Asian Growth and Recovery Initiative

As the financial situation of countries in Asia has stabilized somewhat in recent months, the focus of the international community and governments in the region has shifted toward the critical task of speeding the restoration of growth. Essential to this effort is the need to revitalize the private sector in these economies by helping to facilitate work-outs of corporations' heavy debt burdens and restore their access to financing. In conjunction with the World Bank and Asian Development Bank (ADB), we therefore are proposing a multilateral initiative that will help to accelerate the pace of corporate and bank restructuring in the region, mobilize new private sector financing and promote the speedy restoration of growth. This initiative, which will complement policies to revitalize demand and economic activity and actions to mitigate the adverse social consequences of the crisis, has four key components:

Accelerating Bank and Corporate Restructuring: Rapid progress in restructuring is critical to the restoration of growth in Asia. Success in this effort requires an integrated and comprehensive approach to bank and corporate restructuring, supported by adequate financing for bank recapitalization and incentives for creditors and debtors to play a constructive role in debt work-outs. While countries in the region have made progress in putting in place frameworks to guide this process, there nonetheless remain significant impediments to necessary restructuring.

We are also working together to explore ways in which both debtors and creditors can be encouraged to participate constructively in voluntary debt work-outs. We therefore support the following measures:

Trade and Working Capital Finance: While recapitalization of banks is critical to restore functioning financial systems in Asia, companies in the region also face a more immediate lack of working capital and trade finance necessary to maintain production and employment.

Mobilizing the Return of Private Sector Capital: Successful restructuring of companies and banks in Asia will also require significant infusions of new private capital to help them rebuild their balance sheets and undertake necessary restructuring of their finances and operations.

Technical Assistance: The massive task of restructuring so many insolvent banks and corporations has overwhelmed the institutional capacity of countries in the region. Japan and the United States will expand their existing technical assistance programs in cooperation with the ongoing efforts of the IMF, World Bank and ADB. These programs will help provide countries with the essential financial, legal, and accounting expertise necessary to tackle bank and corporate restructuring and necessary market-based reforms.