Indonesia extra cautious over financial fallout in Vietnam

Learning from the experience of the 1997 Asian financial crisis, Indonesia is closely monitoring developments in Vietnam with the latter ASEAN member at risk of falling into a financial crisis that may drag down other countries in the region.

President Susilo Bambang Yudhoyono said in a press conference after the Asia-Pacific Economic Cooperation (APEC) Summit on Sunday that he had received reports of the situation and had consulted with his economic ministers about the problems.

"The trouble [in Vietnam] should be a lesson for us, particularly in gauging the resilience of our economy against a financial shock," said Yudhoyono.

"Indonesia and other fellow ASEAN members will be ready to help Vietnam through the crisis without the country having to seek a bailout from the International Monetary Fund [IMF]," said Yudhoyono.

He also said that assistance would be given through the ASEAN+3 mechanism, in which China, Japan and South Korea had forged a deal with ASEAN members to jointly weather the financial crisis without having to seek multilateral funds outside the region.

The deal would allow a member country access to a standby loan to address short-term liquidity problems in the region and supplement existing international financial arrangements.

The ASEAN+3 countries had prepared precautionary measures for the financial crisis by pooling a cooperation fund worth at least US$120 billion (S$150 billion) under the Chiang Mai Initiative framework, signed in 2000.

Vietnam risks becoming the biggest Southeast Asian economy to seek an IMF rescue loan since the late 1997 Asian financial crisis, as it moves to support a faltering banking system, Bloomberg reported on Thursday.

According to a report by the economic committee of the Vietnam National Assembly, as quoted by Bloomberg, the country may need IMF aid to recapitalize its banks and must act quickly to clean up bad debt or risk "prolonged stagnation".

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