Asian nations seek $80b lifeline
Written by Writer on Saturday, October 25th, 2008
Asian nations seek $80b lifeline
Global meltdown unites leaders over war chest
ACHARA ASHAYAGACHAT and AFP
BEIJING : China, Japan, South Korea and the 10 Asean nations agreed yesterday on an US$80-billion (about 2.7 trillion baht) war chest to save beleaguered currencies in the most ambitious regional plan yet to cope with the global financial crisis.
Meanwhile, Thailand has sought support from China to raise $350 billion over the long term for stand-by liquidity and sovereign wealth funds.
“We plan with our East Asia dialogue partners to launch [the fund] as soon as possible,” said Sultan Hassanal Bolkiah of Brunei, one of the 13 nations planning to take part in the fund.
Earlier in the day, Chinese and Japanese leaders reached consensus on the plan with their counterparts from South Korea and the 10 members of the Association of Southeast Asian Nations (Asean).
“[They] agreed on the need to strengthen regional cooperation and policy coordination in the face of the global financial crisis,” the spokesman for South Korean President Lee Myung-Bak said.
“The East Asian leaders agreed to accelerate multilateral cooperation to create an $80-billion fund by the end of next year’s first half and establish an independent regional financial market surveillance organisation.”
However, no other party involved immediately gave a firm timeline for when the fund would be created, with officials pointing to further meetings between the “Asean Plus Three” nations.
A working group will prepare concrete proposals ahead of an Asean summit in Thailand in December, the regional group said in a statement.
The fund will be available to countries whose currencies come under sudden pressure, as has happened recently to Vietnam, observers said.
The East Asian countries began talks in 2006 on transforming the Chiang Mai Initiative into a more powerful and multilateral reserve pooling mechanism.
In May they reached preliminary agreement to create a foreign exchange reserve pool of $80 billion.
The initial agreement called for South Korea, Japan and China to provide 80% or $64 billion, with Asean members providing the remaining $16 billion.
However, disagreements continued between South Korea, China and Japan on cost-sharing and the way the fund would be managed.
However, the three countries have now ironed out their differences in Beijing despite the fact that South Korea, which is feeling the pinch of the global financial crisis, has yet to fully commit, observers said.
Meanwhile, President Gloria Arroyo of the Philippines has pushed hard for quick injection of funds but with less regulation, while Singapore insists on iron rules in tune with the International Monetary Fund (IMF) to manage the fund, diplomatic sources said.
Singapore did not think a multilateral fund could be realised in time for the Bangkok summit in December, but other Asean members believed quick measures were needed to avoid a repeat of the Asian financial crisis 11 years ago.
During a bilateral meeting between Prime Minister Somchai Wongsawat and China premier Wen Jiabao yesterday, the Chinese leader was responsive to the Asean call for the fund.
He asked how much was needed. Mr Somchai told him it might be up to $350 billion.
Deputy Prime Minister Olarn Chaipravat said Beijing could come up with the money at a scheduled meeting, possibly in Bangkok or Manila.
He suggested the region’s stand-by liquidity should be increased to at least $150 billion.
He also suggested the pooling of sovereign wealth funds, worth $200 billion, for long-term investment in Asian stocks and bonds. To help, Asian countries are urged to provide 10% of their foreign reserves for initial down payment which should be kept in the form of Asian currencies including the yen, the yuan and/or the Singapore dollar.
This is an initial and meaningful step towards the merging of the Asian financial community over the next decades, Mr Olarn said.
Bangkok Post
Saturday October 25, 2008
