China, Japan, South Korea, ASEAN bloc agree to double crisis fund
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PHNOM PENH - China, Japan, South Korea and the ASEAN bloc have agreed to double the funds available under a regional currency swap pact that can be tapped during financial crises, officials said Friday.
The deal, known as the Chiang Mai Initiative, will grow from $120 billion to $240 billion, giving countries with relatively small foreign exchange reserves a safety net against future liquidity shortages.
The decision to expand the fund was taken on Thursday by finance deputies from the 10-member Association of Southeast Asian Nations and their counterparts from China, Japan and South Korea, known as the ASEAN+3 countries, according to a source privy to the discussions.
The meeting was held in the Cambodian capital on the eve of a gathering of ASEAN finance ministers in which they are expected to endorse the decision.
"This will be the firewall of the ASEAN+3 region against further crises," said Cambodian Prime Minister Hun Sen.
He urged the finance ministers "to pay serious attention" to finalising the deal this year, saying it would enhance market confidence in the region's ability to withstand future financial shocks.
The 13 countries are expected to thrash out the details of the agreement when they meet in Manila in May, diplomatic sources said.
East Asia was engulfed by a financial meltdown in 1997 and 1998 and needed substantial bailouts organised by the International Monetary Fund.
Experience from that crisis prompted ASEAN and their economic partners from East Asia to come up with the arrangement -- initiated in the Thai city of Chiang Mai -- in which troubled countries can swap their local currencies for US dollars in times of crises.
Under the current swap arrangement however, 80 percent of the fund comes with conditions determined by the IMF, and only 20 percent can be accessed without IMF guidelines.
But senior Asian Development Bank official Iwan Azis told AFP that finance deputies have agreed to increase the amount that can be used without the IMF conditions to 30 percent.
This will further be reviewed with an eye to increasing it to 40 percent by 2014, said Azis, who heads the ADB's office of regional economic integration.