01/26/98 TABLE: The Plan

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The Plan

How to stop the currency crisis and get Asia growing again

1. A NEW TEAM
Create a task force of top private bankers, IMF officials, accountants, and central bankers from the G-8 nations and Asia. Their mandate: hammer out a regionwide solution. An Asian heads the team. The task force would work in tandem with the IMF, and, if necessary, supersede it.
2. COME CLEAN
The task force's first job is to get all the bad news out on hidden debts and corporate basket cases in all of Asia's trouble spots.
3. TRIAGE
The task force moves fast to stabilize the currencies. Steps include:
-- Coordinating a regional policy of punishingly high interest rates to stop capital flight. This is a short-term policy only.
-- Restoring confidence and liquidity fast. The main step here is to roll over the short-term debt of core banks in Korea, Indonesia, Malaysia, Thailand, and the Philippines. This debt could be securitized through bonds with longer repayment schedules. Interest payments might be guaranteed by governments themselves, or an outside institution such as the IMF. The workout must inflict a cost on the foreign lenders.
-- Encouraging a swift private workout between outside lenders and the region's corporations and finance companies. Western banks can swap debt for equity or grant easier repayment terms. The emphasis is on speed--everyone takes losses.
-- Establishing an additional stabilization fund of about $100 billion. This money would help meet emergency liquidity needs. G-8 nations and rich Asian countries would chip in.
4. NEW FRAMEWORK
Western and Asian leaders will agree to an Asian agency to prevent similar crises. Among its features:
-- An Asian Reconstruction Fund staffed by top technocrats that would sell bad assets in the region and rebuild liquidity when private workouts need assistance. The fund would speed up workouts to strengthen corporate balance sheets and restart capital flows.
-- A new regulatory authority to introduce uniform regional rules that insure full disclosure in central bank accounts, update bankruptcy laws, introduce real supervision of banks, and improve local accounting systems and securities laws.
5. NEW COOPERATION
At an APEC meeting later this year, the world's leaders publicly endorse the workout. In return, G-8 nations (especially Japan) pledge to maintain growth and preserve open markets for Asia.
DATA: BUSINESS WEEK

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