Asean +3 to set up crisis safety net
SEOUL —Fourteen East and Southeast Asian economies said on Monday that they have signed a plan to set up a $120-billion emergency fund known as the Chiang Mai Initiative, Asia’s first move to devise a safety net to shield itself from a financial crisis.
Japan, China, South Korea, Hong Kong and the 10 members of the Association of Southeast Asian Nations (Asean) will be entitled to swap their local currencies into US dollars for up to a pre-set amount by each party, they said in a joint statement.
“The core objectives of the CMIM are to address balance of payment and short-term liquidity difficulties in the region and to supplement the existing international financial arrangements,” the statement said, referring to the Chiang Mai Initiative Multilateralization (CMIM), the official name of a deal.
South Korea said the initiative would take effect in March 2010, adding further negotiations were needed on a proposed surveillance unit, which would play the role of a control station.
The control station is expected to be set up with the help of Asian Development Bank and the Asean secretariat.
The Asean Plus Three first agreed in May to set up the fund by transforming a network of mostly bilateral currency swap arrangements among member economies, valued at $78 billion, into a single $120-billion pool committed by the members.
Reuters provided details of the plan based on a joint statement from the member economies.
The scheme is an upgrade of the Chiang Mai Initiative (CMI), launched after an agreement in the Thai town of Chiang Mai in 2000 among finance ministers of the member countries to help avoid a repeat of the 1997-1998 Asian financial crisis, said the news agency.
Decision-making on lending issues will be made by majority of votes from the members. Changes to fundamental issues, such as membership and lending terms, will require a consensus among all members.
The following is a list of how much each member has committed, and the amount they are entitled to draw, from the fund (in billion US dollars):
The Philippines commits 3.68, and is entitled to withdraw 9.2; Japan and China (together with Hong Kong) each commit 38.4 each, and are entitled to withdraw 19.2 each;
South Korea commits 19.2, entitled to withdraw 19.2; Indonesia, Malaysia, Thailand and Singapore commit 4.77 each, entitled to withdraw 11.925 each; and, Brunei, Cambodia, Laos, Myanmar and Vietnam commit 1.24 combined, entitled to withdraw 6.2 each. –Reuters