have personal experience in this regard. During my three-year stay in Malaysia in the late 1980s, I remember being very alone in opposing loudly the under-regulated opening when people were taking about the opening theory of the capital market. In .Dr. Pakkasem's words, it would be time to take a time-out. I think it is necessary to take a time-out and for that we'll have to find out a logical framework supporting this idea. For example, in a situation Dr. Pakkasem described as "ironic", China and Malaysia which had regulations are now in a relative stability.
Indonesia, on the other hand, is a country where the World Bank has been long performing the role of its main bank. In Indonesia, no restriction has been given to the short-term capital flow or to any activities that might cause a capital flight under the thorough abolition of controlling laws in accordance with Washington's logic which is more drastic than Japan's amendment of the Foreign Exchange Law starting from April 1998. Despite is effort to build the nation with the belief that the market would appreciate the country's proper order, Indonesia is not in good shape at the moment. The theory that Indonesia and Korea are suffering from runs on banks because of their improper national order that is penalized or hated by the market would be indeed correct to a certain degree but I think it is only a one-sided view. The market movement is a round of over-shift and it is apt to be excessive. This excessiveness costs a huge amount of money and it takes time to grasp the steady range of rate or the standard that will be shown by the market. Moreover, the short-term capital moving around in it would be no help for the national interest or the economic development of, for example, Thailand. It thinks only of the short-term profit taking. Therefore we need to consider the introduction of a governmental intervention or regulations according to the development stage, setting aside the question of naming it as an Asian type or not.
Thirdly, I really agree with the idea of an original regional facility for cooperation which Dr. Pakkasem repeatedly mentioned so that I don't have much more to add, but I think it will start as a place for discussion about macro-policy, mutual understanding, and exchanging subjective advice, then it will become a board of risk prevention. I have a feeling the necessity of capital furnishing ability in emergency case, that is approximately, 1,000 billion dollars he said and I agree too. However, a more important thing is to use member nations, or Asian nations, currencies effectively among Asian countries and to set up various measures and systems for this objective within the framework of this new facility. For example, avoiding the dollar-denominated settlement via New York, under which Indonesia pays Thailand for their import with the amount of money it received from Thailand for their export. That is to say that the new facility can take a job or have subsidiary organization of multilateral foreign exchange or account settlement among the member nations.
Simply speaking, it is not desirable that they invest only within the dollar for foreign investment although they have high rates of savings. I agree with Dr. Pakkasem's opinion that the Asian nations need to use their own reserve assets mutually within the region under the diversification of foreign demand, and in terms of foreign exchange policy, they will replace the dollar with regional currencies. It will be a system of baskets. If we set up a policy to stabilize the shift to these baskets, it would be better to start with a practical step such as making a common basket that will be the common calculating unit. If the multilateral settlement system that I mentioned just now applies this calculating unit for the settlement, it can draw an analogy with the creation of ECU in Europe for which BIS offered a place of settlement, and we'll be able to see a development or have prospects that this calculating will be used in commercial activities.
Lastly, I think there are many things that Japan has to do. I tried an intellectual exercise with Prof. Hara wondering what conditions the IMF would lay down if Japan went to them.
Malaysia also carried out a similar exercise last December, nevertheless they are not going to the IMF, They identified some conditions as IMF requirements and announced them as new policies. That makes me think of what Japan will be asked if she goes to the IMF. Among other things, Japan will be asked to increase domestic demand and to restore its economic growth led by the domestic demand. This will not be welcomed by the IMF because it is an opposite side of one medicine. However, Japan has to prepare for the request m strong as even the IMF would make it. We need to improve the Tokyo market as well as the convenience of the yen.
There seems to be a lot to do for globalization of the yen, the Tokyo market, or the Japanese market. I believed the yen has been relatively good as the supplying market, the borrowing market. There has been and is still now an adequate money supply. There will be enough funds for a while to spare for the out-flow. The interest rates are still low which I feel keenly as a manager of a foundation. The yen has been an ideal currency since there is a good supply with low interest rates and it has even devaluated for the last
