By Yoo Choonsik –
NUSA DUA, Indonesia (Reuters) – Japan, China and South Koreafinalized details of an emergency $120 billion liquidity fund for 13 Asian nations on Sunday, a key regional initiative to counter the global economic downturn.
Separately, Japan announced a scheme to supply up to 6 trillion yen ($61.54 billion) to support nations hit by economic crisis. Both announcements were made on the Indonesian island of Bali, on the sidelines of the Asian Development Bank’s annual meeting.
South Korean Finance Minister Yoon Jeung-hyun told reporters after a meeting with counterparts from China and Japan that Beijing andTokyo 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 Association of South East Asian Nations (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 1997/98.
"The three countries have reached an agreement today, recognizing the importance of our cooperation in the region," Yoon said.
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 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 $100 billion," Yosano said.
In addition to the two initiatives, Yosano said Japan will introduce a framework to guarantee samurai bonds, yen-denominated debt issued in Japan by foreign governments and firms, up to 500 billion yen ($5.13 billion).
The ADB itself also plans to ramp up lending to about $33 billion in the two-year period starting 2009, almost a 50 percent increase over 2007-08, to counter the crisis. The Manila-based multilateral lender is funded by donations mainly from Japan, the United States and European nations.
"The economic crisis in Asia has had much more severe impact than probably we have reckoned," ADB Managing Director General Rajat Nag told Reuters.
"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."
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 nations.
"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 in 2009, the slowest pace since theAsian financial crisis a decade earlier. It sees growth recovering to 6.3 percent next year.
The growing efforts by Asian nations to protect themselves from economic crisis will complement the role played by the International Monetary Fund in combating global recession, officials said.
"We are seeing a greater multilateralization and expansion of the Chiang Mai Initiative which is not at the cost of the region’s role in the IMF or the IMF’s role in the region," said the ADB’s Nag.
But he added: "After the 1997 financial crisis, one lesson that Asia learned was you better be ready to depend on yourself.
"If the region is going to be an economic growth center, it is also appropriate that it knows it has the resources and reserves to stand on its own feet."
(Additional reporting by David Dolan)
(Writing by Raju Gopalakrishnan; Editing by Tomasz Janowski)