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ASEAN meets on forex pact, crisis measures

ASEAN finance ministers will meet today to discuss cooperation to tackle the global economic crisis plus the expansion of a currency swap agreement, at a time when some of their currencies are tumbling.

business Updated: Feb 22, 2009 09:27 IST

Asian finance ministers will meet on Sunday to discuss cooperation to tackle the global economic crisis plus the expansion of a currency swap agreement, at a time when some of their currencies are tumbling.

The 10 members of the Association of Southeast Asian Nations (ASEAN) plus Japan, China and South Korea pledged last year to pool bilateral currency swap arrangements under the so-called Chiang Mai Initiative (CMI) in an $80 billion multilateral fund that could be tapped in emergencies.

The finance ministers meeting on the resort island of Phuket will look at how that can be done and will also consider increasing the size of the arrangement, probably to $120 billion, although a final agreement seems some way off.

Suparut Kawatkul, permanent secretary at the Thai finance ministry, told reporters on Saturday that the ministers would look at details for expanding the CMI that were proposed by senior officials at a recent meeting in Japan.

"I hope we should be able to make some progress ... This will be formalised at an ASEAN+3 finance ministers' meeting in Bali in May," he said. "The figure has yet to be finalised but the meeting in Japan suggested $120 billion."

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, countries with vastly different political and economic systems. ASEAN+3 comprises those 10 plus Japan, China and South Korea.

Japan's new finance minister, Kaoru Yosano, is not attending the Phuket meeting, sending a parliamentary secretary for finance in his place. Singapore's finance minister is also absent.

On the sidelines of the meeting, Japan and Indonesia agreed to double their existing bilateral swap agreement to $12 billion and Tokyo also said it would guarantee up to $1.5 billion of yen-denominated Samurai bonds that Indonesia might issue.

Thai Prime Minister Abhisit Vejjajiva will address Sunday's meeting, which will discuss what message Asian countries want to send to a Group of 20 finance ministers' meeting in March and then a G20 summit in London on April 2.

Speaking in Indonesia on Saturday, Abhisit said ASEAN countries, most of them heavily reliant on exports, were worried about protectionism as countries around the world tried to stop their economies sliding deeper into recession.

He noted that despite pledges, "we do detect a creeping protectionism in various countries and regions".

"What I hope the ASEAN countries would do at our meeting next week is to send a powerful message to the rest of the world that despite the global financial crisis, we will not be tempted to resort to any kind of protectionism," he added.

Thailand chairs an ASEAN summit in the resort of Hua Hin from Feb. 27 to March 1.

Asian currencies have been battered in recent months, adding urgency to getting the currency swaps agreement.

The idea is to allow countries hit by short-term liquidity shortages to borrow foreign reserves from other countries to absorb selling pressure on their currencies.

On Thursday, Asian Development Bank President Haruhiko Kuroda urged Asian countries to make the currency swap network more effective, suggesting they should be able to raise the size of the swaps without the need for IMF-mandated reform programmes.

Most bilateral swap lines in the network are designed to cope with emergencies such as a balance of payments crisis, and 80 per cent of the funding is linked to IMF-mandated programmes.