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Asian finance ministers to broaden regional liquidity fund
Monday, 23 February 2009, 17:37 IST
Phuket (Thailand): Finance ministers from Japan, China, South Korea and across South East Asia agreed Sunday to broaden and increase a regional liquidity fund, in the wake of the global financial crisis.
The three, plus the ten members of the Association of South East Asian Nations (ASEAN) penned an agreement at a summit in Phuket, Thailand, to "multilateralise" the Chiang Mai Initiative (CMI) fund, and to increase it to $120 billion.
Until now the CMI has taken the form of multiple bilateral agreements on currency swapping.
Meeting at Thailand's premier vacation island, 550 km south of Bangkok, the finance ministers also agreed to beef up the regional surveillance mechanism for the CMI, by setting up an independent regional watchdog in conjunction with the International Monetary Fund.
How long it will take to implement the multilateralisation is not clear.
Thai Finance Minister Korn Chatinkavanij, who co-chaired the Phuket meeting with his South Korean counterpart Jeung Hyun Yoon, pointed out after the meeting that the various countries have differing approval processes.
"But we expect the approval schedules to be discussed in the next meeting in Bali (in May)," he added.
Until the surveillance mechanism is in place and all countries have approved the multilateralisation, the current bilateral system will remain in place.
It was also agreed at the meeting that the ASEAN countries - Thailand, the Philippines, Singapore, Malaysia, Vietnam, Myanmar, Laos, Cambodia, Indonesia and Brunei - will put up 20 percent of the $120 billion fund, with the remaining 80 percent being contributed by China, Japan and South Korea.
The country-by-country breakdown has not yet been finalised, said China's Finance Minister Xuren Xie said.
"We have a good idea of the splits, both among the ASEAN countries and among the plus-3 countries," Korn noted.
When asked asked whether the absence of the new Japanese Finance Minister, after the recent resignation of his predecessor in an alleged drunkenness scandal, had had any effect on the talks, Korn said, "As far as we were concerned, the Japanese government was represented," he replied. "There was no negative impact whatsoever."
The ministers also made a strong plea for Western countries not to increase protectionist trade barriers in a bid to shield their domestic industries, and to stabilise their own economies and financial markets.
"Free and fair trade must be maintained," Korn said, not only within Asia but globally.
He also called for the development in Asia of "relevant policies for the development of domestic economies in order to counter the effects of reductions in exports."
The ministers, in their joint statement at the end of the conference, noted the importance of the Asian Bond Markets Initiative (ABMI) and hinted at relaxation of international currency regulations: "We recognise the important role of the private sector in the development of bond markets, particularly in cross-border bond transactions and settlement issues. We will explore ideas for new arrangements that would provide development assistance to the region while addressing unexpected liquidity constraints."
Finally, the ministers called for "an immediate and substantial capital increase" for the Asian Development Bank, calling for agreement on this before the next annual meeting of the ADB, in three months' time.
Source: IANS
Source: IANS