Japan, China and South Korea finalized the details of an emergency US$120 billion liquidity fund for 13 Asian countries yesterday, a key regional initiative to counter the global economic downturn.
Separately, Japan announced a scheme to supply as much as ¥6 trillion (US$61.54 billion) to support countries hit by economic crisis.
Both announcements were made on the Indonesian island of Bali, on the sidelines of the Asian Development Bank’s (ADB) annual meeting.
South Korean Finance Minister Yoon Jeung-hyun told reporters after a meeting with counterparts from China and Japan that Beijing and Tokyo would each contribute 32 percent to the regional fund, known as the Chiang Mai Initiative.
South Korea would provide 16 percent, while the rest would come from the 10-member ASEAN. The fund will give emergency balance of payments support in case any of the countries experienced the kind of capital flight that marked the Asian financial crisis of 1997-1998.
“The three countries have reached an agreement today [yesterday], recognizing the importance of our cooperation in the region,” Yoon said.
INITIATIVE
The agreement between the key players of what would be the region’s first anti-crisis fund now makes it likely that all 13 countries involved will conclude negotiations on the initiative by the end of the day.
ASEAN includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
No discussions have yet been held on what currency the fund will be based on, but Japan’s separate plan, announced by Japanese Finance Minister Kaoru Yosano, is aimed at promoting the use of the yen in the ASEAN region, Tokyo said.
“This brings our contribution to supporting regional liquidity to about US$100 billion,” Yosano said.
SAMURAI BONDS
In addition to the two initiatives, Yosano said Japan would introduce a framework to guarantee samurai bonds, yen-denominated debt issued in Japan by foreign governments and firms, up to ¥500 billion.
The ADB itself also plans to ramp up lending to about US$33 billion in the two-year period starting this year — almost a 50 percent increase over the levels for 2007 and last year — to counter the crisis.
The Manila-based multilateral lender is funded by donations mainly from Japan, the US and European countries.
“The economic crisis in Asia has had much more severe impact than probably we have reckoned,” ADB Managing Director-General Rajat Nag said.
“The ADB can only be a part player in this but the impact of the crisis is very real. It’s more than just economic numbers, it’s a social crisis,” Nag said.
“The concern we have is that the crisis is putting at risk the hard-won gains of the fight against poverty,” Nag said.
REVIVAL
Jong-Wha Lee, the ADB’s acting chief economist, said Asian economies had probably reached the bottom of the crisis, but a major recovery still hinged on the revival of demand in developed countries.
“It is almost impossible for the region to return to the boom seen until 2007 before demand from the advanced economies fully regains strength,” Lee said.
The ADB has forecast that Asian economies will grow only 3.4 percent this year, the slowest pace since the Asian financial crisis a decade earlier. It sees growth recovering to 6.3 percent next year.
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