NUSA DUA, May 3 – Ten Asian countries plus China, Japan and South Korea agreed Sunday to set up a 120-billion-dollar emergency currency pool to boost liquidity and help the region overcome the global crisis.
Finance ministers of the 10-member Association of Southeast Asian Nations (ASEAN) plus China, Japan and South Korea announced the deal after talks alongside the Asian Development Bank (ADB) annual meeting in Indonesia.
"We are pleased to announce that we have reached agreement on all the main components of the CMIM (Chiang Mai Initiative) and decided to implement the scheme before the end of the year," the ministers said in a joint statement.
Japan and China will contribute 38.4 billion dollars each, with China\’s share including 4.2 billion dollars from Hong Kong. South Korea was the next largest with 19.2 billion dollars.
Among the ASEAN countries the biggest contributors were Indonesia, Singapore, Thailand and Malaysia, which agreed to provide 4.77 billion dollars each.
The ministers were careful to explain the scheme was intended to "supplement" existing international financial institutions amid concerns from some quarters that it is a bid to circumvent the International Monetary Fund (IMF).
ASEAN member states were forced to implement unpopular economic reforms in exchange for massive IMF bailouts after the 1997-1998 Asian crash, leading to calls for the creation of a regional crisis fund.
But the finance ministers played down any suggestion they were snubbing the IMF and its sister lender, the World Bank, saying the move was only a "natural" step on the path of closer regional economic cooperation.
ADB managing director general Rajat Nag said the scheme was "very much complimentary" to the IMF. He said the Bretton Woods institution was in no danger of losing its place as the global economic watchdog.
"We certainly see this as a very welcome step to help in the current financial crisis," he told reporters at the ADB meeting at the luxury beach resort of Nusa Dua, Bali.
"I should make the point that the ASEAN plus Three finance ministers do not see this in any way being a substitute for the IMF," he added.
The move comes amid China\’s rise as a global economic power and as the world economy suffers its worst slump since the 1930s Great Depression thanks to a banking crisis triggered by bad mortgages in the United States.
Chinese Vice Finance Minister Li Yong, who is attending the talks here, last month condemned the dollar-dominated international monetary system as "a major defect in the current international economic governance structure."
The Asian ministers said the currency swap initiative met the region\’s two "core objectives" — to address short-term liquidity difficulties and "supplement existing international financial arrangements."
"The total size of the CMIM is 120 billion dollars, with the contribution proportion between ASEAN and the plus-three countries at 20:80," the statement said. The plus-three countries are China, Japan and South Korea.
In addition to the Chiang Mai fund, Japanese Finance and Economy Minister Kaoru Yosano said Tokyo was considering a scheme to offer yen swaps worth up to six trillion yen (60.4 billion dollars) to be tapped in emergencies.
Such swap agreements can be tapped to ease liquidity trouble as they boost the amount of foreign currency regional banks can access while helping companies that use foreign currencies when trading.
ADB president Haruhiko Kuroda said Asia\’s main export markets had experienced a "massive contraction in demand" due to the downturn in the world economy and the region had to end its heavy reliance on export sales.
He said any recovery in Asia would likely be driven by domestic demand.
"Over the longer term, developing Asia is starting the process of rebalancing growth from excessive dependence on external demand to greater resilience on both consumption and investment," he said.
"Already there are signs that domestic consumption is remaining strong in Asia and may well lead the way out of this downturn."
The ADB is predicting growth of 3.4 percent for the region this year, compared with more than nine percent in 2007.