Little local fallout from Vietnam crisis: Analysts
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Economic observers are warning that Vietnam’s financial crisis may bode ill for the economies of ASEAN member nations, although it is unlikely to trigger a severe financial crisis as happened in 1997 and 1998.
Bank Danamon economist Anton Gunawan said that the banking crisis currently engulfing Vietnam was “very different” from the one that hit Thailand in late 1997.
At that time, the Thai baht plunged due to massive speculative attacks that eventually struck the currencies of other Southeast Asian countries, including Indonesia.
Fallout from Vietnam would create “negative sentiment among investors toward Indonesia’s capital markets,” Anton said on Tuesday. “But I don’t think that it will be considerable.”
Anton said that many people had been similarly concerned when a financial crisis struck the US in 2008, although Indonesia managed to muddle through successfully.
The economic committee of Vietnam’s National Assembly suggested that the Vietnamese government seek a bailout of at least US$12 billion from the International Monetary Fund (IMF) to clean up bad debts in that nation’s banking sector.
The State Bank of Vietnam, the country’s central bank, has denied that it needs IMF support, describing Vietnam’s macroeconomic situation as “stable”.
Atma Jaya Catholic University economist A. Prasetyantoko also downplayed fears that the bleak outlook for Vietnam’s economy might prompt massive foreign fund outflows in Indonesia or the region as happened in 1997 and 1998.
“It’s true that foreign investors account for 60 percent of the assets in our capital market. But I think there is no place that offers a higher return of investment than Indonesia at the moment, given the fact that Europe is still tottering and the US still faces uncertainty in its economy,” Prasetyantoko said.
“Our economy is also stronger fundamentally. Even though Indonesia suffered an identical shock [in 1997], we are relatively more resistant today,” Prasetyantoko added.
Echoing Prasetyantoko, Finance Ministry interim fiscal agency chief Bambang Brodjonegoro said that Indonesia’s economy was currently “tougher” than in 1997, although the government would continue to monitor developments in Vietnam.
“We must be cautious with what happens, but the economic defense in Indonesia nowadays is stronger than back in 1997-1998,” he told The Jakarta Post in a text message.
Bambang said that Indonesia currently had a number of financing schemes that could be used to protect Southeast Asia’s largest economy from another crisis.
Such schemes include the crisis management protocol (CMP), which has been upgraded to deal with systemic risks resulting from a bank failures, as well as the Bond Stabilization Framework (BSF), according to Bambang.
Bambang said that Indonesia, along with other ASEAN+3 nations, previously signed the Chiang Mai Initiative Multilateralization (CMIM) agreement in 2009, which offers emergency balance support via bilateral swap arrangements (BSAs) for any member country hit by extreme devaluation and capital flight. (sat/asa)
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