian way

Loans from the IMF and the World Bank have often been rejected because the requirements are felt to be too stringent. Enter the idea of a new bank, the AMF, where the "A" stands for "Asian". There is sufficient financial strength in Asia to establish a regional institution of last resort. Japan, South Korea, Taiwan and China are the major potential depositors, while the Asean countries are the major potential borrowers.

Asean, however, does not present itself as an attractive suitor. Asean is now issuing the louder calls for more progress, while the potential lenders are reluctant, having the same reservations as kerbau invited to a kenduri (water buffalo invited to a dinner) convened by lean leeches. The new bank is to have lending policies more suitable to the "Asian way" of doing business. The requirements for the loan are to be less stringent, and all those clauses about financial reform and accountability are to be stricken. The locks are to be removed from the vault. The money is to be put on the table by the lenders, and the borrowers invite themselves to step forward and take whatever is wanted.

This bank is not designed to fly. The Asean countries are listed among the most corrupt in the world. They are quickly losing the favour they once had for offering cheap labour. The political stability they once projected is now seen to be based on repression and removal of all human rights. The reaction to any discussion of reform is met with vociferous denial and vituperative attack on the motivations and basic morality of the lenders. The large bribes necessary to do business are becoming a barrier.

Western-bashing has become established, and the Asian tiger is now regarded with the same caution given to the namesake when wounded. Such an animal is avoided by all, and for the common good such a threat is hunted down and shot. While extreme measures are not part of the modern approach to international affairs, certainly such undiplomatic behaviour toward important trading partners cannot instill confidence in potential lenders that future trade relations will remain cordial.

Malaysia has been first among the Asean countries in pursuing the idea of a regional bank. Now Malaysia is emerging as the leader in Western-bashing. The recent election in the US is used as an excuse to ridicule the operation of open democratic process. The AMF, if it is to be viable, must cooperate as an adjunct to existing institutions, and not as a replacement or competitor.

Malaysia, as a potential borrower, has done nothing to instill confidence that it will not default on AMF loans. The insistence on business as usual, in the form of announced contracts involving Siemens, MRCB and MISC, all close to the personal interests of the prime minister, his son and the finance minister, are a message to the world that it is "business as usual".

The AMF is not designed to fly, and its existence as a new species is stillborn. Asean exists, but as a threatened species. The Dodo, also unable to fly, is extinct because it was eaten by introduced carnivores. Asean struggles on in a similar predatory environment, though the teeth are home-grown.

HARUN RASHID is a scientist avidly interested in the application of Islamic principles in international affairs. The promotion of goodwill through civilisational dialogue motivates his writing. His Worldview column is a personal analysis of Malaysian affairs from a global perspective. [#1][Worldview archives][/#]