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.

• A key element of the strategy to accelerate the pace of bank and corporate restructuring is the Asian Growth and Recovery Program (AGRP), which would be financed in part by the World Bank, the ADB and bilateral support in a variety of forms. The AGRP would utilize innovative, cost effective financing methods to mobilize substantial additional private capital to assist governments in the region to finance bank recapitalization. Support from the AGRP would be provided to countries that need assistance and are implementing integrated and comprehensive frameworks for corporate and bank restructuring.
• The United States, Japan, the World Bank and the ADB are working together to establish the program and identify sources of funding. We initially will target mobilizing $ 5 billion in bilateral and multilateral support, which would be expected to raise substantial additional amounts of private capital.

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:

• The World Bank and ADB should work closely with countries in the region in an effort to remove remaining impediments to bank and corporate restructuring. While the necessary changes will differ depending on the specific situation of each country, these measures may include, among others, legal or administrative changes to remove obstacles to restructuring, strengthened arbitration or dispute settlement procedures, accelerated implementation of disclosure and transparency requirements, and strengthened asset disposition strategies. Access to the AGRP would be tied to implementation of this strengthened framework for restructuring.
• We also pledged to review, and where necessary remove obstacles that prevent creditor banks in our economies from engaging actively in debt restructuring in Asia.

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.

• In order to help alleviate this problem, the Export-Import Bank of the United States (US ExIm), the Japan Export-Import Bank (JEXIM) and Japan Export and Investment Insurance (EID/MITI) will substantially increase the size of their trade finance programs for the region.
• We are also asking the multilateral development banks to explore ways to facilitate the provision of badly needed working capital and trade finance to companies in the region.

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.

• Institutions such as the Multilateral Investment Guarantee Agency (MIGA), the United States Overseas Private Investment Corporation (OPIC) and EID/MITI are uniquely positioned to aid this process by providing political risk insurance.　　OPIC is facilitating the return of U.S. private investment to the region by mobilizing up to $2 billion in political risk insurance and project finance for commercially viable projects that spur development in the region. In addition, OPIC has recently developed a new bond insurance product to help mobilize private financing for development projects in Asia and other emerging market economies.
• The International Finance Corporation (IFC) has been arranging financial, strategic and technical support beginning with companies and banks in its portfolio, and now extending these services to potential new investees. To leverage its resources, IFC has a program to assist the establishment of privately financed and managed investment funds that is targeted to mobilize at least $500 million in additional financing, accompanied by critical restructuring expertise.
• OPIC will also help to mobilize new private sector capital for the region through its investment fund programs. The $150 million Asia Development Fund is now ready to make investments in the debt and equity of firms in the region, thus helping to catalyze private sector restructuring. In addition, OPIC is also exploring the establishment of a new $ 100 million fund targeted at mobilizing private equity investment in medium-sized firms in Asia. If there is private sector demand for this fund, it would provide an infusion of U.S. private equity and management support these firms need to restructure and spur domestic growth.

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.