A Citigroup report, entitled "After the Washington Consensus and Asian Crisis: an Asian Consensus?", released yesterday said Asia is experiencing a convergence in its policy-making to form a consensus of its own, which contradicts the Washington agreement.

The Washington Consensus advocates free-market policies, ranging from free trade, capital account liberalisation and free-floating exchange rate regimes to the free flow of information.

Asian nations, rather suspicious of the Washington Consensus, have formed a consensus of their own.

The Citigroup report said first, Asia has become more self-reliant and less dependent on the Washington-based institutions, such as the IMF and the World Bank. Through their export-oriented policy, Asian nations have accumulated huge international reserves to guard themselves from future financial crises.

Under Governor MR Pridiyathorn Devakula, in particular, the Bank of Thailand's foreign reserves have risen from US$32 billion (Bt1.2 trillion) in 2001 to $58 billion at present. Foreign reserves for all of Asia, excluding Japan, now stand at $2 trillion, compared with $600 billion in 1996.

Thailand and South Korea settled their debts to the IMF a few years after the crisis and joined the other Asian nations, led by Japan, in forming bilateral and regional currency swap arrangements. In a balance of payments crisis, Asian nations can draw reserves from each other with these arrangements instead of begging money from the IMF.

Second, Asian countries have increasingly adopted bilateral and regional free-trade agreements to boost trade as they have reservations about the success of the World Trade Organisation's trade liberalisation agreements.

Japan, South Korea, Thailand, India, Singapore, Malaysia and the Philippines all have jumped on the bandwagon of free trade pacts.

Asean, which comprises 10 nations, is in the process of integrating with China through a regional free-trade arrangement. This can potentially rival the European Union or the North American Free Trade Agreement in the future.

Third, Asian policy-makers have resisted advice from Bretton Woods institutions on exchange-rate levels. For example, the US has failed badly in its attempt to persuade Beijing to let the Chinese yuan move more freely with the market or let it appreciate further to reduce the US trade deficit.

Thailand has also adopted a semi-floating exchange-rate regime, putting in place administrative measures and intervening in the forex markets when necessary to stabilise the baht.

Fourth, Asian nations have taken a suspicious view of capital account and financial liberalisation. Singapore has not allowed its currency to trade freely in the offshore market. Malaysia is adopting tight capital controls. Thailand is pursuing a managed float of its currency unit.

"Thus, an Asian consensus has emerged, whether incidental or coordinated, on a standard set of policies to avoid the kind of financial and political crisis of 1997," the Citigroup report said.

"Those policies hinge on increasing greater self-reliance, independence from foreign influence and integration within Asia."

Thanong Khanthong

The Nation