Asian Nations Set Up $120b Crisis Fund
NUSA DUA (Indonesia) Thirteen East and Southeast Asian countries agreed on Sunday to set up an emergency $120 billion fund to provide liquidity to any of them in need of help during the economic downturn.
Japan also unveiled a scheme to supply up to 6 trillion yen ($61.54 billion) to support nations hit by economic crisis.
The moves, announced on the sidelines of the Asian Development Bank’s (ADB) annual meeting on the Indonesian island of Bali, could lead to some optimism in regional markets on Monday, one analyst said.
“This news is not a surprise but confirmation may be taken by the optimists as a reason to continue the recent rally,” said Kirby Daley, senior strategist at Newedge Group in Hong Kong.
“It’s definitely a step in the right direction for Asia to wean itself from dependence on the West. However, implementation is unlikely to have a sustainable impact on Asian economies in the absence of a robust US consumer.”
Under the plan, China and Japan would each contribute 32 per cent to the regional fund, known as the Chiang Mai Initiative.
South Korea would provide 16 per cent 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 current global situation requires more concerted efforts to enhance confidence, maintain financial stability, and prevent further decline in economic growth,” a joint statement by the region’s finance ministers said.
“The deepening global economic downturn, coupled with heightened risk aversion in financial markets, (has) adversely impacted trade and investment in the region.”
The fund will be launched by the end of the year, and a surveillance unit to monitor the region’s economies will be established with the help of the ADB, it said.
In addition, the meeting decided to set up a $500 million guarantee for local currency corporate bonds issued within the region.
Asean includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Underlining the importance of the Asian regional bond market, Standard & Poor’s announced it was launching an Asean credit rating scale that provides additional transparency about the credit risk of borrowers active in the region.
ADB president Haruhiko Kuroda also told the bank’s annual meeting that Asia needs to develop its debt markets to better channel the region’s massive savings into investments and stave off another crisis.
Japan also unveiled a scheme to supply up to 6 trillion yen ($61.54 billion) to support nations hit by economic crisis.
The moves, announced on the sidelines of the Asian Development Bank’s (ADB) annual meeting on the Indonesian island of Bali, could lead to some optimism in regional markets on Monday, one analyst said.
“This news is not a surprise but confirmation may be taken by the optimists as a reason to continue the recent rally,” said Kirby Daley, senior strategist at Newedge Group in Hong Kong.
“It’s definitely a step in the right direction for Asia to wean itself from dependence on the West. However, implementation is unlikely to have a sustainable impact on Asian economies in the absence of a robust US consumer.”
Under the plan, China and Japan would each contribute 32 per cent to the regional fund, known as the Chiang Mai Initiative.
South Korea would provide 16 per cent 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 current global situation requires more concerted efforts to enhance confidence, maintain financial stability, and prevent further decline in economic growth,” a joint statement by the region’s finance ministers said.
“The deepening global economic downturn, coupled with heightened risk aversion in financial markets, (has) adversely impacted trade and investment in the region.”
The fund will be launched by the end of the year, and a surveillance unit to monitor the region’s economies will be established with the help of the ADB, it said.
In addition, the meeting decided to set up a $500 million guarantee for local currency corporate bonds issued within the region.
Asean includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Underlining the importance of the Asian regional bond market, Standard & Poor’s announced it was launching an Asean credit rating scale that provides additional transparency about the credit risk of borrowers active in the region.
ADB president Haruhiko Kuroda also told the bank’s annual meeting that Asia needs to develop its debt markets to better channel the region’s massive savings into investments and stave off another crisis.
quoted from: Oman Tribune
