Yam backs stronger safety net role for ADB in crisis
Hong Kong is set to urge the Asian Development Bank to take a much larger role in emergency lending to crisis-hit countries, and is prepared to lend substantial amounts to help the bank achieve this.
In a bid to remove some of the burden placed on the International Monetary Fund in the wake of the regional turmoil, Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong said he would suggest at the ADB's annual meeting that the bank become more active in borrowing from some of its wealthier member countries and proceed to develop a role for itself as a lender of last resort.
Mr Yam said he had supported the idea of such an institution at previous multilateral meetings and was preparing a working paper to present to governments, possibly at the IMF's annual meeting in Washington in September.
Mr Yam, attending the ADB meeting in his role as alternate governor of the bank, said the ADB was uniquely placed in the heart of Asia and had a good understanding of the way the region operated, which would help it play an enhanced role.
As an AAA credit-rated institution, Mr Yam said he would be happy to lend a substantial amount of Hong Kong's own hefty reserves to the ADB if it needed the funds to disburse to countries in the region suffering under the weight of the ongoing turmoil.
Under Mr Yam's proposals, Hong Kong would make significant emergency funds available to the ADB, on the understanding that Hong Kong's exposure was only to the ADB, not the end user.
He said such an arrangement would provide a much needed injection of liquidity into the worst hit Asian economies, and would boost the ADB's status in the region.
The ADB has already made available almost US$6 billion for crisis-hit countries alone, but most has come from its own capital resources.
It is being increasingly argued that a more efficient use of funds would be a special contribution from its non-borrower members, such as Singapore and Hong Kong.
A similar system of funding already exists at the IMF, under its yet to be finalised New Arrangements to Borrow, in which several Asian countries - including Hong Kong - could be called upon to contribute to IMF rescue packages.
Yesterday, as the ADB annual meeting formally opened, other policy-makers expressed a desire for the ADB to expand its role.
The ADB board of governors' present chairman, Nicholas Imboden, who is ambassador for trade agreements for Switzerland, said the ADB should be part of discussions launched in Washington to review the architecture of the multilateral financial system.
He also agreed the ADB should play a special role . . . in creating regional surveillance, co-operation and confidence-building mechanisms.
Mr Imboden said there should also be an examination of the use of long-term development loans for quasi-liquidity actions and their pricing.
It seems legitimate to wonder whether the difference in the lending terms - all three loans in the Korea package had different costs and repayment schedules - are justified.
ADB president Mitsuo Sato said however that he envisaged a greater development role for the bank, emphasising longer-term sustainability of its projects in the region, and more technical assistance.
He also said the bank should concentrate on building up the institutional capacities of its developing members, to provide a firmer bedrock for national policy-making.
The ADB also could play a role in environmental issues, good governance and co-operation to contribute to peace.
