ASEAN plans to beef up pooled reserves to fight crisis
by DARIO AGNOTE, Kyodo News | 12/16/2008 10:04 PM
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JAKARTA – The Association of Southeast Asian Nations (ASEAN) wants to enlarge the amount of funds to be provided under a currency swap deal called the Chiang Mai Initiative (CMI) by another $40 billion, an ASEAN official said Monday.
Surin Pitsuwan, ASEAN secretary general, said finance ministers from ASEAN plus its partners – Japan China and South Korea – are to meet next month to strengthen the CMI currency cooperation initiative in a bid to reduce the impact of the global financial turmoil in the region.
The focus of the meeting is how to ‘’multilateralize’’ the CMI, said Surin, adding that CMI has up to $80 billion in foreign reserves pooled by the participating countries that can be made available to a country whose currency is hit by speculative attacks.
‘’The finance ministers want to finalize the multilateralized CMI,’’ said Surin, adding that the ministers are looking at ‘’expanding the facility from $80 billion to $120 billion.’’
He said ASEAN wants the cooperation and the support and participation of Japan, China and South Korea ‘’in order to make sure that the facility is big enough to help with the issues of economic and financial pressures that we are inevitably going to get from the financial turmoil from around the world.’’
‘’We have to present a united front in the face of this pressures of the global financial turmoil,’’ said Surin, adding the ASEAN+3 leaders plan to endorse the package when they meet in February in Thailand.
‘’It is important that the region as a group could come up with some kind of mechanism and other mechanisms so that we can have our own alternative pool of resources that we can draw down from without having to be tied to any particular (institution),’’ he said.
The ASEAN +3 members have already achieved substantial headway on the arrangement under the CMI.
At present, there are two regional financing arrangements under the CMI, namely the network of bilateral swap agreements among the ASEAN-5 countries (Indonesia, Malaysia, Singapore, Thailand and the Philippines) with China, Japan and South Korea with a combined size of $84 billion; and the $2 billion expanded ASEAN Swap Arrangement that includes all 10 ASEAN member countries.
Both facilities are aimed at providing liquidity support to members or participating countries that experience short-term balance of payments difficulties and complement existing facilities made available by international financial institutions like the International Monetary Fund, World Bank and the Asian Development Bank.
To further enhance the effectiveness of the CMI, the ASEAN + 3 have taken efforts towards an advance framework of the regional liquidity support arrangement in the form of CMI Multilateralization (CMIM) or the Self-Managed Reserve Pooling Arrangement, according to ASEAN documents.
Some members of ASEAN, however, want to speed up the process of CMIM to make it more responsive in addressing the financial crisis.
‘’Multilateralization entails simplifying the activation mechanism through the operation of a central coordinating body with adequate safeguards and surveillance arrangements. It will also increase the certainty of funding and send a strong signal of regional cooperation and policy coordination,’’ said the documents.
The current financial turmoil should provide the urgency for focusing efforts to accelerate the multilateralized CMI for greater flexibility and quicker disbursement of funds.
’Its acceleration will provide greater liquidity to the region with minimum conditions,’’ said the documents.
To make the CMIM more responsive to the current turmoil, the documents stress the need to improve the CMIM’s system.
‘’The members that have strong macroeconomic fundamentals, implementing – and has a sustained track record of implementing – very strong policies, and remain committed to maintaining such policies, should be able to have a quick access to the resources without policy adjustment requirements,’’ the documents said.
ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
